Banks told to prepare for gloom

UK banks have been ordered by the Financial Services Authority (FSA) to prepare for a double dip recession, another crash in house prices and a sharp increase in unemployment.

The 2010 stress test targets set by the regulator are even more stringent than last year and draw up a nightmare scenario which may require banks to have a higher capital ratio than the current 4%.

The City watchdog says these new scenarios represents "severe but plausible macroeconomic stress" but they have come in for heavy criticism from institutions already short of capital.

Banks must assume that in 2010 to 2014 economic growth will tumble 8.1% from peak to trough, up from the 6.9% target set last year - which was close to the 6.2% that materialised.

They must also envisage that the unemployment rate will rise to 13.3% from 7.8% at present.

But their models for house prices must only take into account a 36% fall from their peaks in August 2008, an improvement on the 50% set by the FSA last year.

Lord Turner of Ecchinswell, the chairman of the FSA said he expects the UK to see a gradual V-shaped recovery but the tests are a crucial part of making sure banks are strong enough to survive a further downturn in the economy...

from iii

------------
Comment: Hmm, so a real possibility of a double-dip recession. Which presumably would mean that the advertising industry and ad spend would stay subdued - just as Chandratillake has been busy hiring possibly 50 ex-Zango employees.

So perhaps 100 Blinkx employees in total and 6 offices - a massive drain on Blinkx's cash reserves. Let's hope the economy does turn up sooner rather than later, eh?

Because if the next set of Blinkx figures actually show a thumping loss because of Suranga's little hiring spree - people that would not, on this scenario, have paid for themselves because the ad spend isn't there - I think the clamour for Chandratillake's head on a plate may become too loud even for his mentor Lynch to ignore (bagsy I'm the executioner). All the more so because shareholders have never been told anything about the Zango acquisition - we never voted for it, it was just foisted on us by a management team that seems utterly, stubbornly, arrogantly (delusionally?) convinced it's right in what it is doing.

Only problem is that the markets (after the Miva debacle), the courts (in the case of the Blinkbox fiasco) and increasing numbers of very angry, frustrated, disgruntled shareholders disagree...