Greenclose v National Westminster Bank plc: Difference between revisions
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====The collar renewal in 2012==== | ====The collar renewal in 2012==== | ||
Of course, come 2012, NatWest wanted to extend its collar — not because interest rates suddenly presented a real risk that Greenclose might default on its loan (since the start of the loan rates had headed ever lower, and still have not recovered) — but because they would make a ton of money. (Marginal note: This is what banks like to do, first and foremost.) | |||
Ironically, a financial product designed to protect Greenclose against usurious interest rates was now exacerbating that very problem and, extending it would ''increase'' the very risk of insolvency NatWest first required the collar to guard against. | Ironically, a financial product designed to protect Greenclose against usurious interest rates was now exacerbating that very problem and, extending it would ''increase'' the very risk of insolvency NatWest first required the collar to guard against. | ||
Let’s be clear here: in the abstract, this was fair enough: NatWest had priced its lending operation so as to avoid this risk. It would be bad business for a bank not to exercise a valuable option. But all the same, it still managed to make itself look like a big, bad bank. | |||
==NatWest’s errors== | ==NatWest’s errors== |