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Thread: Loans from some banks being called in despite repayments being met?

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    Default Loans from some banks being called in despite repayments being met?

    Years ago a bank manager abroad offered me a loan for business on condition that it could be called in almost immediately on short notice. He hastened to reassure me that in practice the loan would not be called in on short notice. Banks like those loans because they have to put up less reserves against them than on other loans.I declined the loan as I felt uncomfortable with the risk of trusting a stranger.

    Yesterday,I heard second hand that a major bank called in such a loan even though the debtor company was servicing the loan and was not behind on payments. It looks like the bank will exercise its power to liquidate the business and come after the business partners for balances owing. But since only one partner in the business has serious assets,it looks like he will be "jointly and severally" liable for all the debt and lose his life savings. In the Celtic Tiger boom,the small print of loans,a form of borrower Russian roulette, was ignored by many borrowers.

    This ruthless bank action suggests orders from the top to increase bank liquidity at all costs by reducing loan assets on the books at every opportunity,regardless of the soundness of loans. This is a bad sign for the Irish economy.

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    If true, that's a very worrying development.

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    Despicable if true but it wouldn't surprise me. The government need to stop the softly softly cr@p with the banks but sadly I don't think they have the cojones. If they had they wouldn't have let Richie Boucher bytch slap them the way he did last week.

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    We should know that everytime you are dealing with a bank -be alert. They remind me of a tamed wild animal,who may ,and can ,savage one at any time.

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    Unless you know the exact circumstances it is difficult to tell. It is an unsecured loan with PGs.

    It is possible they were aware of something else which made the possibility of them getting repaid remote.

    An example would be that Business A has an unsecured loan and does 90% of its business with Business B, A is doing well meeting its loan requirements but finds that B is taking longer and longer to repay.
    B not disclosing its almost bust and overtrading while building up debts it will never repay.
    Bank aware of B's situation and that it will be shut down in next couple of weeks so it acts to recall the loan from A earlier so as to ensure it collects some money from the situation. Bank cannot disclose anything to A who feels hard done by and completely unaware that its main customer is bust.

    Another may be that Bank is aware that a business is spending way more money that it has and wants to recover something before a business goes bust.

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    Quote Originally Posted by LOCALHERO View Post
    Despicable if true but it wouldn't surprise me. The government need to stop the softly softly cr@p with the banks but sadly I don't think they have the cojones. If they had they wouldn't have let Richie Boucher bytch slap them the way he did last week.
    Banks get slammed for calling in money before a business goes bust but then get slammed for not calling it in early when they have an idea the business is going bust.

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    The old statement about banks, that they are either at your feet or at your throat, is still very true.

    They shoved money at people during the property boom. Many senior bankers "earned" huge commissions for such lending.

    Now they will not lend for any productive purpose, in spite of being expensively bailed out by the tax payer.

    Sure, they will offer loans. but the t and c's are such as to make it commercially unworkable
    Last edited by ergo2; 10th November 2012 at 07:07 PM.

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    Quote Originally Posted by patslatt View Post
    Years ago a bank manager abroad offered me a loan for business on condition that it could be called in almost immediately on short notice. He hastened to reassure me that in practice the loan would not be called in on short notice. Banks like those loans because they have to put up less reserves against them than on other loans.I declined the loan as I felt uncomfortable with the risk of trusting a stranger.

    Yesterday,I heard second hand that a major bank called in such a loan even though the debtor company was servicing the loan and was not behind on payments. It looks like the bank will exercise its power to liquidate the business and come after the business partners for balances owing. But since only one partner in the business has serious assets,it looks like he will be "jointly and severally" liable for all the debt and lose his life savings. In the Celtic Tiger boom,the small print of loans,a form of borrower Russian roulette, was ignored by many borrowers.

    This ruthless bank action suggests orders from the top to increase bank liquidity at all costs by reducing loan assets on the books at every opportunity,regardless of the soundness of loans. This is a bad sign for the Irish economy.
    This stuff has been happening since the bubble burst, and unfortunately it's completely legal,

    It's irrelevant whether payments are up to date or not, if the loan docs say that the loan can be called, than it can be called,

    That guy needs to immediately put his and his families interests first and do what ever is required to secure a future,

    If he has assets the bank may be willing to strike a deal with him in order to avoid a legal battle,

    But he needs to adopt the attitude that they might try to fck him,

    So, he should also have a Plan B in case the bank won't deal!

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    Quote Originally Posted by LOCALHERO View Post
    Despicable if true but it wouldn't surprise me. The government need to stop the softly softly cr@p with the banks but sadly I don't think they have the cojones. If they had they wouldn't have let Richie Boucher bytch slap them the way he did last week.
    But the pressure on liquidity would be greater if the government demands easier lending practices. Maybe the banking system liquidity is being drained by huge mortgage arrears,including arrears on about 20% of home mortgages.

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    Quote Originally Posted by odie1kanobe View Post
    Unless you know the exact circumstances it is difficult to tell. It is an unsecured loan with PGs.

    It is possible they were aware of something else which made the possibility of them getting repaid remote.

    An example would be that Business A has an unsecured loan and does 90% of its business with Business B, A is doing well meeting its loan requirements but finds that B is taking longer and longer to repay.
    B not disclosing its almost bust and overtrading while building up debts it will never repay.
    Bank aware of B's situation and that it will be shut down in next couple of weeks so it acts to recall the loan from A earlier so as to ensure it collects some money from the situation. Bank cannot disclose anything to A who feels hard done by and completely unaware that its main customer is bust.

    Another may be that Bank is aware that a business is spending way more money that it has and wants to recover something before a business goes bust.
    The above situation was true in the old days when bank managers and loan officers at the local level made it their business to "know your customer". Chances are today the decision to call in the loan was made by a young B.Com in head office trying to meet spreadsheet loan targets ordered from the top.

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