The secondary insurance market 'settlements'

Often you hear about a ‘secondary market‘ and often it is related to bonds, in particular the likes of TBills (Tbills are US Government bonds that run less than 12 months, TNotes on the other hand run longer than a year). What this means is that there is a market which operates outside of the primary market – where the transaction first takes place. In the treasury realm (the likes of Tbills) the primary market is from the Government to the buyer – either institutional or private – and the secondary market is between (for instance) one private individual and another. Why does it exist? Simply because the maturity date on the bond may not suit the holder, so private individual A will sell to B rather than wait until the time the bond matures.

A Secondary market exists in many other areas too, one example is that of Life Assurance. There are companies …

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First Active set to close.

It was announced yesterday that First Active is going to close operations in Ireland. This will start with 750 job losses coming into effect via voluntary redundancies, 550 of which will be in the Republic. Unions in Ulsterbank/First Active have said that bank workers are ‘scapegoats’, we spoke about the coming job losses in April of 2008 here.

RBS have made record losses, this lead to their bailout by the UK government. On the ground here it means that at 45 locations First Active will merge with Ulsterbank branches. The removal of First Active from the market will mean there is less competition in Irish lending, this will set the basis for increased margins on lending – at a time when the ECB is dropping rates. Having said that, First Active and Ulsterbank prices are amongst the most expensive in the market with variable rates of over 6% when market leading rates are under 4%.

In …

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How to rescue the financial system

I found this clip today, it is talking about some of the issues I mentioned in the post ‘Survival of the Weakest’ and it talks about the need to save healthy banks in favour of saving weaker banks. The common sense approach would be that you don’t privatise profits and socialise all losses and that you focus on saving firms (albeit banks) that are entities worth saving to begin with.

“A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him” – John Maynard Keynes.

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Peer to peer lending, maybe there is an alternative to banks?

Have you ever lent a friend a tenner? If so you already understand ‘peer to peer‘ lending, this is where one person lends money to another person and there is no bank or other intermediary involved. Traditionally it has been a case of letting a person borrow some money until payday and then they’ll give it back to you, traditionally this was also an interest free proposition, not only because the amount of time the money spent borrowed was generally short term but also for cultural reasons, because lets be frank, if a mate asked for ‘interest’ on a loan for a week or two you’d think of them as an incurable scab.

The current liquidity crisis is hitting banks the hardest, this means that the very stalwarts of the financial world are the ones that don’t have the money to lend out, however, there are many individuals who do and this presents the opportunity for a market niche. The market has responded in the form of enabling technology which connect a borrower …

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