Hi, Two quick questions on Chapter 11:
Page 7 of the Acted notes says: "Bank customers’ risk appetites are closely aligned with those of debtholders. Building society account holders’ risk appetites are more similar to those of shareholders."
1. Presume 'customers' refer to those with saving accounts and so are like debtholders since risk losing savings if the bank has a liquidity/credit crisis. (Assuming there is no national compensation scheme for the full savings amount). How would borrowers (eg. mortgage holders) be classified?
2. Presume that Building society account holders’ are deemed similar to shareholders since they benefit from profits (via beneficial borrowing/savings rates and occasional cash payments, such as Nationwide in May 2023). But in terms of risk appetite, would expect that account holders are more concerned about losing entire savings than missing out on these occasional side benefits (beneficial rates and cash payments). So appreciate if someone would expand on the definitions of a shareholder vs bondholder's risk appetite.
Page 7 of the Acted notes says: "Bank customers’ risk appetites are closely aligned with those of debtholders. Building society account holders’ risk appetites are more similar to those of shareholders."
1. Presume 'customers' refer to those with saving accounts and so are like debtholders since risk losing savings if the bank has a liquidity/credit crisis. (Assuming there is no national compensation scheme for the full savings amount). How would borrowers (eg. mortgage holders) be classified?
2. Presume that Building society account holders’ are deemed similar to shareholders since they benefit from profits (via beneficial borrowing/savings rates and occasional cash payments, such as Nationwide in May 2023). But in terms of risk appetite, would expect that account holders are more concerned about losing entire savings than missing out on these occasional side benefits (beneficial rates and cash payments). So appreciate if someone would expand on the definitions of a shareholder vs bondholder's risk appetite.