Of belt tightening and appetite for risk
Risk appetite – How hungry are you?
British debt problems mounting
There has been a dramatic rise in the number of people unable to pay their debts in Britain. The latest figures from the UK government's Insolvency Service show a record high in personal bankruptcies or people entering into so-called Individual Voluntary Arrangements where they agree to pay back whatever portion of their debts they can afford.
Between July and September, insolvencies in England and Wales were 55% higher than in the same period last year. They reached 27,644 in September. In Scotland, where the insolvency system is slightly different, the figures were proportionally worse, while in Northern Ireland they were better.
With the Bank of England almost certain to increase the base interest rate from 4.75% to 5% next week, more pressure will be put on Britain's borrowers. The one piece of good news is that while individual insolvencies rose fewer British companies went into liquidation over the past twelve months.
Well at least we know some folks who will be profiting from their pain.
England, Wales mortgage repossession orders, actions rise sharply
The number of homeowners in England and Wales facing legal action from lenders and possible repossession continued to rise sharply in the third quarter of 2006, government figures showed today.
The Department for Constitutional Affairs said there were 34,626 mortgage possession actions entered in county courts during the third quarter, up 15 pct on a year before. At the same time, a total of 24,017 repossession orders were made, up 22 pct on the previous year. Of the latter, 11,603 were suspended orders, or 48 pct of the total, against 53 pct in the third quarter of 2005.
Since many of the orders made will not have been enforced these figures do not reflect how many properties have been taken into possession.
Nevertheless, the figures, alongside today's personal insolvency data, show just how vulnerable households have become to rising levels of debt.
"At Zurich Strategic Risk we can help you understand, define and communicate your business’s appetite for risk."
DEUTSCHE BUNDESBANK: "Risk appetite in a dynamic financial market environment"
The risk appetite of investors is of special importance to financial stability. The willingness of market participants to take risks can provide an indication of the condition of financial markets.
Particularly in the light of the current low risk premiums, the question arises as to the extent and nature of interaction between the willingness of market participants to take risks and the performance of financial markets. It is shown that risk appetite is often subject to cyclical fluctuations.What is particularly important with regard to
financial crises is that they can generally not
be explained solely by fundamental factors.
It is becoming increasingly recognised that at
the same time the risk appetite of market
participants, which is subject to fluctuations
over time, also has a decisive influence.
Risk appetite poses a threat to financial stability
in particular if the yields investors expect
to receive in return for bearing risk appear
disproportionately high or low in relation to
their historical mean.
The main problem,
however, is that such mismatches cannot systematically
be clearly identified ex ante, as
neither the risk nor the risk appetite prevailing
among market participants can be directly
observed. Hence it is virtually impossible to
specify a fair valuation level for the pricing of
risks, which in turn makes it considerably
more difficult to identify developments posing
a danger to stability.