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The Big Bank Deep Dive | Alex Gray
Forward Guidance
What's the Consequence of Over Provisioning?
In 2008, it was all about residential mortgages. There was a huge boom in housing in 2020. Exactly. So they said we need to reengineer this test. And so when you put the two together, it looks like everyone ran a pandemic stress test and then up to their provision. When really they were too sort of isolated incidents. They over provisioned and then that's why they had a lot of free money that they could pay out this dividends because losses were so much lower than expected.
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