State feared ECB charge hike before rescue deal - The Irish Times - Mon, Nov 21. The Irish Economy » Blog Archive » Burning Ourselves? On tonight’s edition of The Frontline on RTE, Gavin Blessing, Head of Bond Research at Collins Stewart made some comments about repayments of ELA liabilities by the IBRC (i.e. Anglo-INBS) that I’d like to elaborate on.
Gavin pointed out that IBRC’s major liabilities are to the Central Bank of Ireland. Indeed, I estimate that IBRC now owes about €42 billion in ELA to the Central Bank. Gavin then followed this up by saying that we would be “burning ourselves” if we cancelled these payments to the Central Bank. This is a complicated business and I fully understand Gavin Blessing expressing the situation in this way. However, I would like to emphasise that it is my understanding that there is no offsetting financial gain to the Irish state from the IBRC’s repayment of Emergency Liquidity Assistance to the Central Bank. The details are below but I can summarise this issue as follows: Channelling taxpayer funds towards repayment of ELA is equivalent to burning public money. 1. 2.
BoI sells €4.5bn of assets to pay off central banks - Irish, Business. Emmet Oliver, Deputy Business Editor – Updated 04 December 2012 10:33 AM The bank is trying to sell €10bn of assets between now and 2013 and the latest deals go a long way toward that goal. Market analysts were last night assessing the deal, but expressed surprise the bank was able to sell so many assets this early in its deleveraging plans. The €4.5bn proceeds are most likely to go to the Irish Central Bank, which has been giving the lender emergency liquidity assistance since last year. The ECB may also be paid off as part of the arrangements.
The sell-off has benefits and drawbacks for the bank. Selling the assets means the bank no longer has to put reserves aside in case the assets reduce in value. Banking analysts described the assets sold as good quality in the main, with the US assets the highest quality. Portfolio Its UK commercial real estate loan portfolio was sold for £1.07bn (€1.21bn) to Kennedy Wilson, the US fund that has already purchased Bank of Ireland assets. Irish banks' emergency funds revealed in documents. Monday 18 July 2011 17.39 RTÉ News has obtained documents giving a blow-by-blow account of how the Irish financial institutions came to call on billions in emergency funding from the Irish Central Bank. An estimated €50bn in emergency loans have been extended by the Central Bank to date. Documents released under the Freedom of Information Act reveal how one-by-one these institutions ended up needing that help.
Anglo Irish Bank provided the template. On the night of the banking guarantee in September 2008, the Minister for Finance Brian Lenihan wrote to Central Bank Governor John Hurley saying Anglo might require emergency funding. He said if Anglo was unable to return the money it was the 'intention' of the Government that the Central Bank would be paid back in full. He would have to write the same type of letter for every other Irish financial institution. As money left the Irish banking system late last summer, banks began lining up for Central Bank help. AIB came first. Inside Ireland’s secret liquidity. Buiter on Europe’s secret liquidity operations. Things getting (not) better.. Back in January I wrote a bit about the FRNs that the Irish banks were issuing them selves (see here too) At the time, my thinking was that the bonds would be a mechanism through which the Irish banks would be able to extract themselves from their reliance on Irish Central Bank ELA.
As it transpired, that certainly wasn’t the case – with Irish Central Bank ELA growing to €70bn since (currently at €67bn). Of course, the announcement of the €24bn recapitalisation of the banking system at the end of last month would surely mean that the FRNs could disappear from the bank’s funding needs? Well, it seems not. The original FRNs are expiring at the moment, as they were all issued with three month maturities. And, surprise, surprise, they are being replaced, rather then retired. Here is the latest from the NTMA list of instruments issued under the ELG scheme: This morning’s rollover of the €980m FRN seems to be the end of this round of FRN issues. Central Bank reliance rises to €153 billion. About a week ago the Central Bank published an update of their balance sheet for February. This shows that ‘Other Assets’ which is primarily made up of Emergency Liquidity Assistance (ELA) to the Irish banks had unexpectedly increased from €50.1 billion to €70.1 billion.
To get a complete picture of the reliance of the Irish banks on Central Bank funding this figure needed to be added to the monies the banks have accessed directly through the ECB. In January this was €93.0 billion, giving a total of about €140 billion (not all of the ‘Other Assets’ category is ELA). Figures released this morning put the February liability with ECB at €85.6 billion, which puts the total amount borrowed from the central banks at somewhere around €153 billion. Here are ECB liabilities of domestic banks since the start of 2007. And here’s the scary one – the Central Bank’s ‘Other Assets’. Something (really) rotten in Anglo. I have written ad nauseum on this blog about Irish Central Bank Emergency Liquidity Assistance. Anglo were the first bank to make use of the facility. Assets that they could not repo via the ECB were repo’d through the Irish Central Bank via a Master Loan Repurchase Agreement.
Following the continued deterioration of Anglo’s books, the Irish Government recapitalised the bank via a Promissory note, which also was not eligible for ECB operations. This too was repo’d via the Irish Central Bank via a Special Master Repurchase Agreement. Today Anglo released their Annual report , and on page 95 of that report we learn that there is a strange new facility being used by Anglo to access liquidity from the Irish Central Bank called a ‘Facility Deed’.
The FD is an guaranteed by the Minister for Finance, who separately benefits from a counter indemnity from the Bank should the guarantee be called upon. Special Repurchase Agreement: Collateral – Promissory notes. Facility Deed: Collateral – Nothing. Bailing out Ireland, bailing out banks. To rebuild an Irish banking system, part two. Peston's Picks: The unbelievable truth about Ireland and its banks. Irish bailout: could the bill exceed €200bn? | Business. As Brian Cowen's government teeters on the brink tonight, there are suggestions that the real cost of the bailout could come to more than €200bn. The government hasn't confirmed the eventual cost of the bailout but the general wisdom is it would be in the region of €85bn to €100bn. But a very credible blog, NAMA Wine Lake, which has a very good track record on this financial crisis, has been doing a bit of number crunching and come up with a round figure of €207bn for Ireland Inc between now and 2014.
Economists Brian Lucey and Stephen Kinsella have come up with similar figures - a quarter of a trillion euro all told. Staggering stuff. Here's a summmary of NAMA Wine Lake's nanalysis. (You can read his/her full post here.) €5bn for National Asset Management Agency acquisitions from banks€43.25bn deficit funding for the next four years. I think we've been looking at the wrong thing. Bank exposure to Irish sovereign debt The data was supplied to regulators under a stress test conducted in July. UPDATE 1-Irish Cbank head - ECB to keep funding Irish banks. Will Ireland Threaten to Default? We were surprised that Ireland capitulated so quickly to pressure from its Eurozone confreres and accepted a punitive bailout of its government, when it was in fact its banks that were a mess. As we noted in November: Note that the Irish government is still holding out for a banking-system-only bailout, even if the funds are channeled through the government.
Since I am not aware of any IMF bailout being done on this format, it’s likely to be a sticking point if the Irish refuse to back down (recall that the government itself is under no immediate funding pressure; they have six months before they need to go to market, which is an eternity in crisis-land).The other major bone of contention is Ireland’s super-low corporation tax, which served as a significant incentive for multinationals to set up shop in Ireland. The Germans and French are insistent that it be increased to balance the budget. A footnote: John Ihle reports in The Post: The eurozone is up against Dani Rodrik’s trilemma: Europe’s baffling secret liquidity. Big Picture. Firstly, please excuse the op-ed nature of this blog-post.
Recently I have often found myself discussing the unsustainable levels of debt the Irish sovereign is taking on. My main argument centres on debt dynamics – where the interest payments on the debt so outpace the sluggish growth in the economy that the portion of national income that goes on debt servicing increases every year. Works like this : sovereign debt = 100% of GDP. Interest on debt is 5%.
If growth in the economy is less than 5%, then the economy will shrink by the difference. (this is a massive simplification of the process, but will do for this post). If the economy fails to grow by enough to meet interest payments, then the following year the debt will remain the same, but the economy will have shrunk, so then sov debt = 102% of GDP. If this cycle continues over a number of years, then the debt quickly becomes unsustainable. Very simply, looks like this: First, Irish banks do not have access to the markets.
L'Irlande se tourne vers la BCE pour alléger la facture de son secteur bancaire - POLITIQUE ECONOMIQUE BANQUE. ECB Seeks New Liquidity Plan for Irish Banks. Luck of the Irish… promissory notes. Irish Bank Bonds (and promissory notes) There was some confusion yesterday when the Irish Central Bank issued its latest financial statement. It had been assumed that gov guaranteed FRNs issued by the Irish banks would have reduced the outstanding amount of ELA. It now seems that the debt issued may have missed the cut off date for the CB’s financial statement, so maybe the difference will be in the end of Feb figures. With that in mind, it is worth looking at the total amount of Gov Guaranteed FRNS that were issued at the end of Jan. Here’s the list (as best I can figure it): Bank of Ireland pdf Allied Irish Bank EBS Building Soc Irish Permanent And here are the NTMA guarantee docs: That totals €18.35bn worth of Gov Guaranteed FRNs issued since the last week of Jan.
All of those issues are now on the ECB’s list of instruments accepted for monetary policy operations (list is sorted by ISDN, so these instruments are towards the end). Now, there is a bit of moving of deckchairs going on here. Covered Banks financial position. Irish mortgages everywhere – but not a one to collateralise with? Irish Banks Seek to Delay `Evil Day' of Reckoning as Mortgage Losses Mount. Perched on a chair overlooking a wood panel-lined room in Dublin’s High Court, a bespectacled Judge Elizabeth Dunne has become all-too-used to hearing from the victims of Ireland’s economic meltdown. Each Monday, Dunne presides over repossession hearings, with one in 10 Irish mortgages now in trouble.
At the end of last year, more than 79,000 borrowers were behind on payments or had loan terms altered due to “financial distress,” the country’s central bank said on Feb. 28. “Things are getting worse and worse,” said Dunne, as she weighed the case of a couple about 114,000 euros ($158,000) in arrears on a 558,938-euro home loan, one of 74 cases on her list on March 7. “Putting off the evil day is not going to help.” Irish mortgages account for more than a third of about 270 billion euros of loans that remain with the nation’s so-called viable lenders -- Allied Irish Banks Plc (ALBK), Bank of Ireland Plc, Irish Life & Permanent Plc and EBS Building Society. New Stress Test EU Bailout. A collateral conundrum for Irish banks [updated] The eurozone’s €15.8bn fat finger?
Clues to the eurozone’s €15.8bn fat finger. Banks will need another €25bn - National News, Frontpage. Ireland 's financial future has been dealt a massive blow as a further black hole of up to €25bn in the Irish banks has emerged as part of the Government's stress testing. Senior government sources have confirmed to this newspaper that the stress-testing process will show that the state of the banks' balance sheets is "considerably worse" than previously thought. It has emerged that on top of the €10bn capitalisation deferred by former Finance Minister Brian Lenihan last month, losses at the banks mean that a further injection of between €15bn and €25bn could now be needed. The results of the rigorous stress-testing process, designed to restore confidence in the banking system, are to be presented to new Finance Minister Michael Noonan next week.
News that Ireland will need substantially more money from the IMF / EU to address the crisis in the banks is a blow to Taoiseach Enda Kenny 's hopes to get a better deal at the EU summit later this month. - DANIEL McCONNELL Chief Reporter Exclusive. Irish Banks Seek to Delay ‘Evil Day’ of Reckoning as Mortgage Losses Mount. An Irish bank collateral conundrum, ECB edition. Feb ELA. The latest Irish Central Bank data has just been released. It was expected that the ELA (accounted for in ‘other assets’) would drop by €17.5bn to reflect the FRNs that were issued by the Irish banks in January. So, the expected figure would be in the region of €34bn.
The numbers show the complete opposite. Other assets at the end of February stood at €70bn. This, needless to say, is shocking. What it seems to show is that the funding situation of Irish banks have reached critical/disastrous levels. The Central Bank press release says: One-off technical factors affect the Central Bank’s balance sheet at end-February 2011, most notably transactions surrounding the transfer of deposits and bonds from Anglo Irish Bank and INBS to Allied Irish Banks and ILP.
The first part of that makes sense – we already knew the Marginal Lending Facility would have an effect on the monthly figures. But the second part – regarding ELA is a bit less clear. Irish secret liquidity, forever. Irish Bank issuing bonds to themselves. Scott Minerd's Detailed Pre-Mortem On What Europe's Bank Run Will Look Like, And Other Observations | zero hedge. We traditionally enjoy the periodic letters by Guggenheim's CIO Scott Minderd.
His latest piece, "The Opening Act to the Broader Crisis" is no exception. In it, the strategist dissects the European crisis, compares it to the subprime debacle and sees it as the precursor to the eventual downfall of the euro, a surge in the dollar, the "federalization" of Europe and the adoption of QE by the ECB. The key must read item in the current report is Minerd thought experiment of what a wholesale bank run, first in Ireland, and then everywhere else in Europe, would look like. This is especially important as one could, as Scott claims, start at any moment. What does this mean for investments? "If we are on the brink of crisis in Europe, which I believe we are, then there are several expectations we can draw about the investment landscape. Here is how Minerd, who obviously realizes this dichotomy, attempts to resolve this glaring irony: So is there any hope at all for Europe?
Full report here. European Commission finally publishes Bank of Ireland restructuring decision. February 3, 2011 by namawinelake Well it’s taken Senor Almunia nearly six months but finally yesterday the Decision N546/2009 approving the restructure of Bank of Ireland (BoI) was made public, having been initially communicated to BoI on 15th July, 2010. The press announcement of the Decision last July 2010 is here. Key points (1) There are a considerable number of redactions (signified with “[…]”) which obviously blank-out both figures and text. (2) The first BoI restructuring plan was submitted on 30th September, 2009.
It seems that the “Irish authorities” were not particularly prompt with responses to queries from the EC with an EC query dated 28th September, 2009 not being answered at least until 5th November, 2009. There seems to have been extensive correspondence between Brussels and Dublin on this plan – I count 18 requests for information plus two face-to-face meetings. . (8) Strengthening the capital position means debt-swaps and issuing more shares. European liquidity and Irish handcuffs. AIBs €3.5bn. Ireland funding. Looking at the story wrong.. It’s an Irish bank eat Irish bank world. Feb ELA. Central Bank steps up its cash support to Irish banks financed by institution printing own money - Irish, Business.
We're printing billions, just to save the banks - Irish, Business. Irish Central Bank is printing euros for giving bonuses. Accelerating Deposit Flight In Ireland Forces Irish Central Bank To Print Money Independent Of ECB | zero hedge. Fianna Fáiled: Ireland Prints 25% of its GDP in German Euro’s « Confessions of a Macro Contrarian. The Irish Central Bank solo run? The mechanics of Irish euro-printing. Ireland’s secret liquidity is unbelievably cheap. What Ireland’s secret liquidity costs. Where did Ireland’s secret liquidity go? L’Irlande imprime de la monnaie pour sauver ses banques » Article. ECB refines the framework for the implementation of monetary policy in the euro area. ECB Allows Irish Central Bank to Counterfeit 51 Billion Euros. We're printing billions, just to save the banks - Irish, Business.