The AIB Discussion Thread

Hanley

Mikel wrote: »

You're relying on the Gov to come up with an intelligent well thought out plan which is workable, and on the banks not ballsing it up.

I think you would need a Phd in game theory to figure out what everyone's incentives would be

The practicalities would be a nightmare alright, what is impaired and what are they worth for a start.....
Then there's trying to get them repaid.
What if you owe 50m and you know that
1. Your debt is owed to the 'bad bank', so your debt is 'toxic' so probably already considered written off.
2. The directors of the bank are not repaying their own loans, so why should you?

All good points...

Can anyone explain how a bad bank would work, and how it would be good? not just theoretically.

-mr.x-

it would be excellent for the banks

Hanley

-mr.x- wrote: »

it would be excellent for the banks

It's be frickin awesome for the banks.

And now the practical matter of making it work....?

LostinBlanch

Not sure if any of you guys were listening to Marian Finucane show this morning, at least I think it was her show, but some economist on it, I think it was Jim Power, came out and said that AIB had bad debts of €23billion and BOI had €15 billion. He wouldn't name his sources but wouldn't back down either. So make of that what you will.

daveirl

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Compak

LostinBlanch wrote: »

Not sure if any of you guys were listening to Marian Finucane show this morning, at least I think it was her show, but some economist on it, I think it was Jim Power, came out and said that AIB had bad debts of €23billion and BOI had €15 billion. He wouldn't name his sources but wouldn't back down either. So make of that what you will.

Is Jim Power the chap that was all pro housing/economy until dowturn and now gone all negative?

If so hardly a source that one would have much confidence in.

-mr.x-

daveirl wrote: »

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of course it would be good for the banks .

the banks would have no longer to worry about their bad deaths and could continue opperating normally.they would not have to worry about nationalisation.they would be more or less free from the crisis

DJDC

Whats with this ridicilous fascination with the Irish banks amongst Irish investors. Nearly any of my friends I have talked to back home recently have all tried to get on the BOI or AIB 'bargain'. It is something to do with the fact that you have your mortgage or current A/C with them and feel you have an in-depth knowledge of balance sheets and asset write-downs that people in London just don't have? In the UK on investment forums you certainly dont get nearly every post referring to HBOS or RBS.Why the hell is everyone so interested in these two bloody stocks?

Investing is a wonderfully diverse and interesting area. By confining yourself to two property related call options which is what Irish banks essentially are, you missing out on a vast learning opportunity at the moment. If the amount of time people wasted on AIB/BOI nonsense was spent on talking topics of importance like the correlation of $ and crude,the effect of Obama,options trading, Irish CDS etc. this forum would become a far better resource. Instead it constantly descends into petty squables overs how shoite/great the Irish banks are.

-mr.x-

well if ya dont want to talk about the irish banks dont comment. simple as.
if you want to talk about the $ or crude make athread..

Bearcat

last of the iceland banks were taken into govt control today, anyway back to our banks or whats left of them:eek:

ixus

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7:17a: What investment of the past year would you take back? Buffett laughs and says there are several. He cites ConocoPhillips [COP 36.36 1.00 (+2.83%) ] and the Irish banks he mentioned in his letter to shareholders. He concedes he makes lots of mistakes, but hopes his successes make up for the errors.

-mr.x-

whats your point he obiously would want to take it back if he got in at cllose to €5 are somthing like that

Hanley

-mr.x- wrote: »

of course it would be good for the banks .

the banks would have no longer to worry about their bad deaths and could continue opperating normally.they would not have to worry about nationalisation.they would be more or less free from the crisis

Was that a very clever play on words.... or do you not know what you're talking about?

How would the freedom from the threat of nationalisation make the more free?

And thus far, how has maintaining the status quo in how the banks are being run allowed them to operate "normally"?

That is of course if "normal" banking entails just stuffing your hands in your pockets and sticking your tongue out?

-mr.x-

Hanley wrote: »

Was that a very clever play on words.... or do you not know what you're talking about?

How would the freedom from the threat of nationalisation make the more free?

And thus far, how has maintaining the status quo in how the banks are being run allowed them to operate "normally"?

That is of course if "normal" banking entails just stuffing your hands in your pockets and sticking your tongue out?

if the government took on the banks bad DETHS the banks would therefore be a much safer investment .
this would attract forign investment and pump up the share price.

the government are afraid that the 3.5Bn will not be given out in loans and instead stored away for the stormy day.
if the government create the bad bank then the "banks" wont have to worry about the stormy day the government will.
the banks would almost certainlly be free from nationalisation if the bad bank was created because the government would have already made their decision on the banks.


being run allowed them to operate "normally"?

The banks are not running as they should be at the moment.
Have you noticed that its almost impossible to get a loan from these banks?
This is because they want to accumalate as much capital they can and keep it in the bank so as the can weather the "storm"

and yes that was a "clever use of words" glad you noticed:D

Hanley

-mr.x- wrote: »

if the government took on the banks bad DETHS

Sorry. Wrong again. Stopped reading after that.

Hanley

-mr.x- wrote: »

the government are afraid that the 3.5Bn will not be given out in loans and instead stored away for the stormy day.
if the government create the bad bank then the "banks" wont have to worry about the stormy day the government will.
the banks would almost certainlly be free from nationalisation if the bad bank was created because the government would have already made their decision on the banks.

Actually, I lied. I had to keep reading.

Please explain how the government taking on the banks liability would be good.

Outline why it would be positive for the credit worthiness of the state, the cost of government debt, and how it would be good for tax payer to assume such a large and potentially open ended liability.

EDIT: Mods, any chance of maybe making a bad bank thread instead of derailing this one? That's unless it's ok to keep talking about the bad bank idea here.

-mr.x-

to be honest ive explained myself perfectly.
anyway i never said it would be great for the irish taxpayer but i it would defo instill alot more confidence in the banks.however it may be a better option for the government than nationalisation.
now if you dont understand that its you that dosent have a clue

daveirl

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daveirl

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Mikel

Dammit, almost progressed into an adult conversation there.....

-mr.x- wrote: »

to be honest ive explained myself perfectly

Yes, yes you have.
Why are you wasting your time with us fools?
Get yourself round to the Dept of Finance pronto.
Your country needs you!

Compak

daveirl wrote: »

This post has been deleted.

Banks absorb first 10-20% and pay government 2.5% per annum of absorbed debts sounds reasonable levy to me.
A further equity stake could also be taken.


I think fact is if soultion were easy we would not be still wallowing in this mess. Nationalisation is no simple answer. You only have to look at Anglos current CDS.

Hanley

-mr.x- wrote: »

to be honest ive explained myself perfectly.
anyway i never said it would be great for the irish taxpayer but i it would defo instill alot more confidence in the banks.however it may be a better option for the government than nationalisation.
now if you dont understand that its you that dosent have a clue

What have you explained?

You've said it would give more confidence to the banks to lend, and the to investors as regards the sector as a whole. In theory it would.

Now, try to explain the practical matter of how a bad bank would be formed, how the government would value assume the banks liabilities, the implications the valuations and size of the impaired loans would have for the rest of the banking sector, what would happen down the road to these impaired loans and the likely impact on the cost of government debt.

Very pseudo-intelligent argument by the way - "If you don't understand, you don't have a clue". If you understood what you were saying, you'd be capable of making it understandable for pretty many anyone. Even the mentally challenged, like myself.

Hanley

Compak wrote: »

Banks absorb first 10-20% and pay government 2.5% per annum of absorbed debts sounds reasonable levy to me.
A further equity stake could also be taken.


I think fact is if soultion were easy we would not be still wallowing in this mess. Nationalisation is no simple answer. You only have to look at Anglos current CDS.

Could you expand on this a bit? I'm genuinely interested in the dynamics of how it would work!!

Right now, the simplest way I see of doing it;

Class all the loans the bank holds into certain degress of impairment. Maybe in 5-10% increments. Pay 50% of the impaired amount up front, and the balance over a 5 year period in proportion to how much is recovered.

That is, if "all" of the loan is recovered (all of the original impaired amount - say 80% of actual loan value for example), the bank gets it back. If more than the impaired value is recovered, the bank and government spilt the proceeds, as a reward to the gov for bearing the burden of the liability.

Figure out some way to class the outstanding balance payments the gov will pay on the impaired loans as a contingent assets, and bob's your aunties husband - a bad bank with minimal balance sheet and income statement impact.

Not sure how well the market would respond to these vague contingent assets tho. And I still haven't really tackled the issue of valuation. A 100k loan of which 20% is impaired is obviously not going to be bought by the government for 80k because that's just too much of a risk.

Maybe a standard percentage of the impaired loan amount is paid, which is adjusted downwards the greater the degree of impairment??

Compak

Hanley wrote: »

Could you expand on this a bit? I'm genuinely interested in the dynamics of how it would work!!

Right now, the simplest way I see of doing it;

Class all the loans the bank holds into certain degress of impairment. Maybe in 5-10% increments. Pay 50% of the impaired amount up front, and the balance over a 5 year period in proportion to how much is recovered.

That is, if "all" of the loan is recovered (all of the original impaired amount - say 80% of actual loan value for example), the bank gets it back. If more than the impaired value is recovered, the bank and government spilt the proceeds, as a reward to the gov for bearing the burden of the liability.

Figure out some way to class the outstanding balance payments the gov will pay on the impaired loans as a contingent assets, and bob's your aunties husband - a bad bank with minimal balance sheet and income statement impact.

Not sure how well the market would respond to these vague contingent assets tho. And I still haven't really tackled the issue of valuation. A 100k loan of which 20% is impaired is obviously not going to be bought by the government for 80k because that's just too much of a risk.

Maybe a standard percentage of the impaired loan amount is paid, which is adjusted downwards the greater the degree of impairment??

My suggestion was not for a bad bank but bad debt cover.

To make a bank would be a lot more complicated though lot more clear cut for market as banks are free of them.
You are right how do you class loans? what price are paid? how do you ensure you are not being taken advantage off.I think banks would be doing well to sell them for 50% prob 40%.
And then do you want a bank? Or how about a property company that will just hold the developments and unleash them to market in 5 years or so.

Very very fickle very complicated. Bad banks is a lot clearer for market and allows banks to move on afresh however its definition is a lot harder to set.

Hanley

Compak wrote: »

My suggestion was not for a bad bank but bad debt cover.

Apologies - brain fart!

To make a bank would be a lot more complicated though lot more clear cut for market as banks are free of them.
You are right how do you class loans? what price are paid? how do you ensure you are not being taken advantage off.I think banks would be doing well to sell them for 50% prob 40%.

And here's the next question, if the bank's only getting 40-50% of the impaired loan, they've to write off the difference to their profit and loss. And how many banks would be willing to take a hit as significant as that on 20-40% of their entire loan portfolio (depending on the scale of impairment they currently face). The write offs would be MASSIVE and cause huge losses which I doubt the banks would be willing to absorb.

So if they're not prepared to do that, the government has to pay more. Which I personally think is the stupidest idea going. And if they refuse to pay, the bank simply holds onto the impaired loan on it's balance sheet at 80% of the original amount (or whatever figure). And if needs be they can write down the amount of the loan to 40-50% over the course of a few years, so estentially they've recovered the same amount and spread the p&l effect over a few periods.

The markets aren't stupid, they'd pick up on something as painfully obvious as that and we'd have another reaction similar to the failed guarantee scheme.

-mr.x-

daveirl wrote: »

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A divident you twit, they will obiously pay them back an amount each year.

Hanley

-mr.x- wrote: »

A divident you twit, they will obiously pay them back an amount each year.

Divi-what?

Explain how you propose a payment like that would work.....

The government buys the death/deth/debt off the bank, and in return the bank pays them a set amount year on year?


How does the government value how much to pay?

How do they calculate what the yearly payment by the bank should be?

And why does it make sense to relieve the bank of one liability, and then saddle them with another?

-mr.x-

Mikel wrote: »

Dammit, almost progressed into an adult conversation there.....

Yes, yes you have.
Why are you wasting your time with us fools?
Get yourself round to the Dept of Finance pronto.
Your country needs you!

what are you on about i was just explaining to some dum dums how it would benifit the banks, its not like the government dont no this their just weighing up their options.

looking at your comments, i would hope it was me in the dep finance than you , ya TROLL

-mr.x-

Hanley wrote: »

What have you explained?

You've said it would give more confidence to the banks to lend, and the to investors as regards the sector as a whole. In theory it would.

Now, try to explain the practical matter of how a bad bank would be formed, how the government would value assume the banks liabilities, the implications the valuations and size of the impaired loans would have for the rest of the banking sector, what would happen down the road to these impaired loans and the likely impact on the cost of government debt.

Very pseudo-intelligent argument by the way - "If you don't understand, you don't have a clue". If you understood what you were saying, you'd be capable of making it understandable for pretty many anyone. Even the mentally challenged, like myself.

I am saying for the person with shares in these banks the option that would suit them best would be the bad bank.

I have told you what would prob happen if a bad bank was introduced.
its like talking to a brick wall with you.

-mr.x-

Hanley wrote: »

Divi-what?

Explain how you propose a payment like that would work.....

The government buys the death/deth/debt off the bank, and in return the bank pays them a set amount year on year?


How does the government value how much to pay?

How do they calculate what the yearly payment by the bank should be?

And why does it make sense to relieve the bank of one liability, and then saddle them with another?

right so the government take on 80% of each loan (risky)
any loan that the government take on that is paid back they keep as a reward.
the bank pays back say 20% of their profits each year untill all the government losses have been paid back.
eventually after maby 20 yrs who knows , the bank has no debts and would be back on track