Why is Anglo considered "systemic"

eamonnm79

DublinWriter wrote: »

As much as I hate Anglo, they owe money to the same international banks that the Irish Government will be approaching this year for loans.

That aside, Sean Fitzpatrick and the like should have been made to take the 'perp-walk'.

AFAIK there's still a garda investigation on-going regarding Anglo, so it's very much early days yet. Considering how complex forensic investigations into alleged corporate wrongdoing can be (remember Enron?), it could be a very long time before we see anyone in the 'joy for this.

The irish government are not getting the money they are borrowing from international banks. Well technically they are but it is the Irish banks who are the ones behind/backing the international financial institutions and the Irish banks who get the funding from the ECB. The Irish banks can borrow from the ECB due to the cash injections from the government which give them the required capital requirements. The ECB are getting the Money from Quantitive easing.
Basicly the government and the financials are proping each other up with the help of the ECB. You wont see this written in Broadsheets, but take a look on Irisheconomy.ie

Économiste Monétaire

Do you have a source for the information on all purchasers of primary and secondary Irish sovereign debt?

eamonnm79

Économiste Monétaire wrote: »

Do you have a source for the information on all purchasers of primary and secondary Irish sovereign debt?

Hi EM
The below is a post by Joe Looby on irish economy.ie from May 27th

Sarah,

No need to leave it to another journalist:

1) Go to: http://www.centralbank.ie/

2) Statistics

3) Credit Money and Banking Statistics

4) Latest Monthly Statistics

5) Table C3: Credit Institutions: Aggregate Balance Sheet

6) Holdings of securities - Section 6.2 - Issued by general government - Euro 5.389 bln

Repeat the exercise in the ‘Archive’ from step 3 above, and you’ll see the same figure for October 2008 is just Euro 530 mln.

In plainer english, since the government effectively rescued the Irish ‘covered’ banks with the bank guarantee, they have (miraculously?)seen fit to increase their holdings of Irish Sovereign Bonds/loans to that government by a multiple of 10.

They are likely being enabled to do this/pay for the bonds by accessing the Euro cash from the ECB using said bonds as collateral (as confirmed by the good Doctor from the NTMA in both his recent testimony to the PAC and recent letter to your esteemed employer).

To me, at least the following crucial and to my mind insufficiently aired questions arise from this ’situation’:

1) Having access to such a facility, why should any government deal decisively with its fiscal deficit, and not just leave the ‘tab’ to the taxpayer of the future?

2) Why is Frankfurt (Berlin) allowing Dublin this facility?

3) Has this facility any relevance to the NAMA vs. Nationalisation debate?

Are our leaders learning anything about the dangers of supressing ‘the truth’ in its dealings with the Irish Public?

To have to ask this question in this week, of all weeks, is beyond ‘funny’.

Économiste Monétaire

Thanks, that's pretty interesting, but, sparse on details of recent primary issuance participants. The last numbers I saw for an NTMA primary auction were about 70% banks and 55% of all purchasers operating in Ireland. I just don't see any real evidence to support a claim of Irish banks being the only institutions buying Irish debt; €5bn out of something like €60bn in marketable securities. Also, it's not the policy of the ECB to direct where the monies from EuroSystem MROs and LTROs go, so they're not 'allowing' them to do anything. Sovereign debt isn't the the only eligible collateral for refinancing operations, banks can borrow with legacy ABS as collateral. "Such a facility": Refinancing operations existed before the crisis.

One situation you might like, Eamonn, is what happens when the ECB moves from un-rationed fixed-rate refinancing operations (i.e. they won't be given all the money they want at a fixed-rate) and Irish banks will have to up mortgage rates even before the official ECB rate begins to rise. Check table C2 on this document, it will tell you how much Irish banks have increased their borrowing from the ECB (banks don't actually borrow from the ECB, really, but from the CBFSAI as our constituent central bank) under columns 6 and 7.

eamonnm79

Économiste Monétaire wrote: »

One situation you might like, Eamonn, is what happens when the ECB moves from un-rationed fixed-rate refinancing operations (i.e. they won't be given all the money they want at a fixed-rate) and Irish banks will have to up mortgage rates even before the official ECB rate begins to rise. Check table C2 on this document, it will tell you how much Irish banks have increased their borrowing from the ECB (banks don't actually borrow from the ECB, really, but from the CBFSAI as our constituent central bank) under columns 6 and 7.

AIB have already started this on new mortgages. They raised their fixed rate interest rates during the week.

Économiste Monétaire

Interesting, I wasn't aware of that AIB increase. Existing variable-rate mortgages was my train of thought in that post, my bad on leaving that out; more money markets than long bond financing for fixed-rate customers. Just something else you might be interested in, here's the most recent ECB staff projections, that's a signal of an incoming rate increase next year with the projected increase in 3 month Euribor.

The methodology implies that short-term interest rates remain broadly stable at around 1.2% between the second and last quarter of this year. In 2010, they are expected to increase to 1.6% on average

It's at 1.22% as of Friday. Rising mortgage rates, rising commodity prices, and increasing taxes are a nice mix :pac:.