No bailout money has gone into the banks

Scofflaw

OK, I admit I was surprised by this. In looking for answers to posts in the Alan Ahearne thread, I came across this handy little table of bank recapitalisation costs:

€bn |AIB/EBS |BoI |IL&P |IBRC (Anglo/INBS) |Total
Government preference Shares (2009) — NPRF |3.5 |3.5* |— |— |7.0
Capital contributions (with Promissory Notes as consideration) /Special Investment Shares (2010) — Exchequer ** |0.9 |— |— |30.7 |31.6
Ordinary Share Capital (2009) — Exchequer |— |— |— |4.0 |4.0
Ordinary Share Capital (2010) — NPRF |3.7 |— |— |— |3.7
Total pre-PCAR 2011 (A) |8.1 |3.5 |0 |34.7 |46.3
|||||
PCAR 2011: |||||
Capital from Exchequer*** |3.9 |— |2.7 |— |6.5
NPRF Capital |8.8 |1.2 |— |— |10.0
Total PCAR (B) |12.7 |1.2 |2.7 |— |16.5
Total Cost of Recap for State (A) + (B) |20.7 |4.7 |2.7 |34.7 |62.8

Source: http://debates.oireachtas.ie/dail/2012/03/29/00077.asp

The post-bailout recap costs are in bold there - as you can see, there are two sources, Exchequer cash and the NPRF. Both are Irish, so apparently none of the money put into the banks comes from the bailout funds provided by the troika. That's confirmed by a recent (6th June) comment by Noonan:

However, the cost of bank recapitalisation to date has been met from our existing resources – cash reserves and the NPRF.

Source: http://debates.oireachtas.ie/dail/2012/06/06/00097.asp

So while the public perception of the bailouts is that it's first and foremost for the banks, the truth is entirely the reverse - none of the bailout money has gone into the banks. Which leads, of course, to several questions - what exactly is Alan Ahearne playing at? Why is this not a better known fact? And why has ever effort apparently been made to ensure that only Irish money goes into the banks?

cordially,
but also somewhat surprised and puzzled,
Scofflaw

Cookie_Monster

Er, it's come from the exchequer, which has borrowed money to spend in other areas because it's spent money from those areas on the banks.

So while technically they can argue bank money came from the state and not the bailout its just an cheap accounting trick to hide the direct link...

Isnt that the worst way they could have done it? in terms of leaving the option for separating the debt in the future

Scofflaw

Cookie_Monster wrote: »

Er, it's come from the exchequer, which has borrowed money to spend in other areas because it's spent money from those areas on the banks.

So while technically they can argue bank money came from the state and not the bailout its just an cheap accounting trick to hide the direct link...

Well, no, not really - while I appreciate money is fungible in itself, the sources of money aren't, and a point has been made of ensuring that only "Irish" money has gone into the banks.

To put that another way, say your business needs €25k, and you need €50k for house repairs. You have €25k cash in hand, which you can put to either. If you put your €25k cash into the house, and use borrowed money for the other €25k house and the €25k business, the bank now has an interest in your business. If, on the other hand, you put your €25k cash into the business, and keep the borrowed money solely for the house, the bank has no interest in your business.

Deleted User wrote: »

Isnt that the worst way they could have done it? in terms of leaving the option for separating the debt in the future

You would think so, wouldn't you? Makes me wonder what the point is, exactly. And it makes Alan Ahearne's recent piece very surprising, because his specific argument is that the form of the bailout - that is, any bank money going via the state - is a bad form, when it's not actually happening at all.

The most obvious explanation I can think of is that if bailout money goes into the banks, the troika may look more closely into the banks - if not, then not.

cordially,
Scofflaw

Sponge Bob

This is BS though. It could have been true in 2007 when the exchequer ran a surplus but from 2008 onwards the exchequer ran a current account deficit and unless the money can clearly be shown coming from the NPRF it was BORROWED on the margins as the bank bailouts were unbudgeted current expenditure.

roro2

€17.5bn of the €85bn EU/IMF aid package was self-funded, i.e. Ireland already had this cash in the NPRF, so external aid amounted to €67.5bn. Part of the EU/IMF conditions was that the €17.5bn would be "spent" rather than being retained in cash to make up the €85bn total.

€35bn of the €85bn was earmarked for bank recapitalisation (not all of the €35bn has been needed, so far). I am not sure whether we were told to specifically use the existing NPRF cash rather than Troika money to recapitalise the banks, but it doesn't really matter - the EU/IMF don't recapitalise banks directly (potentially pre-Spain of course). Their funds were always going to be transferred to the government first - it is the government who they have entered into agreement with - and then puty into the banks as needed. The argument doing the rounds now, particularly with Spain, is that the government should be left out of the loop, with funds going directly to the banks and the aid conditions also attaching to the banks.

Sleepy

Could it have been insisted upon by the Troika on the basis that should an extremist government get elected, they wouldn't be able to renege on the "bank debt" as it could be shown that all monies owed were borrowed for current expenditure?

Obviously, I can't imagine the distinction between different forms of sovereign debt would be understood by such a looney left, never mind upheld but maybe it made sense in some bureaucrat's head?

Farmer Pudsey

Where the money came from to bail out the banks dose not matter the reality is that it cost 60 odd million and maybe more as we have share's in the banks that may not be worth what we think.

At the end of the day it is 60 million that we should not have had to borrow the quote below explains part

Scofflaw wrote: »

To put that another way, say your business needs €25k, and you need €50k for house repairs. You have €25k cash in hand, which you can put to either. If you put your €25k cash into the house, and use borrowed money for the other €25k house and the €25k business, the bank now has an interest in your business. If, on the other hand, you put your €25k cash into the business, and keep the borrowed money solely for the house, the bank has no interest in your business.

However you could also explain as you need to borrow 50K to repair your house and 25 million for you business the bank knows that your business is a limited company and it either makes you give a personel gurantee or it puts it onto you morgatage which your spouse has to sign up for as well.

No matter what way we look at it at the end of the day Irish taxpayers are responsible at present for 60 odd million of bank debt and a lot more if you take NAMA into account.

antoobrien

Scofflaw wrote: »

So while the public perception of the bailouts is that it's first and foremost for the banks, the truth is entirely the reverse - none of the bailout money has gone into the banks. Which leads, of course, to several questions - what exactly is Alan Ahearne playing at? Why is this not a better known fact? And why has ever effort apparently been made to ensure that only Irish money goes into the banks?

cordially,
but also somewhat surprised and puzzled,
Scofflaw

Scofflaw the explanation is quite simple: people won't believe you if you try to tell them. I've been trying to tell people that we've only paid out about €15bn from the exchequer for about a year. I had to sit down one of my friends (the guy has a phd so he's not stupid) and walk him through the exchequer statements and trioka agreement before he grasped it.

The banks are a convenient scapegoat, but even if the banks hadn't failed in September 2008 we'd still have a significant deficit. The total deficit since 1/1/2008 is approx €87.5 billion (based on exchequer statements up to the end of May). Taking out the €15bn paid to the banks, the non-banking portion of the deficit is €72.5bn.

Cookie_Monster wrote: »

Er, it's come from the exchequer, which has borrowed money to spend in other areas because it's spent money from those areas on the banks.

So while technically they can argue bank money came from the state and not the bailout its just an cheap accounting trick to hide the direct link...

It doesn't mean that it had to come from the bailout either. The bailout specifiies that €35bn is made available for the banks, over half of which is from the NPRF anyways. And if one can recall there was an infamous comment about 2 months before the bailout: "We're funded through June Next year" - that requires about €20bn of a cash pile. That makes about €37bn of a cash pile. Note that the promissory note is €31bn, we've enough cash to cover the rest of the bailout, with some to spare for the notes. The troika won't if we use the rest of the (bailout) cash to fund the exchequer - as long as we hit the agreed spending ratios.

roro2

Where the money came from to bail out the banks dose not matter the reality is that it cost 60 odd million and maybe more as we have share's in the banks that may not be worth what we think.

The amount of cash put into the banks doesn't take account of the shares ("investment") that the NPRF now has, so these figures won't be revised up if the shares do end up being worth zero, and could be revised down if the shares are eventually realised for cash, which I don't think is likely at least in the short-medium term. The cost could be higher if the banks do need more capital and the State is again the only source.

roro2

The banks are a convenient scapegoat, but even if the banks hadn't failed in September 2008 we'd still have a significant deficit. The total deficit since 1/1/2008 is approx €87.5 billion (based on exchequer statements up to the end of May). Taking out the €15 the non-banking portion of the deficit is €72.5bn.

As an aside, the banks have paid the government more than €500m in guarantee fees since the start of the year - that's well over €1 billion in a full year. How well is this understood?

antoobrien

roro2 wrote: »

As an aside, the banks have paid the government more than €500m in guarantee fees since the start of the year - that's well over €1 billion in a full year. How well is this understood?

Not at all well. Same as the fact that between the fees from the two guarantees & BOIs capital raising (sale of shares) we've gotten well over €3bn back. Not much but it does soften the blow a little.

Scofflaw

Sponge Bob wrote: »

This is BS though. It could have been true in 2007 when the exchequer ran a surplus but from 2008 onwards the exchequer ran a current account deficit and unless the money can clearly be shown coming from the NPRF it was BORROWED on the margins as the bank bailouts were unbudgeted current expenditure.

Possibly Noonan is lying to the Dáil, but that's a pretty serious charge, and I can't see the point of him doing so.

Sleepy wrote:

Could it have been insisted upon by the Troika on the basis that should an extremist government get elected, they wouldn't be able to renege on the "bank debt" as it could be shown that all monies owed were borrowed for current expenditure?

Obviously, I can't imagine the distinction between different forms of sovereign debt would be understood by such a looney left, never mind upheld but maybe it made sense in some bureaucrat's head?

I don't think so, since the troika certainly provided a sufficient facility earmarked for the banks to make borrowing from the troika for the banks a possibility. And if you're reneging on IMF debt you're probably not concerned about niceties like what went where.

I'm not expecting an exciting explanation here, but it's clear that a particular point has been made of using only "Irish" money for the banks, and I do wonder why, particularly given that it's not really publicised.

cordially,
Scofflaw

Sponge Bob

Much of the remainder of the bailout is in the form of Emergency Liquidity Assistance or ELA. (we call it Exceptional but the ECB calls it Emergency). These are around €50bn of IOUs that the banks were given by the Central Bank to 'balance' their books.

It would mean that were the Euro to collapse we would need a new central bank as the old one is the most spectacularly bankrupt central bank in Europe.

Explained Here > http://www.facebook.com/note.php?note_id=196544997039194

So our Central Bank created a sort of IOU they gave to the banksters. They were allowed to do so by the ECB.

antoobrien

Scofflaw wrote: »

I'm not expecting an exciting explanation here, but it's clear that a particular point has been made of using only "Irish" money for the banks, and I do wonder why, particularly given that it's not really publicised.

The only reason I can think of is that money from the NPRF, and any money previously borrowed for other reasons (i.e. public spending for the first 6 months of 2011) is not new money on the GGD. Given that the bailout provides all additional cash that taxation can't raise for the 2011-2014 period, they can claim that the banks (PNs excepted) have been recapitalized from existing resources causing no change to the pre-bailout GGD.

This means that the can claim the only debt affecting GGD is the IBRC debt (PNs), which they are attempting to spread over multiple budget cycles rather than "borrowing" it all up front.

Scofflaw

Farmer Pudsey wrote: »

Where the money came from to bail out the banks dose not matter the reality is that it cost 60 odd million and maybe more as we have share's in the banks that may not be worth what we think.

It would still be slightly less - the bailout figures are gross, and take no account of the value of the shares acquired, so the only way those could make the bailout costs larger is if they had a negative value.

cordially,
Scofflaw

Scofflaw

Sponge Bob wrote: »

Much of the remainder of the bailout is in the form of Emergency Liquidity Assistance or ELA. (we call it Exceptional but the ECB calls it Emergency). These are around €50bn of IOUs that the banks were given by the Central Bank to 'balance' their books.

It would mean that were the Euro to collapse we would need a new central bank as the old one is the most spectacularly bankrupt central bank in Europe.

Explained Here > http://www.facebook.com/note.php?note_id=196544997039194

So our Central Bank created a sort of IOU they gave to the banksters. They were allowed to do so by the ECB.

No, I'm afraid that's entirely irrelevant - the liquidity assistance to the banks is not part of the bailout.

cordially,
Scofflaw

Scofflaw

antoobrien wrote: »

The only reason I can think of is that money from the NPRF, and any money previously borrowed for other reasons (i.e. public spending for the first 6 months of 2011) is not new money on the GGD. Given that the bailout provides all additional cash that taxation can't raise for the 2011-2014 period, they can claim that the banks (PNs excepted) have been recapitalized from existing resources causing no change to the pre-bailout GGD.

This means that the can claim the only debt affecting GGD is the IBRC debt (PNs), which they are attempting to spread over multiple budget cycles rather than "borrowing" it all up front.

The problem with those possibilities is that bank bailout amounts were added to the deficit for last year (true, not the GGD), while the PNs were taken upfront onto the GGD as one large amount. Furthermore, the policy of using cash reserves and NPRF to fund the banks seems to have been consistent pre and post bailout across two different governments.

And if the value of the exercise is a positive PR outcome, then it's a little strange no attempt is apparently being made to use it as such.

cordially,
Scofflaw

antoobrien

Scofflaw wrote: »

The problem with those possibilities is that bank bailout amounts were added to the deficit for last year (true, not the GGD), while the PNs were taken upfront onto the GGD as one large amount. Furthermore, the policy of using cash reserves and NPRF to fund the banks seems to have been consistent pre and post bailout across two different governments.

And if the value of the exercise is a positive PR outcome, then it's a little strange no attempt is apparently being made to use it as such.

cordially,
Scofflaw

That would depend on whom it is aimed. The fact that there's no publicity of this here at home suggest that it's not for a domestic audience. Since most people would rather listen to DMcW & CG, there's probably little point in wheeling this out. Besides, they'd still get stick for the fact that the money is being spent in the first place.

No, the aim of this appears to be for the money markets. If you get a chance I suggest you look at the NTMA presentation for institutional investiors to see how it stacks up. (I haven't had a chance, so I can't comment yet).

Scofflaw

antoobrien wrote: »

That would depend on whom it is aimed. The fact that there's no publicity of this here at home suggest that it's not for a domestic audience. Since most people would rather listen to DMcW & CG, there's probably little point in wheeling this out. Besides, they'd still get stick for the fact that the money is being spent in the first place.

No, the aim of this appears to be for the money markets. If you get a chance I suggest you look at the NTMA presentation for institutional investiors to see how it stacks up. (I haven't had a chance, so I can't comment yet).

Hmm. That table appears on the very last page, but that's it. No attention is drawn to the fact that only "Irish" fiscal resources have been put into the banks.

cordially,
Scofflaw

Sponge Bob

Scofflaw wrote: »

No, I'm afraid that's entirely irrelevant - the liquidity assistance to the banks is not part of the bailout.

€50bn of ELA to balance the books is part of the bailout. It is furthermore guaranteed to some extent by the taxpayer.

It wasn't drawn on the exchequer or on IMF/EU funds and is not part of the GGD but it is a liability.

antoobrien

Sponge Bob wrote: »

€50bn of ELA to balance the books is part of the bailout.

The ELA isn't to balance the books - either of the government or the banks. It's to guarantee the liabilities of the banks (both current & capital).

Scofflaw wrote: »

Hmm. That table appears on the very last page, but that's it. No attention is drawn to the fact that only "Irish" fiscal resources have been put into the banks.

cordially,
Scofflaw

Does it need to? Everybody knows the timings of the bailouts and the timing of drawdown of the troika & bilateral loans is publicly available.

Lawrence1895

I don't think, the government would admit, that they used tax payer's money to bail out the bankers and bondholders...regardless, if they did or not.

antoobrien

Lars1916 wrote: »

I don't think, the government would admit, that they used tax payer's money to bail out the bankers and bondholders...regardless, if they did or not.

Why bother not admitting it. The troika finding is a loan that will be paid back with taxpayer money.

Btw the NPRF isn't funded (primarily) by the taxpayer, it's largely from sales of state assets e.g. the Eircom flotation.

Lawrence1895

antoobrien wrote: »

Why bother not admitting it. The troika finding is a loan that will be paid back with taxpayer money.

Btw the NPRF isn't funded (primarily) by the taxpayer, it's largely from sales of state assets e.g. the Eircom flotation.

The electorate might be angry? Disappointed? Accusing them of lying and hypocrisy, because they took money out of the health and education sector to bail out the banks?

Scofflaw

Lars1916 wrote: »

The electorate might be angry? Disappointed? Accusing them of lying and hypocrisy, because they took money out of the health and education sector to bail out the banks?

No, that does come back to the point of money being fungible - taking the money from the NPRF or Exchequer cash is neither more nor less taking money out of the health and education sector than using troika loans directly.

In terms of taxpayer liability, supporting austerity etc, using NPRF/cash resources makes not a jot of difference. Which is precisely what's odd about this.

cordially,
Scofflaw

jmayo

Scofflaw wrote: »

No bailout money has gone into the banks

OK, I admit I was surprised by this. In looking for answers to posts in the Alan Ahearne thread, I came across this handy little table of bank recapitalisation costs:

So while the public perception of the bailouts is that it's first and foremost for the banks, the truth is entirely the reverse - none of the bailout money has gone into the banks. Which leads, of course, to several questions - what exactly is Alan Ahearne playing at? Why is this not a better known fact? And why has ever effort apparently been made to ensure that only Irish money goes into the banks?

cordially,
but also somewhat surprised and puzzled,
Scofflaw

Dear somewhat suprised and puzzled,
just answer one question please with just Yes or No
And please no ifs buts or maybes about what might have happened eventually.

Would we have needed a bailout in autumn 2010, but for the bank bailout and bank guarantees ?


Then after that you can tell us all how the bank bailout hasn't and isn't going to cost us dearly.

BTW just as a cursory look even on wikipedia which would not be my preferred reference, the government support for the Irish banks had risen to over 30% of GDP.


I am not sure if this thread is to make us feel that the banks haven't or aren't a big problem or that our current deficit is our only problem ?

kippy

How was NAMA funded? Or are those figures included in the table in the OP?
(Sorry not too afay with some of this)

Ultimately, no matter where the money came from, we would possibly have been able to avoid the "bailout" (at least for 2-3 more years) if we didn't have the serious banking issue that we did have, and perhaps "the markets" would have been more likely to lend to us directly at "acceptable rates".
Would this be correct?

antoobrien

jmayo wrote: »

Would we have needed a bailout in autumn 2010, but for the bank bailout and bank guarantees ?

The deficit for 2008, 2009 & 2010 was €56.1bn (exchequer statements).

The value of the banks payments were to 2010 were €4.725bn. Without the bank bailout & guarantees we were still €51.375bn in defecit by the end of 2010.

So yes were would still have needed the bailout. It would have been about €17bn smaller (the portion we are borrowing to fund the banks according to the troika agreement)

antoobrien

kippy wrote: »

How was NAMA funded? Or are those figures included in the table in the OP?

No, NAMA is a 51% privately owned entity. It was funded through bonds that NAMA issued. There's an argument whether they're actually ECB or Irish government paper, but it's a bit pointless because as a Ltd company they can only lose the 100m initial investment.

kippy wrote: »

Ultimately, no matter where the money came from, we would possibly have been able to avoid the "bailout" (at least for 2-3 more years) if we didn't have the serious banking issue that we did have, and perhaps "the markets" would have been more likely to lend to us directly at "acceptable rates".
Would this be correct?

Looking at the figures outlined earlier, given that we've borrowed €17bn for the banks, we'd have avoided bailout for one year at most.

Sponge Bob

You cannot ignore ELA Guys! It is about as large as all our borrowings from all sources to date since 2008 inclusive.

http://www.bloomberg.com/news/2012-05-24/frozen-europe-means-ecb-must-resort-to-ela-as-finance-lights-dim.html

The first rule of ELA is you don’t talk about ELA.

It permits an operation where a sovereign ( or is it?? ) Central Bank creates a security that is acceptable to the ECB for Repo Operations etc.

Each ELA loan requires the assent of the ECB’s 23-member Governing Council and carries a penalty interest rate, though the terms are never made public. Owen estimates that euro-area central banks are currently on the hook for about 150 billion euros ($189 billion) of ELA loans.

The program has been deployed in countries including Germany, Belgium, Ireland and now Greece. An ECB spokesman declined to comment on matters relating to ELA for this article.

The ECB buries information about ELA in its weekly financial statement. While it announced on April 24 that it was harmonizing the disclosure of ELA on the euro system’s balance sheet under “other claims on euro-area credit institutions,” this item contains more than just ELA. It stood at 212.5 billion euros this week, up from 184.7 billion euros three weeks ago.

The ECB has declined to divulge how much of the amount is accounted for by ELA.
Ireland’s Case

Further clues can be found in individual central banks’ balance sheets. In Ireland, home to Europe’s worst banking crisis, the central bank’s claims on euro-area credit institutions, where it now accounts for ELA, stood at 41.3 billion euros on April 27.

antoobrien

Sponge Bob wrote: »

You cannot ignore ELA Guys! It is about as large as all our borrowings from all sources to date since 2008 inclusive.

ELA isn't something that the Irish government are on the hook for, but the ECB. If the ECB goes bust, then we've a lot more trouble than either the the deficit or the GGD (which is why I'm not worried about it because the Germans are pragmatic, not suicidal).

jmayo

antoobrien wrote: »

The deficit for 2008, 2009 & 2010 was €56.1bn (exchequer statements).

The value of the banks payments were to 2010 were €4.725bn. Without the bank bailout & guarantees we were still €51.375bn in defecit by the end of 2010.

So yes were would still have needed the bailout. It would have been about €17bn smaller (the portion we are borrowing to fund the banks according to the troika agreement)

So you are saying that the markets would have frozen us out even without the huge bank debts/bond repayments being made soverign ?

BTW where did all the money that was used to fund NAMA and bank recapitalisation come from again and who owes it ?
AFAIK it comes to a hell of a lot more than 17 billion. :rolleyes:

BTW I am not one of these people that believes the banks are the reason we need cutbacks, but I do think we could have staggered on without the bailout if we hadn't the banks hanging around our necks.
Actually much like Spain could have staggered along until the banks came a calling.

Sponge Bob

antoobrien wrote: »

ELA isn't something that the Irish government are on the hook for, but the ECB.

Wrong. The Irish Government pays it off through those famous Anglo Promissory Notes.

antoobrien

Sponge Bob wrote: »

Wrong. The Irish Government pays it off through those famous Anglo Promissory Notes.

Promissory notes is for IBRC, so how does that effect the (ELA) lending to AIB, BOI & PTSB?

Scofflaw

Sponge Bob wrote: »

You cannot ignore ELA Guys! It is about as large as all our borrowings from all sources to date since 2008 inclusive.

It permits an operation where a sovereign ( or is it?? ) Central Bank creates a security that is acceptable to the ECB for Repo Operations etc.

Sponge Bob, the ELA is irrelevant to this thread, which is about the use of the troika bailout money, of which the ELA does not form any part. Please desist from further off-topic posting. If you need that officially, we can do that.

regards,
Scofflaw

antoobrien

jmayo wrote: »

So you are saying that the markets would have frozen us out even without the huge bank debts/bond repayments being made soverign ?

Yes that's my opinion.

jmayo wrote: »

BTW where did all the money that was used to fund NAMA and bank recapitalisation come from again and who owes it ?
AFAIK it comes to a hell of a lot more than 17 billion. :rolleyes:

NAMA funding has been dealt with extensively in this forum, I suggest you go search if my previous answer isn't detailed enough - however it's not funded from government coffers so we don't need to worry about it (here).

jmayo wrote: »

BTW I am not one of these people that believes the banks are the reason we need cutbacks, but I do think we could have staggered on without the bailout if we hadn't the banks hanging around our necks.

The figures shown in this thread make it clear that the banks aren't the millstone that people seem to believe it was. As I've said earlier:

antoobrien wrote: »

but even if the banks hadn't failed in September 2008 we'd still have a significant deficit. The total deficit since 1/1/2008 is approx €87.5 billion (based on exchequer statements up to the end of May). Taking out the €15bn paid to the banks, the non-banking portion of the deficit is €72.5bn.

The problem was always the deficit, the bank failure was just the tipping point.

jmayo wrote: »

Actually much like Spain could have staggered along until the banks came a calling.

The difference between us and Spain is that it took a few extra years for their deficit to become a problem. They are already in a deficit correction program (or whatever its called). The only reason they've come after Spain now is that there were easier targets hanging about (Greece in particular). I've no doubt that about this time next year we'll start drifting back into the markets sights, if we're not there already.

Dotsie~tmp

antoobrien wrote: »

Yes that's my opinion.


NAMA funding has been dealt with extensively in this forum, I suggest you go search if my previous answer isn't detailed enough - however it's not funded from government coffers so we don't need to worry about it (here).



The figures shown in this thread make it clear that the banks aren't the millstone that people seem to believe it was. As I've said earlier:




The problem was always the deficit, the bank failure was just the tipping point.



The difference between us and Spain is that it took a few extra years for their deficit to become a problem. They are already in a deficit correction program (or whatever its called). The only reason they've come after Spain now is that there were easier targets hanging about (Greece in particular). I've no doubt that about this time next year we'll start drifting back into the markets sights, if we're not there already.

So your saying its the debt burden that locked us out, of which the soverign debt/deficit spending mattered most? Have you not considered markets factoring in future bank liabilities? The global economy is cooling and the Euro is no longer guaranteed survival. The banks are an open ended potentially huge liability in such scenarios.

Sponge Bob

Scofflaw wrote: »

Sponge Bob, the ELA is irrelevant to this thread, which is about the use of the troika bailout money, of which the ELA does not form any part. Please desist from further off-topic posting. If you need that officially, we can do that.

The table you posted originally shows Troika Money going into the banks. Arguably 60% was 'our' money (NPRF) and 20% was Borrowed in Market operations ( we ran a current account deficit in each year shown as you may choose to recall which funded much capital and current spending and still does although capital spending is anorexic as one would expect).

The final 20% ( the exchequer portion of PCAR B ) was Troika money.

When the Troika moved in c.12/2010 we still had around €15bn of NTMA funds borrowed in Market Operations The PCAR B adequacy ratios statement was published in March 2011 and we drew heavily (€11bn) off the Troika/IMF between Dec 2010 and Feb 2011 (compare note 7 in each link)

On a narrow technicality the PCAR B operations did not result in any significant dilution of pre 2009 shareholders in AIB/BoI and PCAR A era operations resulted in Nationalisation or major dilution of existing shareholders so the correct posiition is that we took over 2 of the banks with our own money and money we borrowed ourselves and sadly we rescued Anglo and Nationwide from bankruptcy.

I think BoI did not participate in our PCAR B funding slosh and raised funds on the open market, PCAR B did not result in the state gaining any significant further shareholding in BoI. However I do not think the Permo takeover was funded under PCAR B but was a later panic operation paid for by the TROIKA/IMF. You could possibly add a few quid to that €20bn total so.

The sum total of the drawdown of the Troika/IMF funds will reach €45Bn at the end of this month which will be the first time that we owe the Troika/IMF as much as we seemingly owe the ELA operation as it happens.

We have further drawing rights of €22.5bn between now and around the end of 2013 by which stage we will have exhausted our EU/IMF bailout timeline/fund We ran a deficit of €6.6bn in the first 5 months which implies a run rate of nearly €16bn a year.

So no, we didn't pay in full for the banks, I think we merely used the NPRF as a slush fund as and when required to avoid being seen overborrowing in Market Operations.

Pottler

No Bailout money went directly to the banks because that keeps the bailout debt amounts firmly on the books of the Soverign. Much nicer to have a whole Country and its taxpayers on the hook for the money than some rocky Bankers. The Troika may be ruthless, but they're not dumb.

Sponge Bob

Sovereign drew down Troika funds and shovelled them straight into the banks, the OP was commenting on the provenance of Capitalisation and Nationalisation funds.

antoobrien

Dotsie~tmp wrote: »

So your saying its the debt burden that locked us out, of which the soverign debt/deficit spending mattered most?


No, I'm saying that if we hadn't had the bank problem we'd have lasted about another year before a bailout.

Take a look at the bailout again - we're borrowing €17bn over 3 years for banks. That's roughly equal to the average annual deficit over the past 4 years.

Dotsie~tmp wrote: »

Have you not considered markets factoring in future bank liabilities?

Yes I have - after all I'm not claiming that the banks are totally irrelevant. What I believe is that they're not, and are nowhere near being, the main problem we have.

Dotsie~tmp wrote: »

The global economy is cooling and the Euro is no longer guaranteed survival.

What has that got to do with the topic at hand? We're discussing the curious accounting arrangements around the use of the bailout money, not the future of it.

Btw no currency is guaranteed survival, just take a look at the Zimbabwe dollar - it so devalued as to be utterly useless. It's an object lesson in the damage of inflation. But that is also o.t.

Dotsie~tmp wrote: »

The banks are an open ended potentially huge liability in such scenarios.

No they're not, like any entity (business, organisation or person) - they're only liable for what they owe. However calculating what they owe isn't the easiest thing, even with full access to the books.

Sponge Bob

They are not open ended. They owe around €150bn and we have not even started on the €30-50bn of mortgage writedowns and personal insolvencies coming down the tracks.

Closed ended to the tne of around €200bn I make it. BUT we only spent €20bn shown in the OP acquiring those liabilities and the bulk of the liability is still expressed as ECB Repo cash.

antoobrien

Sponge Bob wrote: »

They are not open ended. They owe around €150bn and we have not even started on the €30-50bn of mortgage writedowns and personal insolvencies coming down the tracks.

Where do you get this rubbish out of sponge? Or do you realize that the second round of capitalisation is aimed at Blackrock's estimation of further losses totaling €16bn.

So come on put some sources forward (that aren't newspaper articles written by hacks that can't add).

Sponge Bob

Blackrocks estimate is too low. Mind you so were 2009 and 2010 estimates of capital adequacy and injections designed to deal with that undercapitalisation. These are shown in the original post.

Since then the Permo has made a few glugging noises, last summer and again in february 2012

Rather than read the media I suggest you read the likes of NamaWinelake who is a dab hand with the spreadsheets God Bless them.

http://namawinelake.wordpress.com/2012/06/11/2011-annual-reports-for-irish-banks-reveal-potentially-catastrophic-losses-and-additional-bailouts-requirements/

The 2011 annual reports for Bank of Ireland, AIB/EBS and Irish Life reveal the scale of losses that will be in store if our economy doesn’t turn around and grow. Each of these three financial institutions published two valuations for their loan-books – a “carrying value” which is what is reported in the accounts and represents the book value of the loans less a convoluted provision for impairments and a “fair value” which represents what the loans are worth today if they were called in and the underlying asset was used to pay off the loan.

Here is the summary of the loan books in 2011 which show that the overall difference between “carrying value” and “fair value” for these three institutions is an almighty €38bn which if it materialised would wipe out the entire capital base and need nearly €20bn in additional capital to boot, just to keep banks solvent.

To give them adequate capital buffers might involve a further €20bn. So €40bn, all told on top of the €72bn current and projected cost.

Carry Value vs Fair Value.

2010 Annual Reports.



2011 Annual Reports.



None of the banks have provided adequately for the losses they have cystallised so far, they have indulged in can kicking like converting Repayment to Interest Only and stretching terms to make the loans 'perform' .

Back to Namawinelake.

Weren’t the 2011 stress tests supposed to put an end to this drip-drip of bad news on the banks, which has entailed a journey from “cheapest bailout in the world” to what is beginning to look like “most expensive bank bailout in the world”? Yes, the stress tests were supposed to draw a line under the banks and their prospective losses, but the trouble is the economy is continuing to list, and our export markets are all looking shaky. We haven’t yet reached the depths in property prices projected in the stress tests, but we are on the eve of getting personal insolvency legislation which may crystallise losses for the banks as people use new arrangements. Last year’s stress tests may need to be revisited in a few months.

And the Personal Insolvency legislation will inevitably lead to a very disorderly deterioration in carrying values and in loss recognition.

There are perhaps €100bn - €110bn of mortgages out there. I posited a loss of €30-50bn of that €100bn mortgage book over time and driven by economic circumstances and personal insolvency factors both together with proper accounting recognition of losses realised but not booked to date.

antoobrien

Sponge Bob wrote: »

Blackrocks estimate is too low.

Possibly, but then in 3 years we could decide they're too high. 1 year later there's no evidence to support your assertion that they're drastically low.

Sponge Bob wrote: »

Mind you so were 2009 and 2010 estimates of capital adequacy and injections designed to deal with that undercapitalisation. These are shown in the original post.

The rules for banking capital have changed since the initial capital injections in 2009 - or have you head about Basel III The banks are capitalized to blackrock's

Sponge Bob wrote: »

And the Personal Insolvency legislation will inevitably lead to a very disorderly deterioration in carrying values and in loss recognition.

Won't be applied to chances who could have afforded but didn't pay the debt - estimated to be between 10% - 20% of mortgage arrears.

Sponge Bob wrote: »

There are perhaps €100bn - €110bn of mortgages out there. I posited a loss of €30-50bn of that €100bn mortgage book over time and driven by economic circumstances and personal insolvency factors both together with proper accounting recognition of losses realised but not booked to date.

I presume you mean 30-50 in addition to the blacrock forecast losses - which are forecast to be €27 billion on the €140bn mortgage loan book between 2011-2013.

As for namawinelake

So far Ireland has spent €67.8bn bailing out the banks, comprising €62.8bn in cash and promissory notes directly injected into the banks, and a further €5bn gifted to the banks by NAMA in state-aid and for which we are now on the hook if property prices don’t recover

We haven't spent €67bn on the banks. We certainly haven't spent all the money on the promissory notes (amounting to half the total).

We have committed to covering up to €62.5bn of capital losses. The analysis on the potential loss is a theoretical exercise that would need the entire loan book to try and sell at once. How likely is that?

Scofflaw

Sponge Bob wrote: »

The table you posted originally shows Troika Money going into the banks. Arguably 60% was 'our' money (NPRF) and 20% was Borrowed in Market operations ( we ran a current account deficit in each year shown as you may choose to recall which funded much capital and current spending and still does although capital spending is anorexic as one would expect).

The final 20% ( the exchequer portion of PCAR B ) was Troika money.

When the Troika moved in c.12/2010 we still had around €15bn of NTMA funds borrowed in Market Operations The PCAR B adequacy ratios statement was published in March 2011 and we drew heavily (€11bn) off the Troika/IMF between Dec 2010 and Feb 2011 (compare note 7 in each link)

Heh - that doesn't prove your claim, though, does it? We know that at most we're talking about the €6.5bn of Exchequer cash here, and you're simply making an assumption that because troika money was drawn down, that cash had already been used, which you don't know to be the case, and which as far as I know is not the case - the government has maintained a cash buffer throughout.

And I'll remind you we have a direct statement from Noonan that contradicts your claim:

However, the cost of bank recapitalisation to date has been met from our existing resources – cash reserves and the NPRF.

Source: http://debates.oireachtas.ie/dail/2012/06/06/00097.asp

Of the two of you, I admit to taking a statement by the Minister for Finance somewhat more seriously.

And, again, please try to stay on topic, rather than weltering around introducing every other issue relating to the banks.

cordially,
Scofflaw

Sponge Bob

Minister Noonan would have been quoting his Departmental Civil Servants.

I'll leave the last word on them lads to his predecessor.....speaking to Ivan Yates on Newstalk.

http://thestory.ie/quotes-from-brian-lenihan/

BL: No you’re missing the point! This is an accounting device! This is not real borrowing! What the markets look at is real borrowing. Not accountancy devices… – April 26 2010.

So it was 'the cheapest bailout in the world' and 'we managed it entirely from our own resources'. Is that what I am meant to say in final summation.....?????

Scofflaw

Sponge Bob wrote: »

Minister Noonan would have been quoting his Departmental Civil Servants.

I'll leave the last word on them lads to his predecessor.....speaking to Ivan Yates on Newstalk.

http://thestory.ie/quotes-from-brian-lenihan/



So it was 'the cheapest bailout in the world' and 'we managed it entirely from our own resources'. Is that what I am meant to say in final summation.....?????

Well, to quote BL, you're missing the point (of the thread). Whether it's an accounting trick or not, the money that has been put into the Irish banks has been treated in such a way as to ensure that legally - and in accounting terms - its provenance as "Irish own resources" has been kept beyond doubt.

And it's something the government both seems to have made a point of, and to be proud of. I'm not sure why that is, and the various issues of ELA, accounting tricks, etc, that you've raised are all entirely irrelevant to that point.

cordially,
Scofflaw

Pottler

Sponge Bob wrote: »

Sovereign drew down Troika funds and shovelled them straight into the banks, the OP was commenting on the provenance of Capitalisation and Nationalisation funds.

No, emphatically, the OP was commenting that "no bailout money went into the banks". It's also the thread title. And it's also entirely logical that the recapitalisation money was drawn from domestic funds rather than externally provided funding, because that does not muddy the waters in the case of a dispute as to who got what and who owes what. You are radically overcomplicating a simple transaction. Troika funds were provided direct to the Soverign and the state was instructed to use its own Capital assets to provide "liquidity" to the banking sector. To me that's blindingly obvious and simply "ringfences" the States absolute liability to repay funds received with no recourse (to either the electorate or the Troika) to plead absolution as "sure the money went to them bankers". The money was for State expenditure - so the money is the states liability. I would imagine it's a simple measure to ensure no room to renege on what has been agreed to date.:)Edit: Pretty much beaten to the punch by Scoffy there. I should have read on past your post Spongebob. :-)

noodler

I thought it was always the case unofficially that we would use our own resources first for the recaps.

The 85bn bailout was
22.5bn EFSF
22.5bn EFSM (incl bilateral loans)
22.5bn IMF
17.5bn Irish Resources (NPRF and Exchquer balances)

The NPRF's involvement in all the recaps since the bailout was a sure sign of this (the big AIB one in December 2010 onwards).

I don't think it is too significant.