# AIB & BOI - Summary of bail out terms



## D8Lady (11 Feb 2009)

Summary of terms, from RTE

 Government to appoint 1 in 4 directors.
 Banks to receive 3.5 billion each.
 Banks will pay interest rate of 8%.

There will be 30% increase in mortgages to First Time Buyers.
 10% increase in loans to SMEs.
 Hold off home repossessions for 12 months.

 33% reduction in senior executive pay.
 Salaries to be frozen.
 No performance bonuses this year.
 Non-exec directors fees cut by 25%

Reactions?


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## TheBlock (11 Feb 2009)

D8Lady said:


> Summary of terms, from RTE
> 
> Government to appoint 1 in 4 directors.
> Banks to receive 3.5 billion each.
> ...


 
Government to appoint 1 in 4 directors.  _What good will this do?_
Banks to receive 3.5 billion each.  _When and how?_
Banks will pay interest rate of 8%. _When and How is this paid?_

There will be 30% increase in mortgages to First Time Buyers. _Are there any? If Not how can this be enforced?_
10% increase in loans to SMEs. 
Hold off home repossessions for 12 months.

33% reduction in senior executive pay. _Good Start_
Salaries to be frozen. _All or just senior?_
No performance bonuses this year. _Or until we the public have been paid back in full. They should be traeted as public servants now no bonuses._
Non-exec directors fees cut by 25% _Good Start_

_These are genuine questions if anyone has anserws or links to answers_


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## Cameo (11 Feb 2009)

appointing directors should mean government has voting rights 25% at meetings and should at the least get a better understanding of what's going on at the banks

assume money will be paid over once shareholders of banks agree

8% interest to be paid annually 

agree not sure anyone wants the cash available and no way I can think of how it would be enforced - this could backfire if money is lent to people on terms it should n't be... could see 100% mortgages here or money being lent were it should n't 

other big point of the plan is that government gets warrants on 25% of the shares at current price or something close so the taxpayer gets a return if the share price recovers from here 

first step - can't think why it took so long


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## diarmuidc (12 Feb 2009)

D8Lady said:


> There will be 30% increase in mortgages to First Time Buyers.


Where's the provios that borrowers can only borrow 80% of the mortgage with repayments capped at a % of their salary? Did we not learn *anything* from this housing bubble?


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## Mpsox (12 Feb 2009)

TheBlock said:


> Government to appoint 1 in 4 directors. _What good will this do? _One of the main issues with the banks at the minute is transparency or rather the lack of it. Having a govt appointed director should at least make it more apparent to the Govt as to what is going on in each bank. It needs however to be accompanied by a serious overhall of the regualtory bodies as well (in my view)
> Banks to receive 3.5 billion each. _When and how? _My understanding is that it will come from the pension reserve fund
> Banks will pay interest rate of 8%. _When and How is this paid?_ Govt is in effect taking preference shares in the bank and the sum will be paid as a dividend, in effect, the exchequer should get €560m pa from both banks until they buy back the preference shares
> 
> ...


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## VOR (12 Feb 2009)

There's nothing technically difficult to negotiate in the above. How could it take so long??
I would have liked to see more lending to businesses (10%), especially innovative start-ups and indigenous SMEs, and no increase in lending to FTB's (30%). 
Its enterprise that needs our money and not houses. Mortgage lending is fine as it is, thanks very much.

_“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant” Adams, Wealth of Nations_


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## Shawady (12 Feb 2009)

Is it a coincidence that BOI have issued a statement this morning that they will have to write of €6 billion (twice as much as previously stated), the morning after the bailout was approved?


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## Mpsox (12 Feb 2009)

VOR said:


> There's nothing technically difficult to negotiate in the above. How could it take so long??
> I would have liked to see more lending to businesses (10%), especially innovative start-ups and indigenous SMEs, and no increase in lending to FTB's (30%).
> Its enterprise that needs our money and not houses. Mortgage lending is fine as it is, thanks very much.
> 
> _“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant” Adams, Wealth of Nations_


 
Why negotiate in the first place?, why not do what they did in the UK?, call the banks in, tell them they are doing it, end of story.


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## D8Lady (12 Feb 2009)

Shawady said:


> Is it a coincidence that BOI have issued a statement this morning that they will have to write of €6 billion (twice as much as previously stated), the morning after the bailout was approved?



Isn't this what the concept of the "bad bank" was supposed to be about? Sweep all toxic debts into one place and then recapitalise the good bank.


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## NorthDrum (12 Feb 2009)

Mpsox said:


> Why negotiate in the first place?, why not do what they did in the UK?, call the banks in, tell them they are doing it, end of story.


 
Yeh I would love to hear the reasons why this wasnt done. 

Were I a cynic I would say that the government dont have the stones to do it, but to be honest I imagine its a little bit more complicated then that.

I know it would of been nice to see the banks get some rough love from our Taoiseach . . .


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## D8Lady (12 Feb 2009)

diarmuidc said:


> Where's the provios that borrowers can only borrow 80% of the mortgage with repayments capped at a % of their salary? Did we not learn *anything* from this housing bubble?



Evidently not. Perhaps this is in there to get the housing market moving again? 
I know several set of couples who are at the having baby / settling down stage who have good jobs (still) and a fair bit saved for a deposit. 
None of them are going to buy a house for at least 18 months, waiting for the bottom of the market.


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## dockingtrade (12 Feb 2009)

NorthDrum said:


> I know it would of been nice to see the banks get some rough love from our Taoiseach . . .


 
This would be very popular, Its strange....


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## Allen (12 Feb 2009)

With the mortgage rate around 5% and the banks paying 8% interest to the government for the bailout money - how will they not become bankrupt very quickly?


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## sfag (12 Feb 2009)

looks like these banks are the only ones who arnt at risk from losing their jobs. 
A pay freeze is hardly penal.


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## sfag (12 Feb 2009)

Allen said:


> With the mortgage rate around 5% and the banks paying 8% interest to the government for the bailout money - how will they not become bankrupt very quickly?


 
Indeed. Except business overdrafts will be set more than the 8% which means business will not get the benefit of lower interest rates. 

It doesent make sense. If the banks could not beat a rate of 8% from their creditor banks then how can they ever get back on track ???


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## csirl (12 Feb 2009)

I was dissappointed with this.

The Government should have come up with a package of measures/conditions to go with the bailout money. This package should have included things like the sacking of the majority of the senior management, proper financial reporting and controls and cost cutting measures such as cut in salaries of all bank employees etc. 

This should have been presented to the bank shareholders at an EGM called for the purpose with the message that if the package is not accepted in full, the Government will let the bank go under and the shareholders will lose everything. Government should also have decided that it was only going to help 4 out of the 6 banks, so only the first 4 shareholders who come back with a positive decision would get the money - this eliminates procrastination and shareholders trying to open up negotiations.

My guess is that the shareholders would have no option but to accept and would have no problem wielding the axe to their managements in order to stay in business.


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## Mpsox (12 Feb 2009)

sfag said:


> looks like these banks are the only ones who arnt at risk from losing their jobs.
> A pay freeze is hardly penal.


 
Ulster Bank(which I accept is not covered under this) is axing 10% of it's staff. It's parent group, the RBS in the UK is laying off over 2000 in what if the rumours are correct, is the first of many

NIB(again not covered under this) have said they are reviewing their branch structure

Irish independent reported at the end of jan that BOI were looking to lay off 1200 staff


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## VOR (12 Feb 2009)

csirl said:


> My guess is that the shareholders would have no option but to accept and would have no problem wielding the axe to their managements in order to stay in business.


 
My understanding is that AIB directors resign at each AGM and then are put forward for re-election. I might be cynical but perhaps the government didn't want to take shares as they don't have the balls to vote against the existing directors. 

It is down to the ordinary shareholder now to voice their disapproval of the directors....and then lose the vote because the institutions will return them anyway.


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## diarmuidc (13 Feb 2009)

VOR said:


> It is down to the ordinary shareholder now to voice their disapproval of the directors....and then lose the vote because the institutions will return them anyway.


If the shareholders don't fire their whole board after what has happened to their investment then they deserve those incompetents.


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## sfag (13 Feb 2009)

Mpsox said:


> Ulster Bank(which I accept is not covered under this) is axing 10% of it's staff. It's parent group, the RBS in the UK is laying off over 2000 in what if the rumours are correct, is the first of many
> 
> NIB(again not covered under this) have said they are reviewing their branch structure
> 
> Irish independent reported at the end of jan that BOI were looking to lay off 1200 staff


 
I choose the word ' these' carefully to mean only Anglo, BofI and AIB. So far no job losses.


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## sfag (13 Feb 2009)

diarmuidc said:


> If the shareholders don't fire their whole board after what has happened to their investment then they deserve those incompetents.


 
Whose the shareholers. The only ones left are gamblers and the government.


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## horatio1 (13 Feb 2009)

Its only a small issue but I thought they might have compelled the banks to pass on any further cuts in the E.C.B. rate?
And if they really wanted to be radical and show that the government were as concerned about ordinary people as they are the bankers. Why not force the banks to write off 5-10% of the mortgage of people who have 1 residence which is there P.R.U.
 I dont have a mortgage at the moment so I do not have a vested interest in this suggestion.It is surely a better suggestion than putting off repossessions for a year?If someone loses their job today, In the current climate the chances of being employed in the next year is minimal.If they are lucky enough to get a job then it is likely to be on lower wages so a reduction in the amount of their mortgage or even just paying the reduced interest payments would give them a better chance of holding onto the house.


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## Kemo_Sabe (13 Feb 2009)

summary fo bailout terms:

'burn through that 7bn there lads, plenty more where that came from'


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## DerKaiser (13 Feb 2009)

horatio1 said:


> Its only a small issue but I thought they might have compelled the banks to pass on any further cuts in the E.C.B. rate?
> And if they really wanted to be radical and show that the government were as concerned about ordinary people as they are the bankers. Why not force the banks to write off 5-10% of the mortgage of people who have 1 residence which is there P.R.U.
> I dont have a mortgage at the moment so I do not have a vested interest in this suggestion.It is surely a better suggestion than putting off repossessions for a year?If someone loses their job today, In the current climate the chances of being employed in the next year is minimal.If they are lucky enough to get a job then it is likely to be on lower wages so a reduction in the amount of their mortgage or even just paying the reduced interest payments would give them a better chance of holding onto the house.


I don't see why the banks should be made pass on the ECB cuts on variable rates. Why should the state see to it that homeowners uniformly benefit?  The banks still operate to make a profit for their investors, that has not changed!
Why write off performing mortgages. The bank should be allowed to get back their money, at a decent margin where possible, to 
1. ensure that the exposure of the tax payer is as limited as possible
2. the return to investors (including the €7bn being stumped up by the tax payer) is as good as possible
The guarantee was to protect depositors
The recapitalisation is to stimulate activity
The term bail-out is a complete misnomer as no one has been bailed out from their debts nor should they be
And I'm a mortgage holder!


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## D8Lady (13 Feb 2009)

If you pass on the rate cut, more money in your pocket. Money that you will hopefully spend to stimulate economy?


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## horatio1 (13 Feb 2009)

DerKaiser said:


> I don't see why the banks should be made pass on the ECB cuts on variable rates. Why should the state see to it that homeowners uniformly benefit? The banks still operate to make a profit for their investors, that has not changed!
> Why write off performing mortgages. The bank should be allowed to get back their money, at a decent margin where possible, to
> 1. ensure that the exposure of the tax payer is as limited as possible
> 2. the return to investors (including the €7bn being stumped up by the tax payer) is as good as possible
> ...


 
performing mortgages/profit for investors/decent margins-- of couse none of these are the sentiments and the prevalence of a greed culture that has got us to where we are?
 I have no problem with the banks making A profit but they really need to return to a certain level of customer focus and appreciation.How profitable will the balance sheets of these banks be when the thousands of jobless " give" the houses back to the banks and they are left with  an asset they can not sell which is depreciating by the day.
 Share price falls today show how many investors are lining up for the banks and most economists who have called it right so far are predicting nationalisation in the end anyway.
I did not suggest every home owner should benefit I suggested people with 1 home that is the P.R.U.


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## murphaph (14 Feb 2009)

Full nationalisation of the banks can't really be a good thing can it? That would make them just another arm of the public sector and we know how efficient that is. It will cost more in the long term if banks are all state owned as the incentive to compete is gone.


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