Government guarantees all deposits in Irish banks

I would think If the banks are willing to cover the liabilities of any of the other banks in return for the government guarantee then they must all be in trouble. Why would any well run bank want to be liable for the errors of less well run banks ???????
 
Okay, Yog and darag. You are talking about a book-keeping time buying exercise. But I don't see any shareholder benefit at the expense of taxpayers, unless of course they make massive share buy-backs and/or dividends in the 2 year window. The Ts and Cs must forbid that.
 
If property lending is the root cause of the trouble affecting irish banks why are so many other world banks now being rescued. while property lending and resultant write offs may have caused much unease i feel it is the complete cessation of inter bank lending is the major cause. In th e fifties and later when major irish banks relied on their home deposit base to fund their lendings growth was very slow. Inter bank lending became the norm and nobody batted an eye lid until it stopped.
 
Duke of Marmalade said:
Okay, Yog and darag. You are talking about a book-keeping time buying exercise. But I don't see any shareholder benefit at the expense of taxpayers, unless of course they make massive share buy-backs and/or dividends in the 2 year window. The Ts and Cs must forbid that.
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"Must" and "do" are the two things I'd like to see in the t&cs. I also think it would give the public more faith in the process if divideds and share buybacks were cancelled for the duration of the program.

This idea that moral pressure can be put on the banks by government or the public is nonsense - actual contractual conditions are going to be the only way to go.
 
dewdrop said:
Inter bank lending became the norm and nobody batted an eye lid until it stopped.
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Who is this fool "nobody" that many people keep talking about?:
"Nobody saw it coming"
"Nobody thought it would get this bad"
"Nobody batted an eyelid"

It is completely untrue to say that "nobody" was talking about this. Many, many economists, international institutions (the OECD, the IMF, even our own Central Bank as far back as 2000), and even journalists warned that the credit bubble in Ireland was unsustainable and that it was built on foundations of sand (borrowing short to lend long at excessive levels of leverage, risk and sectoral concentration).
 
Absolutely right. Many commentators were warning about the housing bubble, only to be answered with ".. but Ireland is different .. we're just catching up". Playing catchup was true for a portion of the growth in house prices but that factor has long ago dissipated.

Increasing the 2.5 times income limit on lending to house buyers was mad. This kind of activity should in future be outlawed.
Lending more like that just pushed up house prices even more, encouraging developers to build more and more at inflated prices with borrowed money which now they cannot repay.

Listening to the Regulator last week was truly revealing. The banks lending practices were not the problem. Liquidity was the problem. Not much hope of tackling the root causes of the problem if the Regulator thinks like that !
 
yoganmahew said:
Who is this fool "nobody" that many people keep talking about?:
"Nobody saw it coming"
"Nobody thought it would get this bad"
"Nobody batted an eyelid"

It is completely untrue to say that "nobody" was talking about this. Many, many economists, international institutions (the OECD, the IMF, even our own Central Bank as far back as 2000), and even journalists warned that the credit bubble in Ireland was unsustainable and that it was built on foundations of sand (borrowing short to lend long at excessive levels of leverage, risk and sectoral concentration).
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Everyone was talking about it. Particularly at sites such as
www.thepropertypin.com.
Peoples savings were lent out based upon over inflated asset prices. Savings in a bank account are supposed to be safe but they were risked without regulation. Now the money has evaporated.
 
Duke of Marmalade said:
Okay, Yog and darag. You are talking about a book-keeping time buying exercise. But I don't see any shareholder benefit at the expense of taxpayers, unless of course they make massive share buy-backs and/or dividends in the 2 year window. The Ts and Cs must forbid that.
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You're right - there is nothing in this for shareholders.

SPC100, what your calculation is missing is the fact that the banks' exposure to property is not just through mortgages; they have also invested directly in commercial property and have taken equity in development deals. The other problem is your assumption that the government will be able to force BOI and AIB to take over a failing bank. I really cannot see how this will be possible legally - it certainly wasn't mentioned in any of the initial details on the deal. Anyway it would defeat the whole purpose which presumably is to provide containment if they attempt to transfer the toxic stuff from any failing banks to the survivors.
 
SPC100 said:
Sean Fitzpatrick has said very clearly on Marion on RTE last weekend, that that the remaining banks will shoulder the fall out from the first bank, and the tax payer will only be called in if all banks are going down.
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I heard that too and it made me wonder what all the fuss is about taxpayer risk. Yet I feel SF must have this wrong. The Minister has Emperor like powers, he will call it as he sees fit. I am sure there are scenarios where it would make more sense to nationalise a failed bank rather than force its troubles on the rest of the industry, in which case taxpayers could be out of pocket before all banks go to the wall.
 
Duke of Marmalade said:
I heard that too and it made me wonder what all the fuss is about taxpayer risk. Yet I feel SF must have this wrong. The Minister has Emperor like powers, he will call it as he sees fit. I am sure there are scenarios where it would make more sense to nationalise a failed bank rather than force its troubles on the rest of the industry, in which case taxpayers could be out of pocket before all banks go to the wall.
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Yup, I agree with you entirely. And due to the netting of the assets and liabilities over the whole banking system we will be bearing the highest cost up front. Why? Because the bank with the greatest disparity of assets to liabilities (most over-valued assets) is likely to go bust first based on other banks assessments of it's likely losses and unwillingness to loan money to it.
 
Hello

The government has given a pledge to protect all deposits up to 100k for all banks/BS etc, and a further pledge to guarantee the total deposits of six banks.

Has the 100k guarantee in all banks actually taken effect yet or are we waiting for it to be ratified by the dáil next week aloong with the further measure covering all deposits?

SM
 
Square Mile said:
Hello.

Has the 100k guarantee in all banks actually taken effect yet or are we waiting for it to be ratified by the dáil next week aloong with the further measure covering all deposits?

SM
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Listening to Eamon Gilmore's questions to Brian Cowen it appears no "deal" has yet been completed.

http://www.rte.ie/news/2008/1008/economy.html

"The Taoiseach has indicated that delays in finalising details of the bank guarantee scheme are due to the Government's concern to ensure the State did not taken any inordinate risks.
Brian Cowen told the Dáil that the scheme would have to take account of the views of the European Commission and of developments in other jurisdictions particularly the UK.
He was responding to Labour Party leader Eamon Gilmore, who claimed delays in bringing forward the scheme were 'creating uncertainty' and that in the meantime Ireland seemed to have an open-ended guarantee. This afternoon, the Cabinet will hold another special meeting to discuss next week's Budget and the State scheme to guarantee bank deposits"
 
I think the main aspect of the guarantee are in place - ie in relation to the 6 main banks.


[broken link removed]

[broken link removed]

Anyone agree ?
 
I can see a run on a certain Irish Bank soon - I was under the impression this was done and dusted.
 
SPC100 said:
You sound better informed then me, would you like to update my calculations with your guesses on this, and how it affect the underlying solvency of the entire industry.
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I know of lots of instances of banks holding equity in various development schemes and of them owning commercial property but have no idea of the overall scale of their exposure. You regularly hear of them buying and selling commercial property here and abroad in the business sections of the newspapers.

Anglo are by all accounts in the worst state so I had a look at their [broken link removed]. This is from March 2007 and to be honest I'm not qualified to read it properly but it looks - to my eyes - that they had 15+ billion of their own investments, about 60 billion of customer loans, about 12 billion of loans to other banks and about 1 billion of other bits and pieces. One thing I find striking 'though is that even a year and a half ago, when their share price represented a market cap of about 12 billion, their balance sheet only showed equity of 3.5 billion.

I think it's fair to say that if a year and a half ago, they had equity of 3.5 billion on 16 billion of their own assets and 60 billion of customer loans and given the massive deterioration of all asset values since then, that their balance sheet must be in a pretty horible state as we speak even if you assume zero write down on their loan book. It seems like the market believes the same given their current market cap is only about 1.5 billion which is miniscule for an bank with a notional 100 billion of assets.
 
Hello. have two questions please.
Have € 350k in E.B.S. from house sale, renting now. This money is my family's whole future, if E.B.S. fails tomorrow will I get full amount as the government says or will I only get € 200k (it' s a joint account) since the full guarantee has not gone to oireachtas yet (by the way when will the full guarantee be legally complete)
Second;
Is there a potential for my € 350k to become worthless as a result of the euro possibly becoming worthless. I don't mean by inflation, I kind of mean like the way some currencies are worth nothing like in Zambia (not sure if that's the right country) Thanks sick worrying over losing this money.
 
chara1 said:
Hello. have two questions please.
Have € 350k in E.B.S. from house sale, renting now. This money is my family's whole future, if E.B.S. fails tomorrow will I get full amount as the government says or will I only get € 200k (it' s a joint account) since the full guarantee has not gone to oireachtas yet (by the way when will the full guarantee be legally complete)
Second;
Is there a potential for my € 350k to become worthless as a result of the euro possibly becoming worthless. I don't mean by inflation, I kind of mean like the way some currencies are worth nothing like in Zambia (not sure if that's the right country) Thanks sick worrying over losing this money.
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You won't lose money if the EBS goes. The government won't allow it just because there is a delay in finalising the details of the plan.

As for your second question, people just need to take a deep breath and relax. But if you really think that is likely to happen, buy gold. By the way I think you mean Zimbabwe not Zambia
 
I appreciate the reply. But one question doesn't gold also have the potential to devalue like any other asset in life does. P.S.thanks for the clarity, I was trying to say Zimbabwe
 
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