Key Post How much more will mortgage defaults cost the taxpayer?

"The only figure missing is the estimate of the losses"

......and that's the figure nobody has. NOBODY.

If you look at my earlier post from earlier in the year. I have explained in great detail
my response to the opening question. I don't think anybody has the capacity to foresee the level of losses that are about to unfold. I cant predict the losses but my
instinct is that they will be sufficiently great to need a further recapitalization of the banks. That's the most anybody can say at this time. My personal guess is that it will be between 20 and 30 billion. Earlier in the year Peter Matthews TD predicted 60 billion. Various rating agencies have come out at different times predicting that more banking capital will be needed. The IMF made some reference to it also recently.

Brendan, you are the only person I have repeatedly heard saying that you believe the Irish banks to be over capitalized. We respect that oppinion also. Only time will tell.

My view has changed on one thing over the last few months. I dont think that the Irish Tax payer is any longer on the hook for future bank re-capitalizations. I think the discussion has now moved to bank "bail-in"s and support through the European Stability mechanism.

Brendan Burgess said:

But I am constantly amazed by people in serious negative equity who would be better off handing back the keys and going bankrupt, but who really will do everything to hang onto the house.

If people believe that house prices are no longer falling, then they will have an added incentive to hang onto their home.

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I agree with you on the first part, it amazes me on AAM even how many people are doing their very very best for the last 5 years to keep going.

In relation to your second point, which we're not allowed to discuss. You do know what the 'experts' are forecasting for this year and onwards?

About your figures on this thead, I don't easily understand those so I won't make any comment.

Dr.Debt said:

Brendan, you are the only person I have repeatedly heard saying that you believe the Irish banks to be over capitalized. We respect that oppinion also. Only time will tell.
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Dr Debt

I think I am also the only one to have done the figures.

I don't understand people's reluctance to do the figures?

By the way, there was an accountant at the ptsb AGM yesterday who said that ptsb was overcapitalised because it has made huge provisions but has not actually written off very much. I didn't follow his figures in detail, but I think he was missing the underlying point. Just because ptsb has not yet written off specific mortgages doesn't mean that they won't be losing the money.

Brendan

Brendan,

I dont understand that either.

If PTSB has provided for the loans in their accounts then the adjustment to capital is already done at the time of loss provision.

Once the loans have been provided for, the time of write-off will have no impact on capital it will just be a net-off between two balance sheet accounts.

I guess what he meant was that the bank has already received a recapitalization but has not yet provided for the bad debts. Even that is difficult to understand as the Central bank sets very strict guidelines on the timing of impairment provisions

Dr.Debt said:

If PTSB has provided for the loans in their accounts then the adjustment to capital is already done at the time of loss provision.

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I don't think that any of the banks have fully provided for the loan losses in their books.

If you take ptsb and work out your own estimate/forecast of what their losses will be and call that X.

The provisions in the accounts will be < X.

However, the recapitalisation process forecast a much higher level of losses than ptsb provided for, and this is why the government put in extra capital.

It would be well worth your while to take the accounts of ptsb and work your way through the figures. I think you will be surprised at the levels of provisions and capital. The losses will be huge, but, in my view, they have enough capital to absorb them. But I would welcome if you or someone else burnt the midnight oil looking at the accounts and I would respect your conclusion otherwise.

Brendan Burgess said:

That is what this thread is - my calculations on how much more the taxpayer will have to put into the Irish banks.

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Apologies Brendan- that is what I get for jumping into a thread and not reading it from the start.

I will not pretend to fully understand all your figures so do not feel qualified to comment. The only thing I will say is that I agree no one knows what people's reaction will be to repaying their mortgage over the next 5/10 years.

My own opinion is that by and large Irish people and law abiding, morally conscious individual who will do 'the right thing' and pay their mortgage if they can.

I will not pretend to fully understand all your figures so do not feel qualified to comment.

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Hi TRS

They require a bit of work to read and understand but they are easy enough if you have the time to go through them.

Brendan