AIB and BOI's combined pension deficits of €2.7 billion

[CaveCanem]

From Sunday Buiness Post…

Banks may need €3.6bn to plug pension holes
14 February 2010 By Kathleen Barrington

AIB and Bank of Ireland’s (BoI) combined pension deficits of €2.7 billion will have to be deducted from their core capital, if new rules floated by the influential Basel Committee on Bank Supervision come into force.

The proposals, known as Basel 3, would mean that the two big Irish banks would require €2.7 billion in extra capital to offset their pension holes alone. On top of that, other proposals from the Basel committee could bring the combined additional capital requirements at AIB and BoI €3.6 billion.

That figure would be before the new capital required to replenish AIB and BoI’s balance sheets after they write off bad loans.

Davy analyst Emer Lang said that, if all the new rules were implemented, and when account was taken of projected loan losses, €6 billion would be wiped off AIB’s existing capital and €4.3 billion off BoI’s.

But Lang expected the Basel measures ‘‘to be watered down (at least in respect of the timing of implementation) and the initial introduction to be eased’’.

sbpost.ie/themarket/banks-may-need-36bn-to-plug-pension-holes-47347.html

First time in a long time I haven’t taken exception to a Davy’s comment. I’d expect such proposals, if enacted, would be eased in.

[sharper]

Sure they should just fix the pension deficit themselves i.e increase contributions, reduce benefits or some mix of both? If not why are the management of BOI there at all if the taxpayer is just going to pay up any and all bills they generate?

[spqr64]

@sharper

Sure they should just fix the pension deficit themselves i.e increase contributions, reduce benefits or some mix of both? If not why are the management of BOI there at all if the taxpayer is just going to pay up any and all bills they generate?

But sure why not, we are payin for everything else, may as well pay for that too. F*** me pink!

[Negative_Covenant]

It may be that pension deficits are due to bad luck. I am also not sure what proportion of the overall fund the deficit represents or how long it would take the company to make this up.

Generally speaking however, I think that where large pension deficits arise there should be an independent investigation as to whether a company knowingly made insufficient pension contributions to defined benefit pension scheme without the consent of employees.

If it is determined that a company did knowingly make insufficient contributions to a fund then there should be an indepth investigation whether this amounted to a fraud on employees and if so whether officers of the company were involved in and may be personally and criminally liable for such fraud.

[Negative_Covenant]

@spqr64

@sharper

Sure they should just fix the pension deficit themselves i.e increase contributions, reduce benefits or some mix of both? If not why are the management of BOI there at all if the taxpayer is just going to pay up any and all bills they generate?

But sure why not, we are payin for everything else, may as well pay for that too. F*** me pink!

As unfair as it is, I think that any obligation of the banks to employees which the banks are not solvent enough to meet should be defaulted upon. It is enough to pay the depositors up to a certain amount and bondholders and other people whom we theoretically should not have to pay.

Pension obligations, indemnity obligations etc should be defaulted upon. Ideally we would replace the debts due to these people with shares in the new bank and the existing shareholders would get wiped out.

[seandoc]

@Negative Covenant

It may be that pension deficits are due to bad luck.

Wonder what they invested the pension funds in…oh wait, dont tell me, not bank shares?

[CaveCanem]

@sharper

Sure they should just fix the pension deficit themselves i.e increase contributions, reduce benefits or some mix of both? If not why are the management of BOI there at all if the taxpayer is just going to pay up any and all bills they generate?

The last paragraph of the article would agree with you

It’s still a large deficit per full-time employee and will take years to balance out. It’s reasonable that these imbalances are taken more seriously - deducting it from capital would certainly do this.

[yoganmahew]

More on Basle III here:
viewtopic.php?f=19&t=27122&p=335313&hilit=BIS+pension+fund#p335313

[Pocket_Change]

It looks like both companies are reviewing arrangements but its a huge hole to fill. It seems the deficits are expected to be made up by increasing employee contributions.

Staff members of the scheme – which was closed to new entrants in late 2007 – were left with little doubt that they would have to up their contributions

According to this BOI has a €1.5bn hole with just €3bn of assets.

[discostu]

AIB staff told that they will be paying additional 5% some haven’t paid a contribution up to now. Went done resonably well I understand

[Pocket_Change]

The problem is that the young workers will be paying more for years to come so that current pensioners and those near retirement can get their full benefits. I wonder what age the people in the banks trusted with making these decisions are?

[Stroke_Politics]

I’ve got 7.5 years contributions left at one of these two firms after leaving them in 2008. Should I get a buy-out bond and transfer it to someone else…?