The CB financial stability report 2006 indicates an aggregate figure of 0.87% for NPAs with a provision of 70%. This is the figure that I was multiplying up by 6 for the post above.

But you can see very quickly how this figure will be worse for some institutions than others…

Historically if the bank is heavily involved in hire purchase type loans, credit card debt etc. it will have a far worse NPA level than one with more residential mortgage lending. The provisions for residential lending are very low. But this is historical data and past performance… While the models may be state of the art, what is being put into them? In this I agree with YM in full.

This is why I ask the question as to what losses were for other housing busts as IMHO banks in other countries behave very much like banks in this country. This is why also I believe that David McWilliams doesn’t pay much heed to the CB stress testing. If Allied Norwegian Bank had losses of 5% during the Norwegian boom, why not Allied Irish now? Of course, maybe Irish banks are more conservative, maybe Irish banks are different.

See in the footnote the reference to interest being rolled over or capitalised, I wonder if the central bank is privy to this information, otherwise why specifically reference it?

Thanks for the link.

Gilroy, interesting table. As I see it, if the roll-over is equivalent to more than 90 days interest (i.e. if nothing has been paid for 90 days) the asset should be described as non-performing?

I find the 0.5% NPA figure for Residential a bit shocking, as I have been looking at what the banks have been setting aside - 0.02% in specific provisions and 0.04% in general provisions. Why, if the NPA is 0.5%, are they only putting aside 0.06%??? This is the figure that I thought was being stress tested 6x = 0.36%, a pittance.

How is the Central Bank allowing the banks to underprovision like this? Never mind the bogus stress test, what about the current NPA! Or am I reading the table totally wrong? Is there a sprinkle of magic dust from Electra the Asset Quality Improvement fairy that I am missing somewhere?

I asked the question in another thread and never got an answer, but if anyone can come up with the total amount loaned to purchase development land in 2005, 2006 & 2007 then we would have a good ball park figure to kick around for potential bad debts.

Of course this is not where all bad debts are going to come from, not by a long shot but I do think that it will be the area where the highest value bad debts will be concentrated. My reasoning is this:

If I look around, within 3 miles of me I can tot up over €100million worth of development land that it will never be profitable to build on. And that just at the price it changed hands for, every day that passes more interest is rolled up on those prices. That’s just in Mullingar, around Dublin, Meath, Kildare etc. the total figure must be astronomical.

Many of these sites don’t even have planning granted on them, in general the cost per unit of the serviced land would be in the range of €125,000 - €200,000 (before accounting for interest payments), that’s before the cost of actually building the house! Given the value of a new 3-bed around here is around €190,000-€225,000 and falling it’s not hard to see how these sites will never be developed by their current owners.

Assuming that the banks do foreclose on these lands, the chances of them selling for anything more than agricultural valuations is virtually nil given the volume of lands involved.

There was a recent auction by the County Council for 2 x one acre sites and only one bidder showed up! There’s not much appetite for speculating in land at the moment!

I think ‘delinquent’ is less severe than ‘default’ might be interpreted.


for the average First Time Buyer on the street … who has been holding out for the last five or six years as house prices soared and has life savings of 200k sitting in EBS 3 monthly savings invtestment account … should he be worried about bank failour as in Northern Rock?
Thanks for advice in advance.

In the states you can walk away so I’d be surprised to see 9% of mortgage defaults or anything close,

The problem in Ireland is the Developers because it’s the same banks playing both ends.

easily see the commercial defaults rocket

Eggs? One basket?

Ever a good idea? :angry:

Average FTB with 200k in savings?
I’m not sure you would be defined as average :slight_smile:

people tell me all the that i have an honest look about me. why don’t you send your few bob down to me in Kilkenny and i’ll put it somewhere safe for you. :wink: