SBP: the stress tests

thepost.ie/news-features/str … 55051.html
(Courtesy John McHale @ IE.ie)

Kudos to the author, must be a new fellow at the SBP…

Anyone, care to guess which banks will enter wind-down after the stress tests?

Perhaps, EBS ? Is AIB out of the question?

Well it won’t be bank or IL&P, so the process of elimination leaves…

AIB is too big in an Irish context with too many tenticles for a really quick wind down, so I presume EBS is the fall guy this time, as the focus moves on to Residential books. Which have hardly been touched on so far.

EBS will be sold first. It has a buyer.

AIB has just bought a mass of deposits as has PTSB… which leaves…

Pick a bank, any bank, they’re all the same! :smiley:

EBS may not have a buyer. Cardinal Capital may be rejected by the CBI according to The Sunday Business Post.

Oh. That would be bad.

ABOI (Allied Bank of Ireland) or BI (Banking Ireland) anyone?

Seriously, though. Can’t see how we can support these two big retail banks with branches beside or opposite one another.

This is what a greatly reduced banking system means to me.

Something really big has to go. EBS is not big. BOI shut down or merged into AIB, now that’s the big one.

EU Said to Discuss Tough Capital Pass Rate for Stress Tests -> bloomberg.com/news/2011-03-0 … -test.html

somewhat anecdotal but…

a friend of herself works for one of the big 4 - more mgmt consultant than bean counter and is going to be on a ‘transformational project’ with EBS for next 2 years at least, which makes me believe that a buyer is essentially in place - the interm management would not commit to a project of this magnitude without it - IHMO

I don’t know anymore and if I did I prob couldn’t say

Talk about a hostage to fortune.

noir.bloomberg.com/apps/news?pid=20601087&sid=aKaAxdTTfn9k&pos=1

This article just keeps giving and giving and giving.
Its OK, I won’t post anything on the cotton futures thread. I promise. There is a cotton thread isn’t there?

Enda Kenny’s not going to bother pushing for a reduced interest rate at tomorrow’s EU summit in Brussels, preferring instead to wait until the results of the stress tests are out. It will then be handled by EU finance ministers as the next EU summit is scheduled for June. The thinking is that it’s better to deal with the whole question of sustainability in the round rather than tackle it this week and then have to return to it when we realise the hole in the banks is ‘bigger than 10bn’.

That said, there could be an emergency summit in April to deal with Portugal which looks almost certain to need help very soon. Complicating things there is the probable collapse of the Lisbon govt any day now. Imagine they call elections - which will presumably take at least three weeks - and their spreads soar further, forcing the EU/IMF to step in. Who would negotiate on behalf of Portugal if it only has a caretaker govt? The election would surely lead to a pre-emptive rejection of the kind of deprogramme Ireland/Greece is having to implement.

Still, it looks likely that when they come to design a package for Lisbon they’ll by then know how bad the Irish banking story is and might take the opportunity to reasses Ireland’s situation.

Incidentally, also hearing the the Dutch suggested Ireland could raise VAT instead of corpo tax. Odd suggestion but it’s something we can live with…not least because it’s already in the Programme for Govt! “Okay, okay, we’ll hike VAT (sigh) in return for lower interest, a longer repayment term and the ECB taking a debt-for-equity-stake in our banks. K?”

Meanwhile the Finns are still blocking agreement on increasing the size of the bailout fund (due to domestic political pressures arising from their upcoming election) so no clearcut deal is expected at Thur/Friday’s summit. Y’know, the one slated ages ago as the summit where they’d finally draw a line under this whole debt crisis milarky.

This mess is about to get messier.

Sound of kicked cans clanking down the road. :angry:

Is that can rolling around a cliff edge?, what is the Irish governments cash burn rate? How long before the next emergency budget?

So the latest is that the Portuguese government has collapsed.

And EU Finance Ministers are to meet to discuss the bank stress tests?
independent.ie/business/iris … 92507.html

Originally it was 10bn but most of us new 35bn. Now there is concern that it is more than the max 35bn figure agreed in the bailout.

Holy s$it !!!

What’s the figure?
50bn, 70bn, 100bn

50bn is likely the next made up figure but what’s it really?

Does it matter? I mean let’s be honest we can’t pay this back. The Irish Central Bank printing press is smoking, it’s printing so fast.

Can this be fixed, by transferring all banks to control of the ECB, where they should be given they control fiscal policy, the main tool for controlling lending?

if he concedes on Corporation tax we could have the situation where
a senior member of a political party in this country goes to another country to negotiate a deal for Ireland,
on his return and presenting the deal to the Dail,
the opposition party voice their dissent that we have conceded too much,
while the negotiators argue that it was the best deal we could get.

The country will then be split between those that think we have no choice but to accept the terms of the deal and those that think we should not accept the deal and instead default.
:mrgreen:

Banks are supposed to have their own stress test models for years, under Basel II.

See page 89 of the document Basel II International Convergence of Capital Measurement and Capital Standard a Revised Framework.pdf available from the BIS web site.

This means they should have their own models already. They should know the bad news. So should the fucking useless regulator.

We should not need to go outside only for the fact that the banks are a bunch of lying fuckers.

The assumption that Blackrock is being handed by the Irish government to work off is a 60% drop from peak.

But, how sound is this assumption?

According to Morgan Kelly

Or, if you look at the extent of our bubble, and acknowledge that in every bust in history, prices return to the mean line, and in fact overshoot it on the way down (and in view of our oversupply, unemployment, lower quality of new builds, etc, this is a certainty), well using the graph below to return to mean in real terms, we are talking a 70% drop - (320-100)/320… and roughly an 80 per cent drop if we get a correction that follows the same profile as every other bust in history. ie. overshoot the mean on the way down.

This is merely the second or third last round of extraction of taxpayer monies. Just like all the ones that have preceeded it, we are promised it will be the last. Not likely. Let us take up McWilliams suggestion of examinership or something along those lines.

Hmmmmm…

By Scott Rose
March 30 (Bloomberg) – European Central Bank Executive
Board member Lorenzo Bini Smaghi said the ECB expects Ireland to
stand ready with a “backstop facility” for its banks.
“We expect the government to stand ready with a backstop
facility to reassure markets and creditors that the banks are
viable,” Bini Smaghi told reporters in Moscow today.
Ireland’s government agreed as part of its bailout last
year to set aside a 35 billion-euro fund to cover potential
further losses in its debt-laden banks. Ireland may have to
inject 27.5 billion euros of that amount into the banks
after the results of stress tests are published tomorrow,
according to the median estimate of 10 analysts and economists
surveyed by Bloomberg News.
Ireland has already injected 46.3 billion euros into its
lenders over the past two years, giving it majority control of
four companies, including Allied Irish Banks Plc, Anglo Irish
Bank Corp., EBS Building Society and Irish Nationwide Building
Society.

And now this from market news…

PARIS (MNI) - A possible new ECB facility to help Ireland’s troubled banks restructure over a longer period of time could provide credit lasting up to seven years, a well-placed Eurozone source told Market News International.

 The official, who is involved in discussions on the matter, also suggested that the concept could become part of a larger plan to deal with the "addicted banks" -- troubled institutions with limited market access who currently depend largely on unlimited fixed-rate ECB refinancing with maturities of one week to three months. 

 "The idea is that this helps the Irish banks now and for an extended period," he said. "If banks from other countries need it, the structure will be repeated." 

 Significantly, the risk on the credit provided to the banks "will be carried more by the Irish central bank than the ECB," the official said. This point may provide some solace to those who worry about the state of the ECB's balance sheet, already holding nearly E77 billion in risky peripheral EMU sovereign bonds. But that depends on how much, if any, of the risk on the new credits the ECB itself would actually accept. 

 The ECB declined to comment on the facility. 

 Ireland's main banks, which have largely been taken over by the government currently have about E100 billion in outstanding refinancing operations from the ECB and nearly E70 billion in emergency liquidity assistance [ELA] from the Irish central bank, which is short-term money provided in exchange for collateral that might not meet muster at the ECB. 

 "The loans to Irish banks from the central bank [of Ireland] would be of a much longer duration than those available from the ECB currently, and the idea is that they would replace some of the existing emergency assistance," the official said. "The loans could be up to seven years." 

 Under the current ELA program, the national central bank makes the decision and initiates the loan, although approval of the ECB is required. The ECB would play a more central role in the new facility, even if the risk -- or the lion's share of it -- remained with the national central banks. There would also be stringent conditions attached to the funds, and compliance with them would be regularly monitored. 

 There have been several news reports in recent days about the planning for this facility, but so far the ECB has kept silent on it. 

 ECB Executive Board member Juergen Stark said in a newspaper interview published Monday that reports of a new ECB facility for Ireland were "just rumors." Pressed on the issue of banks that are not solvent, Stark said, "that is a matter for national central banks that can offer liquidity at their own risk and at their own expense at a higher interest rate." 

 While that description does not deviate much from the current ELA system, it is not inconsistent with the idea of a new facility in which risk would still be shouldered by the national central banks. Details about the precise division of labor in such a facility between the ECB 

and the national central bank were not available. Although Stark dismissed talk of a new facility as “rumors,” Irish
Prime Minister Enda Kenny told Irish radio on Friday that Ireland was in fact in discussions with the ECB for longer-term financing to help the country’s banking sector restructure and recapitalize over a longer period of time.

 "Emergency funding is obviously critical, but medium-term to longer-term funding would be much more stable," Kenny said. 

 On Thursday, Ireland is due to release the results of its bank stress tests, which are expected to show that the country's four largest lenders need an extra E18 billion to E25 billion in capital -- a sum that would exhaust the bank contingency fund contained in the IMF-EU aid package that Ireland agreed to late last year. 

 The well-placed Eurozone source predicted that the impact of the Irish stress tests would not be "extremely negative," because the deleveraging of banks can be spread out over a significantly longer period of time. 
  "Previously the assumption was that the banks would have to deleverage [ie, sell bad assets] over three years. That will be extended and become much longer -- probably five to seven years," he said. "It also means that write-downs can be stretched out and you won't see the need for urgent fire sales of assets right now. Avoiding a fire sale is important to the Irish government." 

 He added: "With a seven-year period of [bank] de-leveraging, you would expect that some kind of recovery in real estate would start to take hold by then and help the recovery process."

XX