We cannot afford to keep Anglo open

[BoyRacer]

We cannot afford to keep Anglo open → timesonline.co.uk/tol/news/w … 086795.ece

The banking crisis reached a tipping point last week when the public learnt that Anglo Irish Bank will cost taxpayers at least another €10 billion on top of the €12.3 billion of our money it has already consumed. The final figure will be greater if the loans the bank is keeping rather than selling to the National Asset Management Agency (Nama) perform worse than expected.

The public is so beaten down by the drip-feed of stories surrounding the banking sector that it takes something quite extraordinary to whip them into another frenzy of outrage — but the revelations surrounding Anglo have achieved just that. Many accusations have been levelled at Anglo since September 2008 but there is no gainsaying its recklessness or the croneyism that coursed through its veins. So where to from here?

Anglo as a business no longer functions: it has not issued a loan since it was nationalised 15 months ago. Brian Lenihan claims closing the bank “would be tantamount to a banking failure and have negative implications for the entire banking sector”, but the finance minister is wrong. Since Nama and the Financial Regulator outlined their respective decisions on asset values and banking capital ratios last week, it is now possible to define precisely which banks are viable and those that are not. Bank of Ireland, certainly, and AIB, after a fashion, will both survive the madness while a third bank will emerge from the entrails of Irish Nationwide, EBS and Permanent TSB.

there is more

[write_down]

The deposits held by customers can be sold to another bank

I don’t understand this. How can liabilities be sold?

[revo]

people should petition the senate and the Dail to call a referendum on bailing out Anglo. It needs half of those in Senate and one third in Dail for the President to have to agree, surely as the Senators are under threat of abolition should Fine Gael win power that they may wish to do something in the interests of the people…

[BuyHighSellLow]

@write down

The deposits held by customers can be sold to another bank

I don’t understand this. How can liabilities be sold?

Brian Lucey wrote it on April 1st in the Indo so we could give him the benefit of it being very dead pan April fools day shenanigans. or we could greatly fear for the standard of lecturers in university these days.

On the other had most apartments are liabilities and the developers were selling them for years…

[ThomasB]

@BuyHighSellLow

@write down

The deposits held by customers can be sold to another bank

I don’t understand this. How can liabilities be sold?

Brian Lucey wrote it on April 1st in the Indo so we could give him the benefit of it being very dead pan April fools day shenanigans. or we could greatly fear for the standard of lecturers in university these days.

On the other had most apartments are liabilities and the developers were selling them for years…

Yes I heard him say that again today on the reun of his interview on Newstalk, he said could get 95cent on the euro, doesn’t make sense to me, maybe someone can enlighten us

[mr.agent]

If you have a deposit book of 100m, you might persuade another bank to take it off your hands for 95m on the basis that you’re getting a client base and a future credit line. However you cannot sell a liability. It makes me wonder if Brian Lucey understands banking. He repeated his miracle suggestion on a radio interview on the weekend so it’s not an april fool’s joke.

[dame]

In banking, aren’t deposits considered as liabilities (owed BY the bank) and loans as assets (owed TO the bank)?

[xman]

@dame

In banking, aren’t deposits considered as liabilities and loans as assets?

Yep

[Renting_And_Proud]

@mr.agent

However you cannot sell a liability.

Why not?

I work in insurance and Loss Portfolio Transfers were common not so long ago. Can something similar not be done in banking?

[write_down]

McWilliams too

davidmcwilliams.ie/2010/04/05/anglo-armageddon-is-a-myth

We can also sell the deposits of Anglo to one of the bigger banks to protect depositors.

I guess the gov you could pay other banks to take the deposits. I guess the banks would accept a slight discount as they usually need to offer higher rates to attract new deposits.

[bob3367]

@write down

McWilliams too

davidmcwilliams.ie/2010/04/05/anglo-armageddon-is-a-myth

We can also sell the deposits of Anglo to one of the bigger banks to protect depositors.

I guess the gov you could pay other banks to take the deposits. I guess the banks would accept a slight discount as they usually need to offer higher rates to attract new deposits.

Lets suppose that was 5% how much would that be?

If deposits were €50bn a 5% premium would be €2.5bn… no need to recapitalise then

[write_down]

Anglo: What Are The Options?
This post was written by Karl Whelan
irisheconomy.ie/index.php/2010/04/03/anglo-what-are-the-options/

What’s the composition of these liabilities? Let’s take them in order of size.

1. €27 billion are customer deposits (nearly €8 billion of which is payable on demand.)
2. €15 billion are debt securities. Most of this debt is due very soon. There’s €1.5 billion in shortish term commercial paper and CDs. Of the €13 billion in medium term notes, at least €7.4 billion is due before the guarantee runs out in September this year and €9.7 billion is due by December this year.
3. €12.2 billion is owed to the ECB (not the €24 billion figure mentioned by Brendan Keenan on Thursday.)
4. €9.3 billion is deposits from banks.
5. €2.3 billion in subordinated bonds, none of which are due before 2014.
6. And then there’s the usual odds and ends such as derivatives and other random stuff.

[yoganmahew]

@bob3367

@write down

McWilliams too

davidmcwilliams.ie/2010/04/05/anglo-armageddon-is-a-myth

We can also sell the deposits of Anglo to one of the bigger banks to protect depositors.

I guess the gov you could pay other banks to take the deposits. I guess the banks would accept a slight discount as they usually need to offer higher rates to attract new deposits.

Lets suppose that was 5% how much would that be?

If deposits were €50bn a 5% premium would be €2.5bn… no need to recapitalise then

I just don’t see it. Normally the FDIC gives the deposit cash to the new bank. The new bank buys at a discount, i.e. they pay the few hundred million to get the depositors of billions.

Our government would have to raise a serious stink of cash on the open market to do that. There is no deposit money sitting in a safe. Anyone suggesting such a thing needs to have their heads examined. Those who left Anglo early in the ongoing run got their money out. The assets have all been tied up satisfying that run.

NAMA is swapping bonds for worthless assets. The government is providing the rest. Then there will be some money in Anglo and it will be split into a good bank and a bad bank. The good bank will be sold off with the depositors and assets to cover them. The bad bank will fester with the bondholders. Anglo will be sold off for way less than we put into it as another bank.

It is being wound down. This is what is happening. The Anglo story is finished bar the finger pointing. The money is spent. Get over it.

NAMA, BoI, AIB, INBS etc. are where it is at next…

[Larry]

@write down

Anglo: What Are The Options?
This post was written by Karl Whelan
irisheconomy.ie/index.php/2010/04/03/anglo-what-are-the-options/

What’s the composition of these liabilities? Let’s take them in order of size.

1. €27 billion are customer deposits (nearly €8 billion of which is payable on demand.)
2. €15 billion are debt securities. Most of this debt is due very soon. There’s €1.5 billion in shortish term commercial paper and CDs. Of the €13 billion in medium term notes, at least €7.4 billion is due before the guarantee runs out in September this year and €9.7 billion is due by December this year.
3. €12.2 billion is owed to the ECB (not the €24 billion figure mentioned by Brendan Keenan on Thursday.)
4. €9.3 billion is deposits from banks.
5. €2.3 billion in subordinated bonds, none of which are due before 2014.
6. And then there’s the usual odds and ends such as derivatives and other random stuff.

Does Karl Whelan’s post have a thread on the Pin? Was surpirsed I didn’t see more debate on it here. Seems quite significant.

[Gilroy]

@write down

McWilliams too

davidmcwilliams.ie/2010/04/05/anglo-armageddon-is-a-myth

We can also sell the deposits of Anglo to one of the bigger banks to protect depositors.

I guess the gov you could pay other banks to take the deposits. I guess the banks would accept a slight discount as they usually need to offer higher rates to attract new deposits.

It’s simple double entry book-keeping. If a bank takes on the liability of €27bn of Anglo’s deposits, the only way to balance the books is to take on €27bn of Anglo’s assets. Assets are loans, cash or other securities such as NAMA bonds. It would be interesting to see how much in assets another bank would require to take on 27bn in Anglo liabilities.

I can’t see how another bank would take on 27bn of Anglo’s loans without a serious discount even after NAMA had taken the biggest loans. It’s just as likely that the sub €5 million customers are in as much trouble. If we had another 40% discount, then the other bank would insist on at least €45bn of Anglo’s loans for the deposits. If Anglo offered cash or government bonds then the other bank would look at the make up of the deposits to work out how much it would look for. If the Anglo deposits paid a higher rate than normal, then the bank taking these on would look to get more than the nominal value in cash/bonds for them to cover that. If the deposits paid less interest, then the bank would take less than the nominal value. That’s the only way to make a profit from getting rid of the deposit book. But look at Anglo’s rates and consider that historically they went for a high margin business (high deposit rates and high loan rates), we can be sure that the aggregate interest rate of Anglo’s deposits is higher than most of it’s competitors.

@Yoganmahew

Normally the FDIC gives the deposit cash to the new bank. The new bank buys at a discount, i.e. they pay the few hundred million to get the depositors of billions.

We don’t have an FDIC so it’s likely that the central bank would have to play this role. The new bank would more than likely take the deposits in return for cash, NAMA bonds and a taxpayer IOU for the balance.
Rumour is that PTSB will take over the €2bn deposit book of INBS. We might get some more detail when that happens.

[yoganmahew]

In one, Gilroy. Sometimes I wonder did the finance and economics academia and commentariat of Ireland watch a different Chris Matrensen video. They don’t seem to understand what happens to deposits. Sarey Carey does, as can be seen from the IrishEconomy thread.

Either that or I am going bonkers and there is a safe in Anglo with 21bn euro neatly stacked.

[Rick_Flair]

How come the depositers havent been taking their money out hand over fist anyway?

I know the deposits are covered by the guarantee but I would have thought that most people with money in that cesspit would have simply moved it elsewhere by now.

[bob3367]

@Rick Flair

How come the depositers havent been taking their money out hand over fist anyway?

I know the deposits are covered by the guarantee but I would have thought that most people with money in that cesspit would have simply moved it elsewhere by now.

Interest, in a word.