Anglo-Irish Bank: “Spending cash we do not have to save a bank we do not need” Post author By Philip Lane Post date June 15, 2009 Brian Lucey explains in this Irish Times article: you can read it here. Categories In Banking Crisis Tags Anglo Irish Bank 45 Comments on Anglo-Irish Bank: “Spending cash we do not have to save a bank we do not need” ← An Emerging Consensus on NAMA Overpayment? → Morse: the Trinity link 45 replies on “Anglo-Irish Bank: “Spending cash we do not have to save a bank we do not need”” Well done Brian! I think that this was a very brave article to write. I hope it has enough of an effect. @Eamonn – Brave…thats a worrysome word to use to an ex civil servant! Next to “courageous”….. This country has a poor record with looking after whistle blowers, I know that many others were thinking and saying what you said but i bet a reaction to your article is question one Q and A tonight. Good job only political anoraks watch it! 🙂 http://www.guardian.co.uk/business/2009/jun/14/economics-globalrecession can some one put this up? Some truths, but why has the tone from start to end be so Vindictive and Destructive —-no strain of any Constructive comments; very much “A Party Political Broadcast”. @Tadgh Im not a member of any party, so lets be clear on that. Nor is my tone , I think, vindictive. Harsh, perhaps but not vindictive. @eamonn Well, Q&A aside, Im not sure if there will be much fallout. The other thread on overpayment notes the consensus that we are fubard on overpayment. We have a govt and, it seems, a Dept of Finance, that are deaf to all bar their own voices. There’s a severe “not invented here” problem in the senior reaches of “The €60 billion figure that the minister uses to illustrate the cost of shutting Anglo comes from the sum total of all deposits. These deposits are made up of some €16 billion in commercial deposits, from large corporations and treasuries; some €18 billion from retail or non-corporate deposits, and some €30 billion in the form of inter-bank loans. …. Thus, in reality, the maximum amount that would flee is the sum of the retail and commercial deposits, and it is only credible that they would fly if their owners felt the Government could not meet the guarantee on deposits.” @BL Is it not conceivable that corporate and retail depositors might decide that they would prefer their money to be in a bank that is not being wound up? They might do this for their own corporate governance reasons or because they don’t want to be dependent on the Irish Govt being able to borrow money to meet their deposits. Perhaps they would have a general antipathy to having their deposits in a bank that is in liquidation! If it were me I would transfer the funds elsewhere and leave Anglo, the State and other depositors to worry about it. I might even consider transferring finds out of BoI and AIB if I thought Govt borrowing would be prejudiced. We are in a risk averse world where CEO’s get praised for prudence. This idea that everybody will be happy with the guarantee and will not withdraw their deposits strikes me as an educated guess rather than a near certainty. We may have to stump up €30 Billion if the educated guess is wrong. That is less than satisfactory. I also notice that you did not even mention the Anglo Chairman’s point that the bank would lose its licence to take deposits. I guess you are assuming that the ECB will waive the rules but that you were limited in how much you could address in an article? You also did not address the fact that the cost of funds to the Irish banks who have interbank deposits with Anglo would rise and that this increase of cost of funds would fall to be paid by the tax payer. Do you see the increase in the cost of funds to be insignificant or a false danger? Lastly, if your plan were to work, when would you see Anglo eventually paying back its depositors? Within the next 3/5/7 years? I agree with the comments of Zhou_Enlai. I would also be interested to know why Brian Lucey thinks that the loan book is only worth between 30 and 35 billion. That is more than a 50% write down of the loans of about 70 billion. It sounds like scaremongering. Anglo has a provision of €4.9billion which at 7% sounds prudent. Donal O’Connor thinks that if the economy deteriorates much further a furher provision of 2.6 billion might be necessary (giving a total of 7.5 billion). Looking at the accounts this sounds realistic and very prudent. Remember Anglo is not doing any new lending except to help existing clients to finish uncompleted projects. There are impaired and overdue loans of 23 billion but given that most of the loans are asset backed it would be reasonable to expect a high percentage to be recovered. As far as I know the current chairman Donal O’Connor is a reputable person. I found the transcript of his presentation at the Oireachtas Finance Committee plausible, but I would be interested to hear what other people think. I am concerned with many of the people who claim to be experts in resolving our financial difficulties. In relation to the Anglo €4 billion issue. I like everyone else, hate the idea of putting money into this bank. However, I must agree with the Government analysis that the cost of doing nothing is too high especially when you look at the options: Option 1 – Let the Bank collapse This is not an option as every Government has agreed that banks cannot be allowed collapse. Why would anyone leave their money in a country where the Government does not protect it. Option 2 – Wind the bank down Even if the State winds the bank down then it must put the €4 billion in as without this cash it is no longer a bank. If it is no longer a bank, then the State must immediately repay €24 billion of Central Bank and European Central Bank money in Anglo as they cannot put money in non-banks. Option 3 – Keep the Bank going This is virtually the same as option 2 because the Government has to repay people and companies who have put funds into Anglo. The real problem is that all of the banks assets (the loans) are illiquid (i.e. repaid over time) but its liabilities are liquid and must be repaid if demanded by depositors. This means that the State must provide cash to the bank because we nationalised as many economists wanted! As someone who was wary of the housing market for a number of years, it sickens me to see Brian Lucey claiming to have been a warning voice and now proposing crazy solutions. I especially note the Irish Times report of a study he did (14 February 2006): “A report by Dr Brian Lucey, a lecturer in finance at Trinity College, says that mortgage lenders will be able to grow their business activity through high-interest loans to people with poor credit records – known as “sub-prime” mortgages – loans for investment properties, 100 per cent finance for first-time buyers and equity release loans. Dr Lucey said concerns that there may be a housing “bubble” would prove unfounded and that there was little risk of a catastrophic fall in house prices.” Now is the time for people who have delivered accurate considered analyses of the situation. It is not the time for adopting positions that we all want to hear, these are what got us into trouble in the first place. @Ted At the time of writing that report, late 05, based on the data to hand then, best quality being the DoE 04 data, that was my thoughts (on a bubble) then. Were they wrong? In retrospect, yes. And I have said that elsewhere. Stating that there was a gap in the market was stating that there was a gap in the market. Note that I have NEVER claimed to be a “warning voice”, au cointreau. I was wrong then, and may be wrong now. Thats why this is a social science not physics. Im not sure now what benefit “playing the man” gets us. If you think my analyses NOW are incorrect, lets hear why. Im all ears and willing to change my mind when evidence suggests I should. Are you? @Ted : well, it may well be an overestimate. But to date every “it cant be as bad as that can it?” figure anyone has put in has proven to be a lowball estimate. But time will tell. For what its worth, I would treat the anglo accounts with the salt amount that is appropriate based on their moving feast nature over the last while. Brian, “We have a govt and, it seems, a Dept of Finance, that are deaf to all bar their own voices.” I fully understand, and greatly appreciate, the efforts you and many others are making to compel a rational and sensible approach to addressing this major threat to the solvency of the Irish state. But do you not accept, as you seem to, that there is no mechanism to ensure that consideration of any alternative approach(es) will impact on the decision-making process? While the numbers in the Dáil stack up, as was demonstrated again last week, the Taoiseach (and his Minister of Finance) will “govern as he sees fit”. There are no checks and balances or competing locations of power or authority. Indeed, the more solidly-based and authoritative the critiques of Government policy in this area are, the less inclined will the Government be to concede any ground. Increasing the intensity and frequency of the attacks merely reinforces the siege mentality. It may make more sense to try and persuade the opposition parties to commit to reform of the Oireachtas that would include opening up the selection of Committee members, reducing the powers of the whips, allowing more free votes, empowering and resourcing Committees to hold the government to account more effectively and, perhaps, to initiate legislation. Specifically in terms of economic and financial policy, Committees with enhanced powers and resources would be able to secure the necessary expertise to critique government proposals effectively and the government, in turn, would be required to increase the quality of analysis underpinning its proposals. It won’t resolve this mess, but it might prove effective in preventing a future recurrence. @ Brian Fair enough about playing the man but it has been far too easy for academics to change sides in the debate, whereas banking representatives are immediately dismissed as having being wrong in the past and therefore their view does not count. Re playing the ball, how can you claim that we don’t need to put in €4 billion and still keep €24 billion of Central Bank and ECB money in Anglo. Once the banking license is gone, this money must be repaid immediately and that will fall to the State. Also, how can you be so certain that the funds will stay in the bank even if it is being wound down, when the experience to date has been that funds have left even with a State guarantee. @ted : which academics have “changed sides” as you put it? The nature of debate is to evolve positions, not to cement them. I, and many others, dismiss bankers and brokers impartiality in framing analyses only in so far as they may be informed by their vested interest, not for their past views. Re the REPO issue : AFAIK, and im open to suggestions here, we cant. thats the nub of the (balance sheet manifestation of the) loss. Im not sure the license needs to go either ; in a winddown situation they may lose the right to take deposits and make loans but thats actually seperate from a banking liscence, ITIR. Re funds ; well, they may or may not. Mine is an opinion (thats why its in comment and opinion, not news), not holy writ. But its equally as valid an assersion as “they will fly the instant”. @BL What would the consequences be of following your advice if your said “opinion” turned out, in hindsight, to be wrong? @John Martin “Anglo has a provision of €4.9billion which at 7% sounds prudent. Donal O’Connor thinks that if the economy deteriorates much further a furher provision of 2.6 billion might be necessary (giving a total of 7.5 billion). Looking at the accounts this sounds realistic and very prudent.” John – the reality is we don’t know if it’s prudent or not. I am an accountant and in my auditing days I audited a bank (not Anglo I hasten to add!). The question which no ones seems able/willing to answer is what the property that makes up the security for the loans is actually valued at. If it is property in good locations then a major write down may not be necessary. If on the other hand it was highly speculative then it may be worth very little. We just don’t know. Unfortunately the trend at the moment is to release an estimate and then a few months later increase it considerably. As for trusting the guys in charge of the bank who were there when they made their first estimate back in September (and were wrong) well I’ll hold counsel on that one. The proof will be in the eating when they make their next pronouncement. As far as I can see Anglo will be wound down and it’s going to cost us as taxpayers either way. As a bank it is finished. It’s reputation is shot. Good piece Brian, about time someone told it as it is, banana republic stuff. The characterisation of the nationalisation option as socialist is bizarre when it is the logical outcome of the socialism for the bondholders etc being practiced by this useless & reckless government. Good article again Brian but the discussion seems to have veered off track again. The only real issue in this whole debate is whether the bondholders take some of the banking sector losses. Winding down, up or anything else really isn’t going to make much difference to the overall cost to the state, the only way to limit losses to the state is to make the bondholders accept their fair share. These were professional investors, they earned higher yields because they were willing to accept that sometimes investments go wrong. If they were always going to be bailed out of their bad investments by the goverment why were they getting higher yields? To me this is the only issue that really matters! Stuart, I am an accountant as well but have no experience of auditing or working in a bank. My general point is that the key figure in the accounts is the 70 odd billion in loans (assets to the bank). The accounts are remarkably simple and easy to read. But it appears that this 70 billion is anything but simple to value. And judging by Brian Lucey’s reply to me he hasn’t given much thought on the matter. My impression from his submission to the Finance Committee of the Oireachtas is that Donal O’Connor has given considerable thought on the matter. That’s his job. Of course he may be wrong, but I don’t think he has any interest in understating the provisions. He joined Anglo in June 2008 as a non executive director. He cannot be held responsible for what went on before he joined. And a non executive director can only deal with what has been presented to him at board meetings. If the executives are guilty of bad faith, there is not much the non executives can do. In my view O’Connor has been given a thankless task. I think at the very least he should be given a fair hearing. From what I’ve heard on this thread and elsewhere it will be more expensive to wind the bank up than to keep it as a going concern. Despite the cynicism by some contributors on this site I think the Government is pursuing the correct policy in the extraordinary situation we find ourselves in. S&P have downgraded Anglo to BBB+/A-2, removed it from credit watch and provided a commentary on this decision. The beleive it to be of “of high systemic importance, reflective of the scale of state support, and as a result the long-term rating on Anglo receives six notches of support above its stand-alone credit profile. ” Also: “The negative outlook reflects our view of continuing uncertainties regarding Anglo’s future capital needs, possible EU state aid implications, and business plan execution risk,” added Ms. Curtin. It also reflects the continuing difficult operating environment, which is expected to continue to suppress earnings into the midterm. Rating pressures are mitigated, however, by government ownership and the potential for continued extraordinary support Also another thing. Has anyone considered the timing of obtaining the “30-35” billion referred to in the article. Who can realize this quickly and in such a manner that the cash can be used to settle some of the deposits. I think this assumption is quite fool hardy. Also, what are the implications to the book values in the other banks if a fire sale is permitted, as confidence would implode and thus push the credit spread above where its true value is due to the liquidity premia being placed on the balance sheets. Whilst i believe that Anglo is doomed and should be wound down, to do so in a willy-nilly fashion such as allowing it to go under would place a short term strain on the Irish government vis-a-vie the guarantee and the capital issues that would result in BOI and AIB… @John Martin What % fall in value do you think the anglo assets have suffered? 20%? 30%? Im saying 50% : recall that some commercial property has fallen by 80% in the last year. @ Noel Your first post says “anglo is of systemic importance. We know this as the government told us. They also guaranteed it. So it must be”. Great article Brian. Given the widespread problems throughout the eurozone banking industry, do you know if the ECB has given any consideration to the creation of a FDIC style agency that could wind down the likes of Anglo and certain Swedish banks once Latvia devalues etc.? @ BL. Whilst I believe that Anglo, on its own, in normal market times, isn’t of such great importance, in these uncertain times, the international bond market will view AIB and BOI in similar terms and have lumped them all together with Ireland itself into their credit watch committee hit list. Anglo implosion: If depositors, en masse, attempt to leave, NTMA will have to go to the market for massive short term cash, and this they will only get from an ECB bailout – or have the ECB g’tee the Irish state. If a fire sale is triggered, the NTMA will have a bond sale failure, credit spreads and yields on Ireland would sky rocket and ever single Irish bank would find itself in default of all regulatory capital requirements indefinitely. Result then is that AIB and BOI also have a flight and the whole thing goes spiraling down. I, personally am greatly disgusted by the idea of NAMA and can see quite plainly, that in its current format it does nothing more than increase the burden on the taxpayer and prolong this depression that we are entering. But, what i do find interesting is that not many people have so far been able to offer up anything that I can see workable. McWillaim’s has some interesting suggestions or repoing all the shite to the ECB and then just fund the haircut….perhaps….. Personally: I believe that some sort of a SPV, wrapped in ECB credit protection on one side and backed up with TRS back to the original banks that issued the loans would provide the best solution to this mess. Let’s be smart and start tapping the ECB for this issue too. Ireland will bring down the euro quite easily. Even any trembles from us would cause the spreads for all euro countries to rise – and last time I looked everyone is running a deficit. So, we need to be ruthless, it’s a business we are running. And its also the cheapest way out of this mess. Failure to do anything: Result is a country of Zombie Banks. So, Brian, what’s you suggestion to fix this mess…. Brian, I don’t know what percentage is reasonable. The accounts indicate that 7% is a reasonable provision rising to just over 10%. This is the opinion of people who have examined the books. I see no reason why O’Connor would understate the figures. Indeed it would be tempting to do the opposite so as to look like a hero in six months time by showing a dramatic improvement. You are suggesting a wildly more pessimistic view (valueing the loans at 30 to 35 billion is more than a 50% provision) but you haven’t given much evidence to support this. Only 60% of the loans apply to Ireland. Also only about 16% of the loans are Irish and development loans. Just because property has fallen by whatever percentage it has fallen (O’Connor says between 50% and 70% from its peak but admits the lack of transactional evidence) it doesn’t follow that this percentage should be written off. These debtors have made millions over the 15 year period of the boom. I assume that most of them can take the hit. @John It all depends on the pressure O’Connor is under. Let’s say for example there is another €4billion to write off and they know it. If they had released €8b as an extra provision plus maybe more then there may have been a bit of panic. And so they will drip feed us the figure – €4b today, another €2b in a few months and so on until we get to the real figure. As you say yourself no one really knows how far property has fallen, very little transactions, so who’s to say they’re right or wrong. I do agree with you – a thankless job. @Noel Im not sure what my solution is. Nationalise, reorganize and recapitalise? Noel, what makes you think we wont have a bond failure when we go looking for XXb from the markets for NAMA. Perhaps Ciaran O’H or some bond market lurkers might tell us how they will get that away, at what cost, at what coupon, at what level of discount etc. I suspect also that the ECB have been put on the hook by our actions. Its like we walked into the ECB with a shotgun and said “gis the effinf money, roit, or de euro gedsit”. So who will blink first is what it may come to. The assets that allegedly backstop the loans are worth what? Nominal or Real? Nominal is easy: Zero. Real will be known when the assets are put up for sale and are bought. This is reality, all the rest is wasteful speculation. What is value anyway? Sentimental opinion. The Irish taxpayer has been forced to pay back the loans (in part or in full). Now the loans are virtual money, but the repayments are made with real money, from real wages and salaries. Hence, the future incomes of all (well most!) Irish taxpayers will be depleted somewhat. Less to spend translates into reduced economic activity. Now what happens, as is likely, when total wages and incomes decline? Tax revenue declines! So how will the loans be repaid? Inflation? Let the insolvent financials go down. They are private companies. If this country need banks, then constitute new state owned ones – the ECB will capitalize them at 1%. Cost to taxpayer? Zero. If you guys are patriotic citizens of this state you must demand that you, and every other citizen, is not put in harms way. Demand that the insolvent financials are put into administration. The investors will have to bear the loss – not the Irish taxpayer. If the legislators in the Dail have any testicles they will repudiate the guarantees (except for individual depositors). There will be consequences, but the citizens (ang that means YOU) will not be robbed. Brian P Zombie Banker Blues: The Movie Irish Economic Policy As A Comedy Horror Show @stuart : Dukes on q&a seemed to impluy that banks cant have general provisions ? Thats not right surely? The debate seems to have yet again drifted to ideas, that all though important, are only really side issues. Whether we wind Anglo up, keep it as a going concern or anything else you can think of doesn’t really change the total amount that the taxpayers will have to fork out. The only way we can reduce the cost of the banking losses to the state is to impose some of those losses on the bondholders. These professional investors lent money to Anglo in return for a much higher yield. In doing so they accepted the reality that in return for that extra return they were exposed to the risk that they wouldn’t get all their money back. Why else would they be getting an extra return? Whether we have to wait until the guarantee expires in Sept 2010 or not the bondholders must be forced to take some losses because that is how capitalism must operate. All the other arguments are a complete distraction in my opinion. Its an absolute disgrace that he was let on Q and A tonight. I wonder what FGer was asked to stand aside to let him on to spout his Anglo Propaganda. Brian did they ask you on as a counter weight? BTW I think brians estimate of 30 to 35 billion is too high. When you consider the massive increase in supply and the collapse in demand which will be compounded by or debt burden, 30 -35 billion recoup seems to be a very long term (meaning graeter interest repayments) or very aspirational. It looks like the Fianna Fail led government has decided it will mortgage the foreseeable future of the Irish people to keep international bondholders onside. As NTMA indicates on its site, the government depends substantially on international investors for its funding – “Irish Government bonds have moved substantially into the hands of international investors since the introduction of the euro. Non-resident holdings have increased to an estimated 82 percent of the total outstanding from 22 per cent in 1998 “ http://www.ntma.ie/GovernmentBonds/bondHoldings.php NAMA , particularly its Anglo-Irish component, is one heck of a big mortgage on the citizens of Ireland . It’s a major gamble, the outcome of which depends primarily on when and by how much the Irish economy recovers something that is, largely, outside the control of the government. This website has provided an excellent forum to explore what is going on. The government and its appointees seem to resent this scrutiny in public. Alan Dukes was at it on Q&A tonight. This is deeply worrying for Irish citizens/taxpayers who could be paying off this NAMA mortgage for many years to come. The public are quite right to ask questions and get clear and unambiguous answers before the present government commit us to further debt. Dreaded Estate is making very good points! In addition, we need to nicely calculate the time of what is going to happen. Worse is to come. Delay will “Japanese” the problems faced. Banks will be more dead than undead. What loans is NaMa to deal with first? The prime developments that were in prospect are now gone. Valuation is sentiment, but now and for a period, the length of which is contingent, in part upon the resolution of these backing assets, the value of these assets is simple: current use. Car parks? Green fields? None will be developed by the owners for many years. Value is simple but the news is all bad! Very low: the chain that leads to development in Ireland starts with the cute hoor and involves low value land sold for the greatest profit. Even in cities the current use value is low. Once a period passes, then planning permission lapses. There is no guarantee that it will ever be sought again, let alone granted, in the new climate. Capitalism accepts the morality of loss. Why is this corrupt government lying? I still maintain that they are compromised by their financial relationships with developers and the banks. The regulator did not know that billions were being “bed and breakfasted” in other banks? What a feeble lie! Investigate the worst ten developers’ accounts, funds and assets and examine what alls out. No tribunals, the GBFI is fine, eh Fachtna? International markets will downgrade but they will have a great deal more to deal with soon, and what we do will be just a blip, if the timing is right. @ Brian Lucey Thanks for the article! and Dukes is wrong. What a general provision will do is depress the value of the earnings and therefore shareholders will be upset. The taxman will add all of it back so tax will be higher than the stated profit will suggest. To be allowed for tax purposes, the provisions must be justifiable. using accounting and legal principles. some of the most complex cases go to the House of Lords in the UK, on the specific facts of each case as to whether the accounting treatment is allowable. Perhaps Dukes meant that it would be commercial suicide for the directors to do this? Clearly, they should all have made far bigger provision on specific, identified basis, given the economic conditions current…… @Brian “Dukes on q&a seemed to imply that banks cant have general provisions ? Thats not right surely?” Accounting rules are fairly strict on this. 1. Specific provisions are straight forward enough. The loan is non performing, you value the security (i.e the land/development at current market value – if you can) and the difference between the loan and the value is the provision. 2. General provisions are more vague and are meant to represent the experience of current good loans going bad in the future. Everything looks okay at the moment but experience says a % will go bad. Pat is right, these are not allowable for tax so every business I have been involved in (no banks – mainly the wholedsale/retail sector) does not have general provisions, they effectively make them specific. This is done by providing against debtors who are non performing (i.e outside credit terms) in full even though you know some/most of them will pay eventually. Or you might undervalue the security to give you a cushion. It all depends if Anglo is being very prudent or hoping for the best. Provisions (stock, debtors) are grey areas at best and one of the last places you can “manage” your accounts. Much of it is subjective and now even more so. @Dreaded I agree with you. I have long since felt whether it is liquidation, nationalisation or Nama the outcome will be the same unless the bond holders take a hit. If that is not going to happen the only difference is the period of time over which the taxpayer gets hit. Re Dukes of Moral Hazard on general provisions. I’d like to see his interpretation of the €500m provision below. Anglo’s Annual report for 2008 (pg7) “In addition, a collective provision of €500 million (2007: €31 million) has been charged. This reflects an allowance for losses in the performing loan book where there is currently no specific evidence of impairment on individual loans.” Wasn’t Alan Dukes an Eircom director back when the sellout, erm, selloff to Vodafone was done? 2 things based on Q&A last night: -that Alan Dukes can still feel it reasonable to say that questioning of the government’s plans is hitting international confidence astonishes and worries me; the implication clearly being that the government know better and we shouldn’t worry our little heads about it -secondly every time Paul Anthony McDermott is on anything he cheapens the debate to a sub Liveline level in a pathetic attempt to get some laughs out of the audience. His usual spiel about Anglo was not just childish but damaging to a forum from which a lot of the public get their only informed opinion Stuart: You are right that the rules on banks provisioning are vague at bust and this is an area where managerial judgement and discretion comes into play. But, that is precisely the reason why it is an area that can be used to manage earnings. The move to a realized loss model with IAS 39 (and SFAS 114 in US GAAP) was designed to curtail the extent to which banks could manage their earnings using accruals. There are lots of academic studies showing that banks manage earnings using their loan loss provisions (Prof Steve Ryan at NYU did a bunch of them). @DB “There are lots of academic studies showing that banks manage earnings using their loan loss provisions (Prof Steve Ryan at NYU did a bunch of them).” Not just banks but all PLCs. The new IAS are interesting in that they are trying to move away from the “smoothed” model of presenting results. In a good year PLCs hoard provisions to release in the poorer years. Problem is the investors want growth all the time at a nice steady rate. This just doesn’t happen but when a PLC disappoints the share gets thumped hence the smoothing. Perhaps if we get away from this we might get more realistic sets of accounts perhaps even a “true & fair” view. Agree with Jack above. Dukes, who I have some time for, should not have been on the show – he had a clear conflict of interest. It’s deeply worrying when we’re told don’t ask questions, we know what’s best for you from a guy of his intelligence. McDermott is a total clown. Last Friday the Government published the Financial Measures (Miscellaneous Provisions) Bill 2009. It is due to be debated in the Dáil next week. Amongst other things, this Bill will allow for the extension of the bank guarantee indefinitely by ministerial order (i.e. without further recourse to the Dáil). The Minister for Finance had indicated in his most recent budget speech that the guarantee would be extended for up to 5 years on a limited basis. What do people think of this further widening of the original guarantee. ovet proposal in Bill due before Dail next week to amend guarantee law to allow extension of guarantees beyong Sept 2010 by Ministerial Order. Would be interested in hearing reaction of website participants to this further widening of original guarantee. @BL As I understand it, NAMA will fund its balance sheet by the Government simply issuing bonds to the banks it is acquiring assets from. There will be no need for an open market fund raising, which I agree would be impossible for these amounts. @JB Clearly the ability to extend the guarantee is absolutely essential. Perhaps it should have been subject to Dail approval but the least uncertainty about the governments ability to stand by the banks come what may the better the prospects of the strategy working. 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