€74 Billion in Guaranteed Bank Debt Maturing Before October

Last week, I provided calculations from annual reports showing that at the end of 2009, the banks covered by the State guarantee owed €71 billion in various types of bank debt (bonds, commercial paper, interbank loans) that matured before the end of the year (the reports did not provide information on how much matured prior to expiry of the guarantee at the end of September.)

The Department of Finance have now provided figures as of the end of April on how much covered debt expires before October. In a written answer to a question from Joan Burton, the Department have stated that €74.2 billion in bank debt expires before the end of October, €57.8 billion of this being senior debt and €16.4 being interbank deposits.

30 thoughts on “€74 Billion in Guaranteed Bank Debt Maturing Before October”

  1. Now now Karl, dont be giving out that sort of information. Dont scare the horses.
    It would seem that there is a short window of time within which some senior debt negotiation can take place, were such a thing contemplated.

  2. “€74.2 billion in bank debt expires before the end of October”

    No wonder the Americans call that time of year “The Fall”

  3. @Karl Whelan

    Keep up the realism! We need these figures, frightening and all as they appear at first glance.

    Odds on guarantee extension and The Governor busy signing off on more ‘pieces of paper’?

    Contemplation of negotiation on senior debt (which I 99% support, and 100% on Anglo_Irish) as the state owned Anglo_Irish Albatross refuses the Director of the state body ODCE access to certain documents – and once again the pragmatic legal realist Judge Peter Kelly keeps the citizenry updated … WHO are the board of Anglo-Irish protecting?

    Time for the Citizenry to fire this board … legally, are its masters. Or is Irish Corporate Governance the exception that turns such theory on its head ………? 1789

  4. Anglo are claiming legal what? Surely Brian Lenihan should just pick up the phone and tell them to co-operate fully with the enquiries? Has anyone in the Dail challenged him on this? This is ridiculous.

  5. Is this Alan Dukes at it again? I think he claims two state incomes as well. Now it seems he may be holding up a state investigation (or at least not facilitating it).

  6. @KW – Is this number as expected?

    Considering aggregate bank debt is far greater than sovereign debt and given that the total amount covered by the guarantee was €400bn odd, is this really a big scary number? Or should we be happy it is not as big as it might have been? Also, shouldn’t the BoI, PTSB and EBS portions of same be easier to roll over?

  7. Those figures don’t take account of the large chunk that has already been refinanced so the liquidity position while serious is not as bad as those figures make out.

  8. An €66.9bn in demand deposits. No doubt some hot money there.

    Also, if there is a problem refinancing in the absence of another guarantee, the sovereign will have difficulty refinancing its own debt, EU/IMF?

  9. Chow and Lie
    “really a big scary number”

    It scares the cr%p out of me…….!

    That must be some silver spoon you were born with, bucko!

    You are clearly a rent seeker? Big numbers just appeal to you as an opportunity to make out at the expense of OPM?

  10. Joseph
    Naif or what?????? 😉
    Rip off the taxpayer! The best game in town! Who appointed them?

    In the name of the people?

    Tumbrils are a’comin’!

  11. Didn’t realise the guarantee excluded the DGS @ €76bn which is not quite a direct state guarantee but a co-insurance scheme backed by the state. Wonder what the small people would think of bond holders being provided with a better quality guarantee – am I right in this? I wonder what the ranking system is like : bond holders and interbank depositors first and unsophisticated retail depoistors second?

  12. and …the 76bn in DGS retail deposits appears to include credit union deposits.

    Given that the DGS compensation limit is 100k it appears to be the case that any retail depositor having more than 100k on deposit with a bank or credit union is not covered by any guarantee. The 76bn probably includes these uninsured deposits.

  13. This 74bn is untouchable as far as I’m concerned. The state(/Lenihan) has guaranteed it. Even with Honohan and Elderfield’s recap, Irish banks are unlikely to be able to roll debt over without some form of guarantee. Therefore a new ‘guarantee’ is highly probable.

    The ending of the current guarantee represents an opportunity as debt that expires after Sept 2010 is in play. Any resolution needs to happen quickly. Options to look at would include debt for equity swaps on unexpired Tier 1 and converting unexpired Tier 2 to Tier 1.

    The new ’guarantee’ should only cover new debt issues and preferably be higher ranked than the converted unexpired debt. The price of the new guarantee may place a large burden on the banks. It could be high/close to market price as the EU may otherwise consider it state support.

    A separate problem to consider is the deteriorating credit quality of the Irish state. The weaker this becomes, the lower the value of the guarantee. I don’t know of any possibilities but the state needs to explore ways of sharing the bank risk with the EU/ECB.

  14. @ Ahura Mazda

    Yes.

    We can’t honour the guarantee.

    We can’t rescind the guarantee.

    We’re on a road to nowhere other than EU//ECB and possibly IMF intervention.

    The EU may have instructed Cowen and Lenihan “do not let your banks fail”. Now they have to stump up for that policy.

  15. @ Greg

    Hard to believe that anyone in Europe advised that Anglo be guaranteed. This is an Irish stew, with the traditional local ingredients of inertia, croneyism, monopoly practices, secrecy, and deeply embedded vested interests.

  16. Calm down everyone, Mr Frank Daly aka Mr Nama , says today that the Nama bonds that have been issued to our Banks have given them the liquidity to grow our ecomony. Sure if Nama keeps pumpimg out these IOU’s the banks will have no roll over problems. Does anyone think all these guys need a few hours in a class room to be explained Finance and Ecomonics.

  17. @Garo,

    Well spotted, but I don’t think Pres. Nazarbayev or his cronies were holding any bonds. It’s a bit different when your banks, pension and insurance funds take a pasting.

  18. @ Garo

    i dont think there’s too many people behind the basic theorethical principle of orderly restructuring of bank debts. However, the core underlying theme of the article is one of amazement that the Kazaks have managed to do this when nobody else seems to have done it. As such, while you can argue, with 18 months of hindsight, about the rights and wrongs of the Irish government standing behind the Irish banking liabilities, its hard to argue that the Irish government didn’t go down the standard orthodox route in most of their decision making up to this point.

  19. It is amazing because nobody has tried. They are all terrified – unjustifiably as the Kazakh example shows. This inability to face up to losses is a failure of the last 30 years of capitalism.

  20. @ Garo

    Dead right. John Authers excerpt from his book in the FT Weekend a few weeks back showed that the problem with markets is that they have lost the ability to price risk properly because they no longer have fear, because they know that government will socialize the losses if they are big enough. The consequences for our economies and societies of the resulting mis-allocation of resources and talent compounded over decades is really profound.

    I’m no Austrian or libertarian, but we need to right this ship somehow. Enough with the there-is-no-alternative arguments. When people talk about free-market capitalism I am always reminded of Gandhi’s line about European civilization: “I think it would be a good idea!”

  21. @ Mick

    ‘I’m no Austrian or libertarian, but we need to right this ship somehow’.

    Maith an fhear. We can’t emigrate from the planet.

  22. Daly said last week that the “Irish banking system lent far too much to one sector of the economy, lent far too much to a small number of borrowers within that sector and is now paralysed into inertia as impairments build up and capital is depleted”.

    I don’t know him. But at least he is capable of telling the truth.

  23. Think the markets are beginning to see through the smokescreen. Just saw an interview with a trader on Bloomberg(forgive the lack os specifics) drawing attention to what we know already – well need more cuts and we can’t afford them.
    A few high probabilities:
    bank guarantee will be extended
    public sector wages will be cut again
    social welfare cuts again
    bond markets know it’s not sustainable and then what…….
    A few interesting months coming up!

  24. @Eureka

    >bank guarantee will be extended
    >public sector wages will be cut again
    >social welfare cuts again
    >bond markets know it’s not sustainable and then what…….
    >A few interesting months coming up!

    Excuse me? Do u work “for” the government?

    Whoever said there has to be cuts exclusively?

    My understanding is that by the law of diminishing returns, cuts will weaken growth as spending activity and consumer confidence take the hit.

    Why not privatise?
    I really can’t see how this government can retain any shred of credibility if they don’t tackle THEY’RE own inefficiencies. If it’s properly regulated privatisation with some REASONABLE concessions made to the trade unions, then what’s wrong with that?

    It’s the right thing to do. There are inefficient government groups across the board – transport, health being obvious ones. They are loss makers. The government pumps money in and nothing necessarily comes out. You would hear the inevitable arguments on TFL “If they privatise this, my daughter won’t be able to get the bus from BallynaX to Galway or some other pbscure villaget” But if there’s enough demand, there will be a service provided. If we don’t privatise, what’s to stop the government going after more front line services like nurses?

    Cut the bloat if you’re going to cut pay/jobs, or you will regret it. Greek style protests are surely on the way..

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