The Domestic Banking System

Eoin Dorgan’s letter in the FT this morning provides a useful reminder of the distribution of assets in the Irish banking system. Monday’s FT article used the Central Bank data on ‘domestic credit market institutions’ – the total assets of this group stood at €776 billion at end June.  Eoin Dorgan points out that the total assets of the ‘six domestically owned banks’ (I presume he means the six institutions covered by the guarantee) was €523 billion at end June.  The non-covered institutions (Ulster Bank, Danske, Bank of Scotland Ireland etc) account for one third of total assets and any comprehensive analysis of the expansion, collapse and restructuring of the Irish banking system needs to incorporate this category.

The full list of domestic credit market institutions is available here.

25 thoughts on “The Domestic Banking System”

  1. I know it is very tempting to respond to these articles sometimes but I hate seeing it. If the Government want to refute the arguments made by the FT, they need to get on the road and meet the people who matter i.e. investors directly. I think it is time for the NTMA and Lenihan to put that Government jet to good use. We are not going to restore our reputation through the letters page of the FT.

  2. Slightly off-topic though germane to the size of government guarantee, NAMA has just announced that the government will definitely be guaranteeing the €2.5bn Euro Commercial Paper programme being used for short-term funding of NAMA projects – a futher programme for medium term funding is to be announced in Q4, 2010. The NAMA Act said the government *might* guarantee this €5bn-max of debt, it seems that they definitely are. Our national debt thus increases by €2.5bn.

    Anyone care to guess what the discount or coupon will be on this short term debt?

    http://www.nama.ie/NAMAECP.php

  3. Thanks for the list.

    It is my understanding that it is not just the six domestic institutions that are covered by elements of the guarantee, specifically relating to deposits. Is there a list anywhere of what amounts are covered under the 100k deposit scheme? (i.e. how much in gross terms is there?).

    In addition, are the foreign branches of the domestic banks covered in the calculation of domestic bank assets?
    http://www.finance.gov.ie/documents/publications/other/2010/listparticipatinginst.pdf
    These would be non-domestic, but guaranteed assets.

  4. From Eoin Dorgan’s letter
    “Sir, Your leading article (“No Irish Lazarus”, September 13) claimed the Irish government was trying to bring its most distressed bank, Anglo Irish Bank, “Lazarus-like” back to life.”

    I don’t think the original article said this. The relevant paragraph seems to be:
    “Unhappily, what is emerging in Ireland is how staggering bank losses are. It is time to let them fall where they should: on unsecured creditors once shareholders are wiped out. But Irish leaders are prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life.”

    My reading of this is that it refers to bank’s assets, with Irish leaders hoping for a recovery on these rather than developing plans to assign losses to bondholders. Perhaps Eoin Dorgan thought it related to a good bank / bank bank.

  5. In line with what Enda says, I don’t think there’s much outside assurance in pointing out that bank balance sheets are only €523bn and not €776bn. The narrative war is being lost.

  6. @ Enda

    the NTMA already conducts investor roadshows all over the world. They are probably our best asset in assuring foreign investors on the case for continuing to invest in ireland (well them and Wilbur Ross on CNBC yesterday).

  7. @Eoin

    Yeah I know and they have a very good reputation. If they start responding to the letter pages in every paper that makes a comment that they don’t agree with, the press officer (you!) will be a very busy boy!

    Someone should direct him to this site!

  8. @ Eoin

    On Wednesday, I was adding a CNBC clip of the Wilbur Ross interview and I was going to term him a ‘billionaire’ investor but CNBC termed him a ‘vulture investor.’

    As to the letter to the FT, the Irish authorities do not do themselves any favours with the confusion as to what relates to domestic banks and IFSC firms.

    Somebody should tell the Bank for International Settlements to add a note to the Irish data.

  9. Have to agree with Eoin on this. No point in writing to most papers but when it comes to the FT and Wall St Journal I think you have to respond if you feel they are being incorrect on the figures.

  10. The FT and the WSJ write a lot of rubbish as well. The problem with those papers is that their articles get picked up by non financial media. The letters page doesn’t.

  11. @Neil
    While I agree that it would be important for the Govt to correct any factual errors in the FT, it would not be a good idea for the Govt to attempt to correct errors that the FT had not actually made.

    If, as Ahura points out above, Eoin Dorgan’s letter aims to correct something that the FT didn’t actually write then our credibility is merely damaged. The journalist will notice, the editorial desk will notice, and the charity of their assumptions about Ireland and the Irish Govt will be lower in the future.

  12. @Enda f
    Mr. Dorgan signs himself as being a “Press Officer” in the Department of Finance, not as being from the NTMA.

    “But Irish leaders are prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life.”
    is the sentence that caught my attention. “bankS” – all the Irish banks are all zombies. We have the evidence around us:
    – Not lending? Check!
    – Weighed down by bad debts that they can’t afford to recognise? Check!
    – Reliant on a state guarantee that underprices the risk it is covering? Check!
    – Cracking open skulls and eating the goo inside? It can only be a matter of time…

  13. Hog, I know. Personally I think they should leave all investor relations up to the ntma. The department should not be getting involved. Having saig that, the ntma got involved in a public slagging match with s&p which was stupid as well. Investors are more impressed by one on one meetings than articles in the letters in the FT. How do you think products like CDOs and CPDOs got sold!

  14. @hugh I was referring specifically to the mistake about the assets hence restricting my comment to the figures. The rest I would consider opinion on both sides.

  15. I have to agree with Ahura here. I’m not sure this letter was worth writing. The actual sentence was “But Irish leaders are prolonging the uncertainty in the hope that zombie banks will, Lazarus-like, come back to life.”

    Pretty clearly, “banks” refers to more than one bank. The point being made about Anglo seems pedantic — I’m pretty sure the FT know what’s happening with Anglo. My reading of the editorial was that the FT were saying that other Irish banks (AIB?) were zombies that were receiving forebearance from the Irish authorities in the hope that things will pick up. That point may have been worth responding to but Dorgan’s letter doesn’t do this.

  16. I read the letter to mean that the FT were wrong to say the guarantee was 4.8 times GDP when every fule know that it is only 3.5 times GDP. It may have been appropriate for someone to write to the financial paper of record to correct what seems like a mistake but having a government dept do it looks inappropriate and in some respects laughable as both numbers are firmly located in the land of fantasy and could never be honoured anyway.

    As to the Lazarus comment, isn’t the government’s preferred plan for INBS a rescue of some part of it and obviously EBS is being sold as a viable business. And frankly AIB is not so healthy either. And with Anglo the government never actually used the “wind down” expression last week, nor indeed the “reject” word in respect of the EC.

  17. @Cearbhall O’Dalaigh
    Thanks for the link.The quote below is deeply troubling coming from such a renowned economist. No wonder we are back at crisis levels in the bond markets.

    “Second, a fudged set of financial “stress tests” sought to persuade markets that European banks’ needed only €3.5 billion in fresh capital. But now Anglo-Irish alone may have a capital hole as high as €70 billion, raising serious concerns about the true health of other Irish, Spanish, Greek, and German banks.”

  18. A Chara!

    It will certainly kick start the Irish economy, if Permanent TSB were to pay the outstanding interest to most depositors from 1958 to 20 February 1993 who have been “underpaid”, to use a polite and charitable term

    Cheers

    Srinivasan Devrajan

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