Exposure Fears for “Irish” Banks ?

The lead story in the Companies & Markets section of today’s FT carries this headline and focuses on the high apparent exposures of “Irish” Banks to Portugal, Greece and Spain: you can read the story here.

I am pretty sure that the exposures of the banks that are underwritten by the Irish State to these countries must be quite small.  Rather, the high numbers in the BIS dataset reflect the activities of international banks that have operations in the IFSC  – these banks do not have a role in the Irish domestic financial system.

(This is a periodic story that is re-reported with every release of BIS data.)

19 replies on “Exposure Fears for “Irish” Banks ?”

@ Philip

It’s a poorly researched story from some journo’s who don’t really understand how the banking sector is actually set up here. Im 99% sure its pretty much all, or certainly for the most part, related to Depfa – i think they had around $15bn in Greek and $30bn in Italian government bonds. Whats interesting is that i believe Depfa’s balance sheet should now be back in Germany (in a far less transperent and realistically valued ‘bad bank’ than our NAMA) as of end-October (see Central Bank Oct stats notes). Next BIS figures should reflect this.

Why don’t these guys check their stories? Who we have and what happens in the IFSC is not exactly a secret.

It’s more nonsense. The situation is bad enough without it. For instance, I saw in a breakdown somewhere that Ulster Bank accounts for 52 bn of the liabilities to the UK. That’s all of its funding without taking any account of its assets…

It is a one-sided look at funding without looking at assets. Ireland, as JohntheO pointed out at one stage, is a huge buyer of US Treasuries. This is not, as he supposed, individuals in Ireland, but rather funds domiciled in the IFSC.

So, yes, there is huge funding exposure to Ireland, but a chunk of it has bought assets outside Ireland and a chunk has bought assets in Ireland. The assets in Ireland may be performing badly, but the exposure is far less than the headline numbers.

Is there no way for the BIS to report a more diluted, accurate, less sensationl etc set of exposure figures on a quarterly basis?

I’m getting sick of the figures that get banded about every quarter as well.

Even the BBC seems to get caught out (link below): “According to the Bank for International Settlements, foreign lenders still have $170bn (£107bn) invested in Irish banks. Of this total, $46bn has come from German banks, $42bn from British banks, $25bn from US banks, and $21bn from French banks. ”

Mind you as regards confusion and mis-reporting my pet peeve is the use of the word “bondholder”. There is some €126bn lent to the six State-guaranteed banks, a proportion of which is senior bonds, the rest is “medium term notes (MTNs)”, commercial paper, certificates of deposit. and some €13bn of subordinated bondholders and “short term debt”. When folks say “burn the bondholders” are they just conflating all lenders together for the sake of alliteration?


Yes, the IFSC is the main issue. No, that doesnt get us totally off the hook should things go wrong. Think Depfa and the 75b dollar bullet we dodged….and the reputational damage that that did which we are now in part paying for (imho).

Depfa Bank may account for a lot of this amount.

We should be very grateful that the Germans picked up the tab for this particular crock. Some reports estimate the size of the hole there at €102 billion.

The Italian finance paper Il Sole 24 Ore has an excellent piece today on the need for Europe, particularly the ECB working with the Financial Stability Committee, to get a process of restructuring underway immediately. It begins with a brief analysis of Irish banking liabilities which it puts at somewhere north of 700% of GDP. The main thrust of the piece is that it is unrealistic to expect Greece and Ireland to bring public debt under control while actual outstanding liabilities remain so high. In order for the weaker economies to recover, these liabilities must be restructured and in turn this means that banks in other lending countries (and their citizens) will have to take a hit. The article is a sympathetic to the plight of the Irish government in September two years ago, arguing that in the absence of an existing European mechanism, it was obliged to wing it. However, this comes with the caution that each time a country does a solo policy run, it can often end up creating more problems for other countries.

There was another problem with the reporting of the budget deficit at 32% of GDP where lazy journos didn’t point out that 20% of GDP was flushed down the toilet on behalf of Anglo and INBS in a one off manoeuvre.

Tob-billed front-page story on the of the Companies and Markets section of the physical edition of the FT today. A bit unfortunate. I generally expect clarity and accuracy from the FT. That’s why I buy it.

@ All

JtO is off on safari somewhere, so felt it was my duty to inform you that exchequer figures for end-Nov are in, and total tax take 500mn ahead of schedule (29.5bn vs 29bn), or +1.6%. Corporation tax especially impressive, 19.1% ahead of schedule, indicative of export led recovery still being firmly in place. Only metric thats actually behiond is income tax, by 3.3% (but its the biggest input so has big affect). With this weather though we’re likely to see some sort of fall off in retail sales and general hours worked for December.

If there is anything to this story (and I have read the earlier comments), could the ECB not organise a massive intra-Eurozone set-off, to eliminate some assets and some liabilities in all countries, and maybe make us all feel a little better?

The only papers sensible people believe routinely on factual matters are the Racing Post and the FT. The Racing Post would be embarrassed to have headlined such a boo-boo. The problems with the BIS data were pointed out here 18 months ago.

The Central Bank have released a document highlighting that the ELG Irish banks foreign exposure is only €207bn.

The €525bn figure that was doing the rounds in the media a month or so was actuall talking exposures going the other way, wasn’t it? Or am I going mad?

@Rob S
The NTMA put the figure at 147 bn at end September 2010:

On top of this is the sub-100k deposit exposure, I believe.

There’s then the 34.5 bn at the Irish Central bank and ~90 bn at the ECB. These aren’t guaranteed by the ELG, but the former is a firm obligation on the exchequer and the latter an implied one.

I don’t think the 525 bn figure is accurate for current liabilities. It may have been so for the original guarantee (CIFS).

Comments are closed.