FT: Ireland revives ‘haircut’ demand

The FT reports on Minister Noonan’s IMF initiative here.   I would be interested in reactions to the Minister’s tactics.

129 replies on “FT: Ireland revives ‘haircut’ demand”

Timothy Geithner will bully the IMF into making no concessions to Ireland. Period. The Geithner Doctrine: Governments must bailout banks no matter what the cost to the citizens or economy of a country. He and Obama represent Wall Street.

It is true that the European banking system is in dire straits. Why? Because the arrogant bankers made huge foolish decisions. In a market system investors in foolish enterprises should suffer the negative consequences, and fire the incompetents who caused those losses. But we no longer have a market system in finance, we have an oligarchy. You might as well rename Europe and the US as Bankistan.

Ireland should invite Canada or Sweden in to create and run a new Irish banking system based on prudence, competence, integrity and willingness to accent market discipline for poor practices and decisions.

I suppose the churches will give him their blessing this time as the poltical class here badly need a little bit of meat to throw to the masses.
The optics of the situation is really bad for the hidden power as people are staring into the tabernacle and nothing miraculous is happening !

I can understand now why the IMF is shocked – they preformed their castration of 87 with the utmost of professionalism , the willing corporation of the domestic poltical class made it all so much easier to carry the day.

The ECB badly need to produce a new catechism

Minister Noonan seems to be trying to get IMF backing to put pressure on Europe, in what is a change from the previous tactic of keeping the head down as the Greek crisis unfolds.
So presumably he either believes that whatever is agreed in relation to Greece will provide an opening for Ireland here in relation to the specific group of bondholders mentioned…requiring the ECB to relent. Or he feels that there is a general tactical advantage in upping the ante now, in seeking other concessions such as the delivery of the lower interest rate and maybe other items. Again all presumably depending on how Greece plays out.
Perhaps the most interesting part of this is the decision to try to exploit the gap appearing between the Europeans and the IMF. While the IMF appears to be relenting on releasing the next tranche of money to Greece, it obviously ain’t happy. Thought it was telling that Noonan stayed on to meet the IMF and Geithner, rather than coming home to emergency ECOFIN yesterday.


I wonder if there is a risk in this in terms of the perception of reliable ECB funding. It was striking — and disappointing — how firmly Draghi ruled out a medium-term facility the other day. But ever since the since the stress tests the ECB have done nothing to undermine confidence that the short-term funding will be there. Of course, it is not in the ECB’s interest to create any doubts and have a resumption of the slow motion bank run. But doubts will inevitable creep in if there are signs of irising tension between the government and the bank.

@John McHale
Draghi firmly ruled out any change but the media spun it differently. The funding issue is clearly a major concern and one must wonder if MN was wise to discuss openly burning seniors because even burning warehouses can have devastating consequences. It now seems certain that Greece will implode and JCT has enough on his plate without Paddy the Arsonist threatening to light fires.

@ John Mc
Gay Mitchell was on RTE this morning stressing how Draghi had not ruled anything out…that he’d said things would have to be considered. Central Bankers do speak in riddles, but Gay’s interpretation seemed a stretch.

@ all
It’ll be great if the Minister gets a breakthrough on this but the grounds given – that Anglo is no longer a bank – seem a rather weak basis on which to proceed.

Also, the rather scary thing is that I can read about how the Minister might be able to save several hundred million Euro and my reaction is “bah, that’s not very much”.

@John McH

Assume Ireland knocks 30%, 50% or whatever off the unguaranteed bonds of a couple of former banks. Would you like to have a go at drafting the press release that would accompany the ECB’s decision to either refuse to repo, or only repo Irish bank assets at an Ireland-only penal rate?


I don’t think they would. But even small doubts can be enough. Would youi agree there was an improvement in the perceived reliability of the short term funding after the stress tests?

Why now?

““All eyes were on Greece,” Mr Noonan explained. “Whether Greece would restructure or reschedule or reprofile or default.” In the circumstances, he said, he “certainly didn’t want the attention to switch to Ireland for a relatively small amount of money in the overall context of things”.

Is this a strategic move or simply daft.

I really doubt that a small increase in doubts about the reliability of the short term facility is uppermost in anyone’s mind. It’s hardly going to accelerate the outflow of deposits significantly, and by the time even optimists think we will be ready to reenter sovereign debt markets these events will be deep in history.

My read is that Noonan sees the ECB’s stranglehold on policy coming to an end, and is positioning Ireland to exploit that.

Noonan isn’t as green as he is cabbage-looking. If Greece blows up it will be a game-changer and it’s looking volatile over there at the moment.


“Would you like to have a go at drafting the press release that would accompany the ECB’s decision to either refuse to repo, or only repo Irish bank assets at an Ireland-only penal rate?”

Chuck it over here – I will give it a go 😉

It is complete and utter political postering and is extremely annoying to see the Government involved in this type of thing. Leaving aside the rights and wrongs of imposing haircuts on Anglo and INBS, why on earth did they decide to have this discussion through the media. What sort of la la land are they living in if they think they are in a position to pressure the ECB into changing their position with regard to senior bonds. On a negative day in the markets, the Irish Minister of Finance decides to throw petrol on the fire and the market for financials across Europe suffered. That’s the way to win friends in Europe.
If they want to impose losses on Anglo, then they should do it but not play games. Could they not have tried to presuade the ECB in private instead of spooking the market for potentially nothing? They should also ask Denmark what they think about acting alone with regard to imposing a haircut on senior bonds.

“Would you like to have a go at drafting the press release that would accompany the ECB’s decision to either refuse to repo, or only repo Irish bank assets at an Ireland-only penal rate?”
I was thinking the same thing myself this morning when the SocGen bond chappie, Bud or Brad or Burt or whatever, was on Moaning Ireland saying the ECB wouldn’t allow it – could the ECB risk alienating the populations of Europe by actually writing and saying in public what they have apparently been saying in private? Not even getting as far as penal repo (ouch), but actually threatening to do it?

I wonder if there’s a case to be made just to go ahead with haircutting and see what they do. The domestic economy is a credit-less basket case as it is. If the ECB take the secured assets repo’d to it, bank deleveraging has been achieved rather handily. Has the threat lost much of its sting?

@John McH

Yes, but because the ECB were moaning about the er, fact that they were in repos with insolvent institutions, so you could envisage them wimping-out of a rollover.

I think as others have said the probability of the ECB removing the liquidity support for Irish banks is very remote.

Firstly, it would look extremely spiteful which I doubt is the image the ECB wish to convey to the markets.
Whatever the negative consequences the ECB feels would arise from burning €3.5bn of senior bonds in a small former bank with no deposits, I think it would pale into insignificance compared to the damage a threat of a central bank willing to withdraw liquidity support from a country just because it didn’t do as was told.

Secondly, there would be political up roar across Europe if this were to happen.
I think the ECB is already at its limits of dictating policy to European heads of state, were it to withdraw support from a country like this I think European central bank reform and wing cutting would become inevitable.

@ All

It seems to me that Cantillon got it about right in today’s IT.

“The European Central Bank declined to comment yesterday and its support for such a move would represent a very significant concession given its terror of the systemic consequences of senior bond defaults. Such support seems unlikely, but at least the Government has found another bargaining chip in the bigger game of trying to get better terms on the bailout”.

I have used the parallel of all trains meeting in the station at the same time. It is evident that the two principals – Sarkozy and Merkel – have only one last chamce to get things right next week to avoid an almighty train wreck. This would include allowing all heads of state and government to emerge declaring victory for Europe and, incidentally, themselves.

The fact remains that if investors\depositors believed there was a perfectly reliable LOLR for the Irish banks they would not have a funding problem. They do have a problem. The perception of the reliability of that funding is a variable than cannot be ignored.


Agree. The history of the EU (including all its previous manifestations) has been ‘out of crisis, progress’. We can only sit, watch, wait and hope. The principals, as you decribe them, have some very fine political calculations to make.

Was it Ricky Gervais that first popularised the saying

“If my aunt had [liathroidi] she’d be my uncle”

Well, if the ECB approves the haircut then we’ll be fine. But why would its stance have changed since last November 2010 when they, “the people” used [in the words of Governor Honohan last Friday on Vincent Browne] “influence” to stop any burden-sharing with snr bondholders.

What sophistication or innovation is now contained in Minister Noonan’s “plan”? Maybe the plan is to wear “the people” down with persistent pleadings. Gwan, gwan, gwan, gwan. GWAN!

The ECB relies on consensus among solvent euro area states that it should be permitted to dictate policy. Without that consensus, which seems to be coming apart, it is a paper tiger.

The loudmouth behaviour of some of our favourite ECB folks should be viewed in that light.

On liquidity support, I think we are getting close to the point where its continuation is more important to the ECB than to Ireland. Just because the funding is short term does not mean that they’ll get it back if they trigger a crisis.

Tanaiste Gilmore is reported by RTE to have said

“The Irish economy is in an entirely different situation than the economies of some of the other countries whose budgets are in trouble. Therefore we are in a much stronger position today than we were at the beginning of this Government and certainly than we were in November to negotiate with the European Central Bank”

Our banks are now on the floor (by reference to their share prices), headline deposits are still reducing (albeit at a much reduced rate), our 10-year bond price is now at 11.5% compared to 8% last Nov, our unemployment is near 15% rather than mid 13-14%, our GDP is officially estimated to grow 0.75% in 2011 rather than 1.75%, we will need much more than the €10bn to recap the banks that was estimated last Nov (it seems now it will be slightly under €20bn though how much more will Anglo/INBS/credit unions need?). And now we’re in a stronger negotiating position?

“And now we’re in a stronger negotiating position?”
Bad is good. The sooner the sovereign gets downgraded to junk the better…

Some questions:

Is Anglo still receiving ELA from the ECB? Or to put it another way, are Anglo assets currently being offered as collateral to the ECB?

If the answer is no to these questions, wouldn’t that be a reason why the ECB would turn a blind eye to Noonan’s initiative and why Noonan is pushing this now?


So if the EU or IMF say to Gilmore

“Shame you don’t like the bailout terms, but if you don’t want it, don’t take it”

What would he tell the Crokies?


According to Gilmore, Ireland has friends in Europe and internationally. We will just borrow from them at much better terms. I am sure Obama will rush through legislation in Congress to see us right. The Queen might even sell some land to give us a helping hand.

Good tactics by Noonan. Note that the IMF did not immediately issue a statement saying you can’t do it.

Post a Greek default or whatever, the stage is now set to dump the seniors of Anglo/INBS, even unilaterally, provided he can keep the IMF/Geithner out of it.
Even PR Guy would struggle with an ECB press release that said that taxpayers must ‘pay the bondholders in dead banks in Ireland but stretch them out or haircut them in Greece’.

LBS would of course issue one of his morality missives on behalf of the bondies. But who is listening to him anymore. He would have to threaten to stop funding the Irish banks.
If I were ICB governer I would love him to do that. I would take him up on it. My attitude woul be
‘Well thats one one very large creditor out of the way for a very long moment’.

@John McHale

I don’t think “a perfectly reliable LOLR” ever exists. In a sane world, a central bank lends only to solvent institutions. So there is always the possibility that it will pull the plug in the light of new information.

A big part of the reason why I have grown to detest the ECB is that it doesn’t make these decisions on the basis of perceived solvency. Rather what it demands is obedience. Sooner or later some Eurozone finance minister is going to call the ECB’s bluff, which of course means running the risk that it isn’t bluffing. Whether Noonan should do it now is a very difficult call. He may feel that there isn’t that much to lose, since the ECB’s policy will do immense harm to Ireland in any case.

A question occurs to me, prompted by the fact that commentators regularly warn that Ireland must not take unilateral action. John McHale has been particularly insistent, but Colm McCarthy and others have said much the same thing. My question is: if Ireland takes an action opposed by the ECB, but with the support of the US and the IMF, is that unilateral? Presumably not, but I’m puzzled as to what the advocates of caution demand in a situation like this.

@ Phillip II

lots of headlines but not too much follow through, caught people by surprise last night, but the Greece situation is the bigger issue. Probably even been missed by a few people on account of the Greek headlines. So it’s more in the “interesting” column than the “panic” one, though any suggestion by the ECB that they’d consider it would definitely move some markets.


yes — that is obviously the power the ECB have over us… whether they state it explicitly or not. and maybe they prefer to keep us on short term funding so they can stay in control, rather than commit to something medium term which would be more difficult to back out of..

as I said, I think the best guess may be that it is a bargaining chip for us to position to argue for some concession as the Greek situation plays out.

of course the cynic might say it is also political — given that we are at 100 days………

Great Bargaining chip.

Probably only talking about 50% haircuts so 1.6bn saving or so.

Whereas a 1% (none of this 0.6% lark) cut on the remaining EFSF/EFSM (but not the 5bn of bilateral loans) would be worth arounf 240m per year for 7 years i.e. 7 X 240M = 1.68bn

Both would be great but it is a nice conincidence we are talking about a bargaining chip worth an amount very similar to an interest rate decrease.

@Cliff Taylor:
Not be a cynic, I hadn’t thought of that!. Hope the cynic is wrong this time.

June 16 (Bloomberg) — Ireland opened a new front in the drive to restructure debt on the euro area’s periphery, adding to the European Central Bank’s concerns as it tries to head off another wave of financial turmoil.
Irish Finance Minister Michael Noonan said yesterday that senior bondholders should share in the losses of Anglo Irish Bank Corp. and Irish Nationwide Building Society, reversing a policy of protecting owners of senior securities. The ECB is against imposing losses on investors. President Jean-Claude Trichet said on Feb. 7 that haircuts aren’t part of a plan to reduce the Ireland’s debt load.
Ireland’s about-face on bondholder involvement in its banking crisis comes as European lawmakers struggle to settle a dispute over how to avoid a Greek sovereign default. While German Finance Minister Wolfgang Schaeuble said last week that Europe’s biggest economy insists on the participation of the private sector, his French counterpart Christine Lagarde has ruled out any action that constitutes a “credit event,”
backing the ECB’s view.
“Noonan must be kidding,” said Klaus Baader, an economist at Societe Generale in London. “It’s not so much money-saving as a way of Ireland trying to improve its bailout terms, just as the Eurogroup is focused on Greece. Naturally, it means investor stress and increases pressures on bank funding. The ECB won’t take this particularly seriously, but the annoyance factor is extremely high.”
The Frankfurt-based ECB declined to comment.

Unguaranteed, Unsecured

Noonen was referring to Anglo Irish and Irish Nationwide’s senior unguaranteed, unsecured bonds. These total 3.8 billion euros ($5.4 billion), the Irish central bank said on April 1.
Ireland, which has injected a combined 34.7 billion euros into Anglo Irish and Irish Nationwide over the past two years, is merging both lenders and winding down their assets over a 10- year period. The government had previously said it wouldn’t seek to impose losses on senior bondholders unless the lenders need additional capital. The central bank said last month neither would need a further cash injection.
Ireland’s Deputy Prime Minister Eamon Gilmore said today the government can’t act unilaterally in its aim to share losses with investors and plans to discuss senior bond loss-sharing with the ECB.
“The ECB’s position was justified on financial stability concerns for Ireland, as well as on grounds of potential contagion for other European banking systems,” said Antonio Garcia Pascual, chief economist at Barclays Capital in London.
“Ongoing concerns on financial stability, especially in European periphery financial institutions, could make contagion remain a relevant issue for ECB’s stance on this issue.”
Ireland secured a bailout package of 85 billion euros on Nov. 28 after it was locked out of credit markers due to concerns about its ability to cope with its bank debt and budget deficit. The government has failed to negotiate a reduction of the 5.8 percent interest rate on its aid loans because it has resisted pressure to raise its 12.5 percent corporate tax rate.

@philip II

Note the panicky reactions of some bond strategists today. There is an assumption in many investment houses that bonds are protected by a free “Trichet put”. The ECB will make taxpayers stop you from taking writedowns, and if that doesn’t work – German taxpayers. Risk assessment and old-fashioned analysis is no longer necessary and for mugs.

You either play that game or you play a game of waiting for that “reality” to collapse.

Note that 6 month equity volatility is near the lows of the last 4 yrs. That means there is a high level of complacency in pricing generally.

I support Noonan’s statement. I don’t think the ECB will ok the burning of these bonds. But what is of value is that it lays down an important marker. In effect he’s saying INBS and Anglo are no longer active banks and that it’s unfair that the Irish taxpayer should cover these losses. If/when the ECB states their desire that these bondholders are repaid in full, they will justify it by stating that it is a necessary step for the stability of the eurozone. In doing so, it (publicly) opens the wider question of why the Irish taxpayer should be footing all the costs for the benefits of all members

@jagdip singh

referring to Eamonn Gilmore’s statement “And now we’re in a stronger negotiating position”,

says “our unemployment is now near 15% rather than mid 13-14%”

JTO again:

Unlike jagdip or myself (or anybody posting here), Minister Gilmore (not that I am a great fan of any Labour Minister) might allready have been aware of the latest QNHS that was released by the CSO a few minutes ago. It shows unemployment fell from 14.8% in Q4 2010 to 14.0% in Q1 2011.



If Sarkozy flips on the ECB after meeting with Merkel tomorrow, we begin a new phase with the governments telling the ECB what to do. And using ECB resources properly to resolve this crisis.

In situations like this, it is amazing how quickly red lines fade and solutions emerge. Expect medium-term ECB support to banks, for example, but limited to countries with IMF programmes. In such circumstances, they would not undermine monetary control (and Draghi knows it).


CSO figures seem to imply near zero net-migration from Irish nationals YoY….where’s Joan Burton and her 500k now??

@Enda F

re Bloomberg:
“Ireland’s about-face on bondholder involvement in its banking crisis “.

Where in the MOU or in the SPU document does Ireland say that there will be no bondholder involvement?
PH: “Its not in the document.”
Bloomberg should get its reporting more accurate.

“Noonan must be kidding,” said Klaus Baader, an economist at Societe Generale in London. “It’s not so much money-saving as a way of Ireland trying to improve its bailout terms, just as the Eurogroup is focused on Greece. Naturally, it means investor stress and increases pressures on bank funding. The ECB won’t take this particularly seriously, but the annoyance factor is extremely high.”

I hope Noonan is not kidding.
And as for the annoyance factor. You bet.
It is extremely high on the Irish side.
These people should have been told where to go a long time ago.

So the big French banks are putting these economist spokepeople out to bat. Bank economists singing for their supper. They are starting to get scared. I wonder why.

@JtO, yes the unemployment figures this morning were positive. If I am reading table 1.2 correctly, the unemployment rate for Oct 2010 was 14.5% Nov 2010 was 14.8%, for December 14.7%, for March 2011 14.0% and May 2011 14.1%

A very welcome reduction.

@Joesph Ryan

I don’t think anyone is getting scared especially the large investment houses. No-body really believes that the ECB will do an about turn on this. We are talking about €3.8 billion of debt.

I wonder if I haven’t given Noonan enough credit. Is it possible he is trying to force a sell off on Anglo and INBS debt on secondary market by threatening legislation and burden sharing and then step in with a voluntary buy back at lower than current levels. I would think most investors at this stage will wait and see what the ECB say on the issue.

Glory. Noonan’s initiative is now the top story on bloomberg.com, emblazoned with a picture of … AIB, of course!

@Enda F
If the ECB say ‘non’, there’s no point in trying a voluntary buyback. You might get some takers looking to lock in profits, but otherwise it would be more rewarding to wait for redemption. No?

This is all useless bluster. Noonan has already said he will seek ECB approval for the deal. This means he will submit the plan to the ECB, they will give a big ignorant “NO.”, and the Minister and the Irish delegation will promptly capitulate, as expected.

The Minister is wasting his time negotiating with the recalcitrant, unelected and unaccountable bankers at the ECB. He would be better off burning bondholders unilaterally.

@ Hogan

a lot of people would tell you that Trichet, his nationality aside, would reply “nein” rather than “non”…

@ All

The statement by Fitch yesterday is very, very interesting.


It has been widely read in the Anglsaxon press as adding more to the woes of the euro. But it is being read in a different light in Die Zeit in an article published just now as “holding the door open a little to a solution” i.e. Greece being at death’s door but without actually going through it.

N.B Also the following extract.

” Finally, Fitch also notes the distinction between a ‘credit event’ and potential ratings default – whilst the latter relates to actions taken by Fitch or any other credit rating agency, only the ISDA Determination Committee can determine a ‘credit event’ which triggers credit default swap (CDS) contracts.”

… it’s just the 100 day itch ….. good local optics … poor EZ politics

Let’s get real – and whack Nicky ‘de nuke’ Sarkozy with a plan to write off €50 billion on the ECB and €20 billion more on the bleed1n pillars … and with out Allies, put the Gov’nor in the hot seat in Frankfurt – we did it in the 7th Century – let’s do it again. And we want Brittany back!

@Joseph Ryan

Some bank economists have a bonus calculated in part on how often they can get a quote in the press which mentions the bank’s name.

When the guys who actually advise the clients start moaning in public, that can be revealing.


“only the ISDA Determination Committee can determine a ‘credit event’ which triggers credit default swap (CDS) contracts.”

This is very true and they are governed by about 60 pages of rules I believe. There hasn’t been much noteworthy coming out of them in recent days other than the following:


and this for general interest


Maybe they are keeping their heads down?

One market that is moving is the bond market. The Greek two year is 29.5% and Irish 12.5%. Looks like the credit event is preordained. The payout on the CDS is going to be very interesting.


I think there are two conceivable ECB reactions to this.

The first, more limited, reaction is to point to the fact that, according its rules, the ECB can only lend to counterparties that are “financially sound” (ECB general documentation p. 15). A counterparty that defaults to its senior bondholders is, by definition, not financially sound and cannot access central bank liquidity any more.

This would have direct consequences limited to the resolution of the Anglo, while the funding of other Irish banks could continue. (Incidentally, Noonan’s argument that Anglo is no more a bank is self defeating in the sense that the Eurosystem can only lend to banks.)

The second, more drastic, reaction would be the ECB judging that defaulting on senior bondholders would constitute a violation of the EU/IMF agreement and would therefore lead to cancellation of the ECB’s waiver of its application of rating threshold for Irish paper, which was conditioned on Ireland’s program staying on track.

This could have wider implications for the Irish banking sector, but it would not necessarily constitute resorting to the nuclear option. Even if the Irish paper became ineligible in the ECB’s regular repo operations, the CBI could still accept it as collateral for ELA financing. Liquidity provision would remain but risk sharing would change.

(Remember that in the Eurosystem, monetary policy repos are a systemwide decision and subject to systemwide risk sharing, while ELA is under the responsibility of national central banks and not subject to risk sharing.)


Anyone got any newz on those Stress Tests on German and French Banks -think they were supposed to be out in June?

And on newz at 1 – no deal on Greece now ’til early July ……….

And Ollie’s spokesman ‘praises’ Irish Gov for ‘very effectively’ implementing the ‘agreement’ of the previous gov – which supports Sinn Fein assertion that FG/Labour are implementing FF policy – which they are.

Looking forward to the Press Conference on the 100 daze …

… & Macedonia are claiming Alexander the Great ….

@ Anonymous

“the ECB judging that defaulting on senior bondholders would constitute a violation of the EU/IMF agreement”

Well, remember, a lot of people have pointed out that there’s nothing in the MOU about senior debt. It was, apparently, done via a side letter between the IMF and the ECB.

@ DoD

German Landesbanks wanted it pushed out til next month i think?

@Bond Eoin Bond

I linked a Der Spiegel some time back that German banks could handle a 50% on Greek … & that Landesbanken fairly exposed. And if Axel Weber thinking still holds sway/influence, and his student and protege now head of Bundesbank, then German pragmatists ready to take on Nicky ‘da nuke’ and the ECB ………. which (aside from Brian Hayes’ idiot comments during week) could be good news for Greeks, and for Sovereigns in general …. if tuff on certain French financial institutions which might be getting a crack of the Fitch …. which I would’nt mind at all at all at all 😆

Anonym, Eoin
The ECB has threatened to withdraw liquidity from the Geek system in the event of a rstructuring a probably from Ireland given bond torching.
If the ECB decides not to rollover Irish and Greek liquidity would there not be a banking crisis in both countries and an exit from the Euro along with massive devaluation of the exiting cxurrencies. That would lead to a run on Portugal, Italy, Belgium, France etc etc.
So the institution expressely charged with monetary and financial stability in the currency zone would be accountable for the collapse of the eurozone & the end of the european project. Who has who over a barrel?

(Bloomberg) — Irish senior bank debt tumbled after Finance Minister Michael Noonan said bondholders should share in losses of Anglo Irish Bank Corp. and Irish Nationwide Building Society.
Anglo Irish’s 1.25 billion euros ($1.76 billion) of senior unsecured floating-rate notes due January next year dived 13 cents on the euro to 70 cents, according to Jefferies International Ltd. prices on Bloomberg. Irish Nationwide’s 598 million euros of senior unsecured floating-rate notes plunged 12 cents on the euro to 63 cents.
Noonan’s call yesterday for burden sharing comes after subordinated bond investors lost as much as 90 percent on their holdings in debt restructuring. Ireland may use the threat of losses to senior bondholders as leverage in its bid to renegotiate terms of its bailout from the European Union and International Monetary Fund, according to BNP Paribas SA.
“This is likely to be an opening of a new act in the play of the Irish government’s attempt to get a reduction on the interest rate on the bailout package,” BNP Paribas analysts Olivia Frieser and Ivan Zubo wrote in a note to investors.
“Having said that, we find this very detrimental for the credibility of the Irish government.”
Ireland said previously that it wouldn’t seek to impose losses on senior bondholders unless Anglo Irish and Irish Nationwide need additional capital and the central bank last month said a further cash injection wasn’t necessary. A combined
34.7 billion euros has been injected into the two lenders by Ireland over the past two years.
The European Central Bank has opposed any moves to force losses onto senior bank bondholders and Ireland won’t act unilaterally, Deputy Prime Minister Eamon Gilmore said today.
“At this point in time our base case is the ECB will step in to prevent any mistreatment of senior bondholders, although whether and when they make statements to this effect is questionable,” the BNP analysts wrote.

BNP have a point about the statements made a month ago.

@Jake Watts – the CDS situation seems to be the crucial one for Geithner/US banking system, rather than the physical exposure by US banks to either bank or sovereign debt.

@ Bond. Eoin Bond

How much would guesstimate Ireland would save from a combined Anglo and INBS senior debt writedown under a best case scenario?


The CDS thing is a non-story with regards to Ireland, Greece and Portugal. There is no huge black hole in the financial system if the Countries or their banks default because of CDS exposure. Protecting senior bank debt and sovereign debt has nothing to do with CDS. The CDS market survived Lehman’s and numerous other events. It would survive this.

BNP are probably delighted that attention directed away from their own exposure to Greece! Anyone know the breakdown of French institutional exposure to Greek debt? Nicky ‘da nuke’ pleading for us all to ‘take one for the French Gipper’ ….

@Eoin and the various anonywhatevers

” would be the ECB judging that defaulting on senior bondholders would constitute a violation of the EU/IMF agreement and would therefore lead to cancellation of the ECB’s waiver of its application of rating threshold for Irish paper, which was conditioned on Ireland’s program staying on track”

Would agree with Eoin, but what is the story with this alleged “side letter”.

So the bailout might actually be dependent on a put for all the unguaranteed bonds?

Now, where is my option valuation spreadsheet………WOW, that put option was worth HOW MUCH!??

Crickey, those Irish really know how to negotiate, take whatever interest rate is offered and throw in a free gift as a sign of appreciation!

Maybe Noonan should get the Revenue Commissioners to at least send the bondholders an assessment for CAT on the gift.

Do we know for sure the side letter exists? Has anyone seen it? What does it say?

Just how bizarre is it that nobody is allowed to know.

Why are the Irish tolerating this?

The Aesthetic Turn goes Dutch ….. hmmmm

The European bail-out fund should be doubled if politicians want private sector investors to participate in a second bailout package for Greece, a European Central Bank governing council director has said.

Nout Wellink told Dutch newspaper Het Financieele Dagblad that a new Greek aid package would carry so many uncertainties and risks that a doubling in the bail-out fund would be necessary to take into account the contagion risk for both Ireland and Portugal.

“If you take these risks, you need to build a safety net,” Mr Wellink, who is also the outgoing Dutch central bank president, said.



@ ED

you cant give these guys nothing, and Noonan specifically noted “secondary market pricing”, so on a nominal of €3.7bn, maybe we could save €1.25bn or so. Anyone who thinks we’re jumping from full repay to zero-ising in one fell swoop is seriously deluded. As noted, this is primarily about (a) politics, and good politics at that in terms of persuading people to buy into the tough measures still required with public spending/tax hikes and (b) a stick to get a better EFSF/EFSM rate. I still do not forsee any bondholder losses being imposed mandatarily on bondholders, but that doesn’t mean its a pointless task either.

Don’t understand what Noonan hopes to achieve by megaphone diplomacy; as the ECB must be seen to be impervious to politicians’ blandishments and exhortations, the nature of the announcement is almost calculated to achieve the worst possible outcome…bizarre.

Not to mention that ‘we’ll break your balls while you’ve got your hands full with Greece’ is hardly calculated to gain friends and influence people. What next; squeeze into the old tie-dyed T-shirt and paint up a banner?!

Didn’t they learn this lesson already re the interest rate reduction and ECB medium-term funding?



Note: this is so he can takeover at the Italy CB i assume, and not because they disapprove of his ridiculous comments…

@tull: is there anyone who thinks that the ECB threat to blow up the eurozone is even remotely credible? I know no-one who does.

@grumpy: there is no such side-letter AFAIK.

Just out. “Late autumn” seems to imply its not gonna be something imminent. “Every red cent” also getting a few mentions.



Do we know for sure the side letter exists? Has anyone seen it? What does it say?

Patrick Honohan’s recent words on Vincent Browne (as transcribed on NWL) seem to suggest that there’s no commitment to repay unguaranteed seniors in the side-letter either:

It wasn’t part of the negotiations as such. There was no deal. There was no agreement on that. […] It’s not in the agreement. It’s not in the agreement. […] I think, well, I mean as I say that’s not really part of the deal. That’s part of the discussion, that’s the reason he was crestfallen. I think this is a matter that remains part of current policy discussion.”

But as you say, what the hell do we know for sure?

@enda f – AIG didn’t survive Lehman’s, due to its CDS business, and the US Treasury had to foot the bill. See http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/4886221/AIG-set-to-unveil-record-60bn-quarterly-loss.html.

US banks filled the CDS-writing void left by AIG’s demise, and at much fatter margins than AIG was happy with. Unhappily for them, with CDS prices at all time highs in many instances ( and close to them even on US gov’t debt) the gross rather than the net position becomes worrisome. You can’t net off with bankrupts.

I’d be delighted if CDS were an uninteresting footnote in the history that’s written of the 2007/11 financial crisis. Unfortunately they’re more likely to have a chapter or three devoted to them – not least as a determinant of US government policy. I hope I’m wrong.


AIG had bigger problems than just the default of Lehman Brothers. Their insurance of sub prime and other structured finance products was the problem.

@Bond Eoin

Just as anticipated. He forgot the pillars when making his announcement. So it was not a cunning MN plan after all, just 100 day politics.

@Enda F – Greece is sub-prime. Anglo is sub-prime. If Greece goes any contagion – sovereign or banking or both – will tip a lot of entities out of investment grade into sub-prime. Have to point out as well that bundled sub-prime in 2006/07 carried a AAA rating in many instances.

@Kevin Or

“there is no such side-letter AFAIK.”

…..how absolutely ridiculous that anyone has to include AFAIK.

@Eoin, Ceteris

You will note the banks liabilities are not denominated in red cents. This could be a reference to the proposed parallel currency 😉

Varadkar was equally certain red cents would not be invested into banks until there was an agreement about haircuts for senior bonds.

Could the red cents really be herrings?

@Jake Watts
re: “The payout on the CDS is going to be very interesting.”

How about a unilateral EZ wide directive.
‘All naked CDS contracts are declared null and void. Contracts written with or by any EZ based bank are hereby cancelled’.
That would simplify the EZ banking system a great deal.

This side letter business is so mysterious. If this was a novel there would be a side letter and it would be linked to the Freemasons and Biddy Earley and the writer of same would be the Italian grandson of a woman shunted off into the Magdalen Laundries by her brother who was in AIB at the time .

@tull mcadoo

To be fair, the ECB mostly lacks the mandate, and more or less lacks the ability, to do things in the name of Eurozone financial stability. Of course that just raises the question of why it decided to bet the farm on insolvent banks and insolvent PIIGS, in the name of EZ financial stability.

In fact the ECB and Ireland are in very similar positions in some ways. Both went far out on a limb starting in 2008, expecting that if necessary they would be seen right for their initiative in supporting the collective bail-out-everything drive. (Indeed both of them forced the bail-out-everything pace quite a bit.) But of course neither of them ever got anything in writing so, very foreseeably, both now risk being hung out to dry as the rest of the EU tires of trying to bail out everything.


…..how absolutely ridiculous that anyone has to include AFAIK.

Where’s an attention-seeking opposition TD when you need one?

@Aiman, I don’t understand your point. You seem to think there is some huge open position on the CDS market with regard the PIIGS and their banks that the US is trying to protect. There isn’t. We have been hearing this for years from politicians but it is rubbish. (Remember the rubbish about how it was the short sellers in the CDS and equity markets which caused Anglo’s problems).

The CDS payout on Lehman Brothers was supposed to bring down other banks. It didn’t. Just as payments on CDS for the PIIGS and their banks won’t bring down the financial system. The net position amongst banks is never as bad as the huge gross figures thrown around by people.
Anyway, this is completely off topic

@Bond . Eoin Bond.


If you were Draghi about to take over at the ECB, the first thing you might want to do would be to call off the mad dogs and at least give the pretence of a sane organization.
I doubt that the Italian CB would think themselves blessed with a replacement such as LBS.

Red cent herring…….poor Mickey got confused. It’s the heat in Washington. Lots of hot air.

The following from the Telegraph live seems to sum the situation well..
“13.40: To continue the Lehman Brothers analogy, Jim Reid, a strategist at Deutsche Bank, had this to say earlier:
We think the global sovereign crisis is still in the early stages, but it does seem that the next few weeks could mark the dramatic end to another chapter in this ongoing story. Will it be a happy ending or a Greek tragedy? No-one really knows at this stage but everyone in every corner of global financial markets should be keeping a very close eye on upcoming Greek events. We believe the period is resembling the build-up to the Lehman collapse where, although markets were increasingly nervous, virtually everyone expected a last-minute buyer.”

@ Joseph Ryan

“If you were Draghi” – what do you mean “If”…oops, i’ve said too much….

Anglo is trading up again following comments earlier. Obviously not many people think this is going to happen. Especially since Noonan says there is no urgency.

The piece below convinces me that Greece is banjaxed and
As Jim Reid indicated above there may be no buyers of last resort….

“The country’s largest private bank, the National Bank of Greece (NBG), has also begun selling off its holdings of Greek bonds, a 180-degree change of course. In 2009, the bank increased its bond holdings to €18 billion in part to “support the market,” it said at the time. According to the bank’s quarterly report released on Wednesday, however, NBG has shed €4.8 billion worth of bonds and plans to continue its sell-off.

Looks like the can has been kicked a bit further down the road, at least for a few weeks


I think Noonan believes there will be private sector involvement in the 2nd Greek bailout, so after that has occurred he will be saying “You’ve allowed sovereign debt holders to take some of the burden in Greece, but you won’t allow the holders of private senior bank debt to take some of the burden in Ireland – now that’s not acceptable to us, and we’re supported in this by the IMF”.

After it becomes clear later on in the year that the sky didn’t fall after the PSI measures for Greece, the threat of unilateral action becomes more credible, in the restricted case of Anglo/INBS. Before then there is an incentive to keep the matter in the public eye periodically to drive the price down in the secondary market, so that whenever some buyback/exchange is proposed there is a bit more to be gained, though in the overall scheme of things the gains are political rather than financial. It is only with unilateral action being seen as credible, that the ECB would “agree” to some limited measures. Otherwise it will just be dismissed out-of-hand, as has happened 100% of the time to date.


“Precisely the opposite is true, is it not?” [Re in what situation Anglo could be considered financially sound.]

Anglo as an individual institution can hardly be defined as financially sound. Its soundness depends on whether it has the full backing of the Irish state or not. Burning the seniors would mean it hasn’t.

@Bond. Eoin Bond


You are probably aware that the _only_ reason for this is that by convention someone needs to make room for a French in the ECB board, and since there would be two Italians there, it needs to be an Italian, ie. LBS.

Of course, he cannot be kicked out, so Italy needs to make him an offer he cannot refuse. Indeed, as you pointed out, the position of the Governor of Banca d’Italia is about to be vacated, so who knows…


Anglo has a balance sheet on which there are assets and liabilities. Restructure the liabilities so they are clearly less than the assets and it is a solvent institution without any need for recourse to the Irish state, yes?

@ Edna F

You are correct that the CDS exposure and counterparty risk will not bring down the financial system. Actually, nothing will ever bring down the financial system, nothing ever has. What does happen, and this is on topic, is the degree and latitude of pain caused by an economic collapse. The recipients of the purposed “haircut” on Anglo bonds may very well scream bloody murder and this likely will cause pain in the CDS market, but it will not bring down the financial system. However, if you are unemployed and broke your financial system is indeed brought down. It’s mostly a political game among the politicians and bankers. It is very unlikely their financial system will ever fail but countries keep rolling along even if you change their boundaries, governments and leaders and even names. Ireland is really not that different in absolute terms from the 12th century. Count your lucky stars you have an income and get a front row seat to one the grandest shows of inequity witnessed in a very long time.

How about this for a worldwide headline from Bloomberg….


@Ceteris Paribus

It looks to me as though an intern pretending to be a sub-editor wrote that. I hope so otherwise the sub-editing standards at Bloomberg have really hit the skids.


I’n not questioning your logic. I’m just pointing out that the ECB has rules regarding its counterparties, and what you describe doesn’t fit into those rules.

The ECB is not supposed to finance bankrupt estates. Events have pushed it quite far into that direction, and I suspect burning the seniors would be one step too far.

The language used in statements by those who stand to lose in any haircut scenario is so self-serving as to be amusing

“At this point in time our base case is the ECB will step in to prevent any mistreatment of senior bondholders…”

You can almost see the headline in the BNP Paribas client newsletter – “Fury as bondholder abuse scandal revealed”, along with a picture of the perpetrator Michael Noonan, and a detailed description of how he mistreated the poor vulnerable bondholders.

That Bloomberg intern is probably just reflecting all the self-serving statements from the ECB, banks and market participants in general, but it does indeed reflect very poorly on their standards.

1 Publish the side letter between the state and the IMF

2 Publish the AG’s opinion on senior bondholder losses

3 Explain IN FULL DETAIL the role the ECB played and plays in relation this issue

4 Do it TODAY

It is ludicrous that debate on these issues is conducted without the full facts being made available.

@Joseph Ryan

“Bank economists singing for their supper. They are starting to get scared. I wonder why.”
I agree the aroma of fear emanating from certain quarters is very strong.

@Bryan G re “perpetrator Michael Noonan”
Try as I might I am finding it very difficult to feel sympathy for “the poor vulnerable bondholders”.


Eamonn Gilmore is correct to point out the differences between Ireland and other states with budgetary problems. As a politician and leader he is fully aware that Greece, Portugal, Italy, Spain and Belgium differ from Ireland in numerous ways. Democratic tradition, no history of default, social stability, history of tackling public debt, above average level of social equality, enagaged and active electorate, even the existence of a Governmenet are just a few that jump to mind.

IMHO Michael Noonan is correct to draw attention to Ireland at this moment and, by doing so, highlighting that the nation is one of the more progressive and credible members of the European Union. After all 500 000 non- nationals were happy to come to work here and did not immediately “rush to the airport” as soon as the recession started. If we are a “basket case” I wonder why 360 000 non nationals (mainly from other EU states) are still in Ireland despite high unemployment for over three years?

@ Jake Watts

“Actually, nothing will ever bring down the financial system, nothing ever has”.

The financial system is just a bigger version of the Celtic Tiger and the current system is only 200 years or so old. The value of any asset is just a social construct innit. Take away the permagrowth and how much is any share worth ?

Consider the value of LinkedIn if the planet will be annihilated in five months time. The current share price requires the social network company to have a double digit growth rate beyond 2018 and into eternity. Assume no growth from October, however, and LinkedIn is worth less than $1bn. Those investors who on Thursday valued the company at up to $11.6bn in its stock market debut are presumably sceptical of Mr Camping’s prediction.

The interest rates on this debt, 13% in some instances, were clearly speculative. At the least, we should haircut for the speculative element…nobody should be able to make a case against that


…….possibly it is written in the margin in lemon juice and can only be seen if you run a hot iron over your computer screen while viewing it…….

Credibility and deliverability is all that matters and non of the ‘players’ have it.

Is this the most damning indictment….”
“The spokeswoman for competition commissioner Joaquín Almunia said current submissions to Brussels on the orderly liquidation of Anglo did not contain “any proposals from the Irish authorities to this effect”. Interviewed today in The Irish Times, Mr Almunia said the 2008 bank guarantee – which included all the banks’ bonds – was a mistake and that the sweeping scope of the measure served to concentrate bank losses on taxpayers. Mr Almunia, who at the time was EU economics commissioner, said the guarantee curtailed the capacity of the Irish authorities to impose losses on senior bank bondholders and undermined Irish sovereignty.

@ All

Off the point, P Lane, J Fitzgerald, and C McCarthy mentioned on Newstalk as possible ‘wise men; to be appointed as head of indepenedent government economic council/advisory body.

Never mind the new government taking it meekly from bankers, they are a shareholder to the tune of 36% of BoI. Did they demand a vote on the reappointment? Did they even send a representative with their proxy? What were the other shareholders thinking?


If you were managing a pension fund and were smart enough to have significant holdings of Irish banks in the funds, would you think you had sufficient job security to vote against the appointment of people who are friends and associates of both your bosses and members of the boards of trustees of your clients?

We are talking about Ireland here, remember.

Bank of Ireland

Pat Molloy
Appointed to the Court in June 2009 and Governor in July 2009. He was Group CEO of Bank of Ireland from 1991-1998 and subsequently served as a Non Executive Director from 1998-2001. He has served as a Non Executive Director on the Boards of CRH plc (1997-2007); Eircom plc (1999-2001) and Waterford Wedgwood plc (2002-2009). He was Chairman of Enterprise Ireland (1998-2008) and CRH plc (2000-2007). His current Directorships are Blackrock Hospital Ltd (Chairman), Dublin Adult Learning Centre and Hugh Lane Gallery Trust (Chairman).
(Age 72)

Richie Boucher
Group Chief Executive
Appointed to the Court in October 2006 and appointed Group Chief Executive in February 2009. Joined Bank of Ireland Group as Chief Executive, Corporate Banking in December 2003 from Royal Bank of Scotland. He was appointed Chief Executive, Retail Financial Services Ireland in January 2006. He is a past President of the Institute of Bankers in Ireland (2008) and of the Irish Banking Federation (2006).
(Age 51)

Tom Considine
Non-Executive Director
Appointed to the Court in January 2009. Appointed Chairman of the Court Risk Committee in August 2009. President of the Institute of Public Administration and a member of the Forum of the Economic & Social Research Institute. Former Secretary General of the Department of Finance. Former Board member of the Central Bank and Financial Services Authority of Ireland and former member of the Council of the Economic & Social Research Institute .
(Age 65)

Qualifications: BA, FCCA
Des Crowley
Chief Executive Officer Retail (Ireland and UK)
Appointed to the Court in 2006. Joined Bank of Ireland in 1988 from Arthur Andersen & Co. Appointed Chief Executive, Retail Banking and Distribution and joined the Group Executive Committee in 2000. In 2004 he was appointed Chief Executive, Retail Financial Services, Chief Executive, UK Financial Services in 2006 and Chief Executive Officer – Retail (Ireland & UK) in May 2009. He is a Director of Post Office Financial Services and First Rate Exchange Services, our joint ventures with the UK Post Office and a Director of New Ireland Assurance plc.
(Age 50)

Qualifications: BA (Mod) Econ, FCMA
Denis Donovan
Chief Executive, Capital Markets
Appointed to the Court in 2006. Joined Bank of Ireland in 1985 from the Central Bank of Ireland. Appointed Chief Executive of the Group’s Capital Markets Division in 2006, having held the position of Chief Executive, Wholesale Financial Services Division since 2003. He was CEO of Global Markets from 1999-2003 and Chief Operating Officer – International, with Bank of Ireland Asset Management from 1993-1999.
(Age 56)

Qualifications: B Comm MBA
Paul Haran
Non-Executive Director
Appointed to the Court in 2005. Spent his career in public service and was Secretary General of the Department of Enterprise, Trade and Employment (1997-2004) during a period of significant economic and social transformation. In that period he was also a member of the National Economic and Social Council (1997- 2004) and the Board of Forfas (1997-2004). He is Chairman of the National Qualifications Authority of Ireland, of Edward Dillon & Company and of the UCD Michael Smurfit Graduate Business School and the UCD College of Business & Law. A member of the Forum of the Economic and Social Research Institute and the Road Safety Authority, he is also a Director of Glanbia plc, the Mater Private Hospital and Drury Communications. He serves on the councils of Camerata Ireland, the Irish Taxation Institute and the Irish Insurance Federation.
(Age 52)

Qualifications: M Sc B Sc
Dennis Holt
Deputy Governor & Senior Independent Director
Deputy Governor and Senior Independent Director Appointed to the Court in 2006. Chairman of Group Audit Committee from October 2008 to August 2009 when he was appointed Deputy Governor and Senior Independent Director. 39 years experience in Financial Services, including Retail Banking Executive Director on the Main Board of Lloyds TSB (2000-2001) and CEO of global insurer AXA’s UK and Ireland businesses (2001-2006). Chairman of Liverpool Victoria Friendly Society Ltd and Non Executive Director of Principle Insurance Holdings Ltd.
(Age 61)

Qualifications: BA ACIB
Rose Hynes
Non-Executive Director
Appointed to the Court in 2007. A Solicitor by profession. Previously held senior management positions in GPA Group plc, including General Counsel and Head of Commercial. Appointed Chairman of Bord Gais in 2009. Director of Total Produce plc, where she is its Senior Independent Director and chairs the Compensation Committee. Also a Director of a number of other companies. Former Director of Fyffes plc, Shannon Airport Authority plc, and Aer Lingus Group plc.
(Age 52)

Qualifications: BCL AITI Solr
Jerome Kennedy
Non-Executive Director
Appointed to the Court in 2007. Appointed Chairman of Group Audit Committee in August 2009. Spent 24 years (1980-2004) as a Partner in KPMG providing audit and advisory services to a range of Irish companies and Irish subsidiaries of multinational groups from 1980-1995. Managing Partner of KPMG Ireland and a Board member of KPMG Europe from 1995-2004. Director of Bank of Ireland Life Holdings plc, New Ireland Assurance Company plc and Total Produce plc where he chairs the Audit Committees. Also Chairman of Caulfield McCarthy Group Retail and is on the Irish Board of the UCD Michael Smurfit Graduate Business School.
(Age 61)

Qualifications: FCA
Patrick Kennedy
Non-Executive Director
Appointed to the Court in July 2010. Chief Executive of Paddy Power PLC since 2006 having previously been an executive director since September 2005 and a non-executive director since March 2004. Prior to joining Paddy Power, was Chief Financial Officer of Greencore Group plc, having held a number of senior positions within the Greencore Group. Also worked with KPMG Corporate Finance both in Ireland and the Netherlands, and as a strategy consultant with McKinsey and Company Management Consultants in London, Dublin and Amsterdam. He is also a non-executive director of Elan Corporation plc.
(Age 41)

Qualifications: B Comm FCA
Heather Ann McSharry
Non-Executive Director
Appointed to the Court in 2007. Director of IDA Ireland and Council member of the Institute of Directors. Previously Managing Director of Reckitt Benckiser and Boots Healthcare in Ireland. Former Director of Enterprise Ireland and the Irish Pharmaceutical Healthcare Association, and a fomer member of Governing Authority of University College Dublin.
(Age 48)

Qualifications: B.Comm MBS
John O’Donovan
Group Chief Financial Officer
Joined the Group in 2001 as Group Chief Financial Officer. Appointed to the Court in 2002. Formerly Group Finance Director / Company Secretary of Aer Lingus Group plc.
(Age 58)

Qualifications: B Comm FCA
Patrick O’Sullivan
Non-Executive Director
Appointed to the Court in July 2009.

Appointed to the Court in July 2009. Previously Vice Chairman, Chief Growth Officer and Group Finance Director of Zurich Financial Services; Chief Executive Officer, Eagle Star Insurance (London); Chief Operating Officer, Barclays De Zoete Wedd Holdings (London); Managing Director, Financial Guaranty Insurance Co. (part of GE Capital) (London & New York); Executive Director, Goldman Sachs International (London) and General Manager, Bank of America Futures (London). He is currently Non Executive Director of Man Group plc, Cofra Holdings AGC and Chairman of Old Mutual plc.
(Age 60)

Qualifications: BBS MA FCA
Joe Walsh
Non-Executive Director
Appointed to the Court in January 2009. Served as Minister for Agriculture from 1992-2004, having previously served as Minister for Food from 1987. He retired from the Cabinet in 2004. Chairman of Cork Racecourse (Mallow) Ltd, Horse Sport Ireland and Irish Hunger Task Force.
(Age 66)


Well, he ain’t ruling it out yet anyways…



“If you were managing a pension fund and were smart enough to have significant holdings of Irish banks in the funds, would you think you had sufficient job security to vote against the appointment of people who are friends and associates of both your bosses and members of the boards of trustees of your clients?

We are talking about Ireland here, remember.”
I agree that is they why, but the WTF for me is that you, as a shareholder, have seen your wealth destroyed. Even as just a pension manager, you’ve seen your bonuses disappear… actually, who am I kidding?

So we are Japan after all…

“He is a past President of the Institute of Bankers in Ireland (2008) and of the Irish Banking Federation (2006).” And didn’t he leave the banking sector in fine form ?

“He has served as a Non Executive Director on the Boards of CRH plc (1997-2007); Eircom plc (1999-2001) and Waterford Wedgwood plc (2002-2009).” 2 out of three dead

“Managing Partner of KPMG Ireland” – Irish accounting has served the country so well in recent years

The elite are useless.


The Institute of Bankers is a fine institution. They are in charge of the qualifications regime for financial advisers in Ireland. Do you have some sort of problem with them.

Reassuringly, they do not recognise or give credit for qualifications from the UK, so the Irish industry is prtected from inferior foreign competition.

What are you complaining about?

@ Grumpy

“Has gonorrhea” would be a more positive CV line than “is a past President of the Institute of Bankers in Ireland (2008)”

The latter is comparable to “Supreme commander of US forces in Vietnam 1973-75” and “Chief risk officer, TEPCO, 2005-2011”.

How long will the euro last (SARKO AND THE GERMAN FIRST MINISTER ARE LOOKING TO BAILING OUT GREECE AGAIN )but for how long .Will ireland ,portgual keep their heads above water with some much public cuts
the big drop in housing ,And all the people out of work was it worth it for ireland to put them selves into so much death and for what .If the Euro goes down it was all for nothning .The big boys needs to keep them in the race for their own security because if the euro goes down we will all be in the same boat.


The ECB is not supposed to finance bankrupt estates.

In what sense would a freshly- (and properly-)restructured Anglo be a bankrupt estate? It would already have emerged from administration, and it would be solvent.

I’m just pointing out that the ECB has rules regarding its counterparties, and what you describe doesn’t fit into those rules.

What rules, specifically? There are two arguments you could make here. One is a substantive argument: that the ECB cannot or should not lend to institutions which are, in fact, financially unsound. Let’s take it for granted that this is the case. But, as we seem to have just agreed, a thoroughly-restructured Anglo would be solvent, and new debt issued by it would be a good credit risk for the ECB. That is to say that the newly-restructured Anglo would, in fact, be financially sound. It might have a liquidity problem, but I don’t think anyone can seriously suggest that the ECB is forbidden to provide liquidity to illiquid but otherwise unquestionably solvent banks.

The second possible argument is a procedural one: that there’s some set of procedures or rules that the ECB is obliged to follow in determining whether an institution is financially sound, and that these rules would deem a newly- (and properly-)restructured Anglo to be financially unsound even though in fact it would be financially sound, and so Frankfurt would be obliged to reject the obviously good credit of a restructured Anglo because Them’s The Rules. You have suggested that the General Documentation might bind the ECB in this way. But there are two problems with this suggestion.

The lesser problem is that it seems far from obvious that a properly-restructured Anglo would in fact fail the General Documentation’s financial-soundness test. Most obviously, it might receive an acceptable credit rating from an accredited rating agency very soon after restructuring. I know very little about credit agencies, and I haven’t been able to find a description of how they handle the aftermath of statutory restructurings of private companies, but I note that when Uruguay did a debt exchange on its sovereign debt in 2002, S&P apparently expunged Uruguay’s default status and gave it a fresh rating less than a week after the exchange was completed. Irish sovereign guarantees and/or ELA could also be used to ensure the restructured Anglo’s access to Eurosystem liquidity.

But the more important problem is that in fact I see no evidence that the ECB is bound to unfailingly follow the current General Documentation guidelines or any other particular procedure in assessing financial soundness. The Statute requires the ECB to “establish general principles” for Eurosystem open market and credit operations, which a) appears to allow the ECB to depart from those general principles as it deems necessary, and b) clearly allows the ECB to revise the principles as it deems necessary. And indeed we see that 1) it is the ECB itself which published the General Documentation – it is not handed down to the ECB by treaty or by any outside body 2) the ECB has in fact already revised the General Documentation on at least one occasion in the past and 3) the ECB has suspended its normal standards for OMOs/credit operations on a few memorable occasions in the recent past, too.

So: the ECB sets its own rules for eligible collateral and eligible counterparties. These rules state that their purpose is to ensure that the ECB deals with financially sound debtors and good collateral, and not with financially unsound debtors or bad collateral. It has been claimed that these same rules call for the ECB to regard certain obviously financially sound banks – namely, banks which have just emerged from mandatory restructuring with a fully repaired balance sheet thanks to sufficiently harsh bail-ins, and which have a new, government-appointed board and senior management entirely replacing the crew which drove the bank onto the rocks – as financially unsound. If that in fact is true, then the rules are misdesigned – unfit for purpose – and Frankfurt not only has full authority to fix them, it is required to fix them, at least if if wants the rules to accomplish their intended purpose. Nor is Anglo some kind of fluke, an isolated hard case which it would be wrong to adjust the rules for. Large numbers of banks all across the EU are in financial difficulty or may soon be. You know that senior-debt bail-ins have been proposed as part of an EU-wide solution to the problem.

Nonetheless, if the ECB couldn’t be bothered to fix its rules promptly for the sake of the Irish banking sector, then in the meantime it could just make one of those derogations from its normal standards for which it is now so well known. I certainly won’t dispute that the ECB’s waivers for Greek sov. debt (among other things) have been a Bad Idea. But they were so almost entirely for substantive reasons – because they allowed the ECB to treat as financially sound parties which were, in fact, not financially sound – not for procedural ones – because the ECB is forbidden to grant waivers under any circumstances. There’s no substantive reason for the ECB not to make an exception allowing it to treat as financially sound a bank which would, in fact, be obviously financially sound, and there’s no important procedural reason either.

No: it walks like a duck; it screeches, bites and chases bread like a duck; it is a duck. The ECB’s intentions in continuing to lend to financially unsound banks while threatening to withhold lending to financiallly sound ones are exactly what they appear to be: to continue to enforce its financial-stability agenda, while escaping the institutional (and individual) consequences of the lending it has already done to financially unsound institutions in pursuit of that agenda.

Nicely put @anonym.

Indeed, it appears that the more thorough the restructuring the better – the bigger the haircut, the more mandatory a restructuring is made (on a scale from optional to mandatory going though incentivised, mandatory seems to be better as it leaves no legacy defaulted debt), the more specific it is, the better.

While there might be a legacy cut in rating for a past default, an Anglo with a rating of:
(new ‘for sure’ solvency)+(more solvent sovereign)-(past legacy of default)
must surely be better than:
(current ‘sort of’ solvency)+(less solvent sovereign)

Like i said with the euro zone getting worse and worse different countrys looking for bailouts their is only one way to go (DOWN)I think things are coming to an end and the countrys concered will be left to pick up the pieces .
And no matter what haircut or style it will be the same result ,

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