Bank Recapitalisation: The Running Total So Far

In response to a question from Pearse Doherty, Michael Noonan provided a useful summary of the sequence of bank recapitalisations so far: available here.

35 replies on “Bank Recapitalisation: The Running Total So Far”

Actually, the figures are not out by ¢3bn, they are out by over ten times that, ¢35 bn.

Remember the toxic loans to the tune of ¢75 bn they paid approx ¢35 for ? Surely, those figures re NAMA should be added unless we are to become disingenuous/ludicrous?

“The respective amounts were €25.3 billion for Anglo Irish Bank, €5.3 billion for INBS and €250 million for EBS. The consideration for the capital injections was promissory notes issued by the Exchequer to the insitutions in lieu of cash. These notes will be redeemed over a period of several years with the Exchequer committed to making annual repayments of 10% of the initial capital value of the notes. This means the Exchequer did not require upfront cash funding for the capital injection. While the promissory notes impact the General Government Debt from the date they were issued, they only impact the National Debt as the annual installments are paid.”

It was a crime, folks; enjoy those annual installments!

Like most ministerial statements in the Dail this is intended to conceal more than it reveals. Is it possible to generate two sub-totals – one adding up what might be considered as an ‘investment’ in the bank system which has a resonable expectation of being recovered or realised in full and the other adding up the money that is being thrown down the plug-hole (or might be considered as the penalty for the total failure of democratic governance)?

(NAMA is a separate calculation in therms of what might or might not be realised.)

@ Paul Hunt,

“(NAMA is a separate calculation in terms of what might or might not be realised.)”

I realise that, but giving that money to the banks for their toxic assets amounted to recapitalisation by the back door.

As for money down the plug-hole or penalty for total democratic governance, political mishandling, NTMA, Department of Finance failure, the ¢25.3 bn for Anglo, ¢5.3 bn for INBS must be high up on the plughole list. Add in ¢35 bn for Nama …. the EMU credit union not going to pay for it if the German parliament have their way ……

Anyway, the full tally for bank recapitalisation is not in yet:

“The next step in the resolution of the banking sector issues, and the main focus of investors, will be the execution of the banks’ deleveraging plans. The Central Bank has required the institutions to prepare deleveraging plans targeting a reduction in loan-to-deposit ratios to 122.5 per cent by end 2013. This will require the run-off and disposal of up to €70 billion in loans. This deleveraging will reduce dependence on wholesale funding, while helping to place the banking sector on a stable footing to support the economy. There are significant challenges inherent in the deleveraging process. The disposal of non-core assets will be dependent on the market appetite for such assets at a time when there are a large number of potential sellers of similar assets. Not alone do assets held by NAMA and Anglo/INBS fall to be disposed of but there are also substantial portfolios of assets held by non-Irish banks which may also be on the market. The objective of the deleveraging process is to achieve a more prudent loan to deposit ratio for the institutions concerned through a reduction of their balance sheet assets of some €70 billion while avoiding sales at prices which absorb excessive capital.”

http://www.ntma.ie/Publications/2011/JohnCorriganOpeningStatementToJointCommittee9Sept2011.pdf

Now €70 billion I’m assuming is non toxic, non NAMA ‘assets’, going out to market, when every bank in Europe is doing the same…..

Pretty soon commercial/residential property prices should reach the stage where, with upward only rent reviews, you’ll be able to buy the same property for the price of a months rent.

@ Colm

“Now €70 billion I’m assuming is non toxic, non NAMA ‘assets’, going out to market, when every bank in Europe is doing the same…..”

Irish banks actually a good bit ahead of the pack, have first mover advantage so far. BOI already well ahead of target in terms of both price achieved and amount sold.

Since I spent about 8 hours over the Christmas working out these figures, I can actually confirm that they are OK (In as much as my word on it is worth)

Surely, those figures re NAMA should be added unless we are to become disingenuous/ludicrous?

‘M glad you asked, because I got my hands on those too.

OK, let’s hope this table works, if not here’s a webpage with the figures in a table as well as a few other facts about the bank recapitalisation in general

Here goes

BankAIBBoIEBSILPAnglo/INBSTotal

Pre 20118.13.5–34.746.3
PCAR 201112.71.2-2.7-16.6
Total Recap62.9

NAMA 20108.55.40.3-1630.2
(Discount%)(54%)(42%)(60%)-(62%)

Recap+NAMA29.310.10.32.750.793.1

(ICB/ECB/ELA???)????????????!?(148.6??)

So, the total cost of bank recapitalisation so far is €93.1 billion.

I also estimate that the nation debt in 2016 will be around a quarter of a trillion euro. YMMV.

Uhh! he site ate my table again. Let’s try once more. Again, here’s a link to the table in case this doesn’t work


|------------------+-------+-------+-------+-----+------------+---------|
| Bank.............|...AIB.|...BoI.|.EBS...|.ILP.|.Anglo/INBS.|...Total.|
|------------------+-------+-------+-------+-----+------------+---------|
|.Pre.2011.........|...8.1.|...3.5.|.-.....|.-...|.34.7.......|....46.3.|
|.PCAR.2011........|..12.7.|...1.2.|.-.....|.2.7.|.-..........|....16.6.|
|.Total.Recap......|.......|.......|.......|.....|............|....62.9.|
|------------------+-------+-------+-------+-----+------------+---------|
|.NAMA.2010........|...8.5.|...5.4.|.0.3...|.-...|.16.........|....30.2.|
|.(Discount%)......|.(54%).|.(42%).|.(60%).|.-...|.(62%)......|.........|
|------------------+-------+-------+-------+-----+------------+---------|
|.Recap+NAMA.......|..29.3.|..10.1.|.0.3...|.2.7.|.50.7.......|....93.1.|
|------------------+-------+-------+-------+-----+------------+---------|
|.(ICB/ECB/ELA???).|...???.|...???.|.??....|.??..|.??!?.......|.148.6??.|
|------------------+-------+-------+-------+-----+------------+---------|

OK sorry, I just cant post a table in a comment no matter what I try. You can follow the links above for a properly formatted table.

I would summarise the starting position as:

1 Exchequer (all borrowed) €15 billion
2 Promissory Notes: €31 billion
3 NPRF: €17 billion
TOTAL: €63 billion

Although €20 billion has nominally come from the NPRF, €3 billion was transferred to the Exchequer to the NPRF in 2009, when we had an Exchequer Deficit of close to €25 billion. This is included under (1) above.

In time (2) will be transformed into (1). The 2011 Promissory Notes payments reduced (2) by €2.5 billion and increased (1) by the same amount. This will happen again in 2012 as well as a further €1.3 billion payment to IL&P which will come from the Exchequer I presume.

Continuing with PQs here are two from Michael McGrath on the General Govenment Debt:

http://www.kildarestreet.com/wrans/?id=2012-01-11.796.0a

Tonight looks like being the night folks, expect Pat Kenny to interupt the Late Late to give you the heads up around 9.30pm…

DJ SEVERAL EURO-ZONE COUNTRIES COULD FACE “IMMINENT” DOWNGRADE BY S&P -EU SOURCES – DJN

FR, IT, SP, BE, and PT the expected targets.

@Seamus

Shouldn’t we also take account of interest payable on (1) and (2) and interest foregone on (3)?

Indirectly, the cost could also include the once-off loss to bank shareholders and the ongoing cost to the economy attributable to the credit crisis.

ObsessiveMathsFreak thanks for link and you site table

Incredible and depressing to look at especially when put into perspective of:

Channel Tunnel cost third of billion euro (current prices) per KM of undersea tunnel, so we could have built a tunnel to wales for about 25 billion + dublin metro for 5 billion + our own nuclear fusion reactor (real smart economy stuff) like http://en.wikipedia.org/wiki/ITER for another 10 billion euro
and still not spend half of what was spent on banks!
maybe have enough left over to have an Irish space programme 😀

Seamus Coffey

Money taken from NPRF is money that can not be spent on a stimulus, infrastructure construction + investment into SMEs

thats money that will not be spent on pensions (and will have to be raised from somewhere! most likely borrowed of course) when the time comes

and of course pension spend (Especially public service) continues to rise out of control

On S&P downgrade. It aint a rumour, not almost accepted as fact – S&P will downgrade 3-5 countries tonight. Gewmany and Holland out of the firing line, everyone else a potential hit.

France definitely to get downgrade it now seems, rumours of it being two notch in nature but they seem more like spiv type stuff.

Friday 13th Jan 2012. Christ, it’s taken ’em a long time to break the phoney war. I can only imagine the fury of the Grand Panjandrums. And Sarkozy could be toast, but I wouldn’t write him off just yet. There might be enough residual de Gaullism to tap in to – France, civilised, unique, defiant in the face of the barbarian hordes.

Greek talks with IIF suspended, “paused for reflection” (seriously) after “no constructive response” from Greece. Its getting a bit nuts out there.

Alright, Pat ain’t gonna hog the limelight with this one. The Ulster rugger match is gonna lose some viewers for 15 mins…

*S&P ANNOUNCEMENT SAID TO COME ABOUT 9PM CENTRAL EUROPE TIME

@Bond Eoin Bond

Did bond yields move (very much?) for those nations?

The French will of course decry it as a worthless/meaningless move as Fitch have said they won’t downgrade short of a shock (is Fitch partly French-owned do you know?). There’s a big PR salvo to be unleashed once it is announced.

What’s your POV on GB? Are they lucky to get away with having AAA still?

Any chance of a breakdown of the recap by developer losses ? I understand that some of the latest recaps involve stuffing the banks with losses that haven’t happened yet. BNut what about the rest? Anglo is 25bn. How much of that is Quinn etc? Agus mar sin de. Who are the b*****.

This could be the end.

Also Spain and Italy both have to pay back large amounts of maturing debt this year.

If downgrades are bad, where’s the money?

Meanwhile not till Jan 20 do they get back to try agree on useless Compact.

@ PR Guy

they were 5-10bps tighter (Italy 25bps) this morning, now 10-15bps wider (Italy 5-10bps). Initially risk on, Italy auction poorish so that saw them come back a bit, then this story saw them sell off a good bit into the close, but equities only small negative, so could have been a lot worse. EUR/USD getting thumped though. One notch for FR, IT, SP, BE already somewhat priced in, so not ‘shocking’, but Austria a problem, and if kept on neg watch people will start pricing in more. Two notch is real trouble.

GB gets away with it cos it can print money. Investors would rather deal with inflation than credit concerns. Anyone worried about genuine dangers of inflationary impact from QE is batsh1t insane in my view, and it seems most other peoples views as well. Just need the ECB to come on board!

@ Colm

Is this the end? Eh, no, one notch already there in the market. Depends if its more than that. Spain and Italy have 450bn to issue this year, between today and yesterday they issued 30bn, so they’re doing ok so far.

@ Brian Flanagan

I gave the “starting position”. The factors you mention will add to this.

@ Seafóid

State contribution of €64 billion (including remaining €1.3bn to IL&P)
Subordinated Bondholders c. €15 billion (claimed)
Loss of Shareholder Equity c. €25 billion

That’s over €100 billion. If losses are at the lower end (€76 billion) should be able to squeak through with money above. If losses are at upper end (€106 billion) well then…

See below, the ECB itself is slowly being backed into a corner. Repo means some banks may purchase Spanish and Italian debt but ¢440 bn below, how much of that can be absorbed by the banks.

The repo means the banks use the sovereign debt as collateral to fund themselves. Meanwhile the ECB is directly purchasing these sovereign bonds from Italy and Spain.

In effect, the ECB is now lender of last resort both to sovereign debt and banking in Italy and Spain. If both are downgraded, this means the end must be near. Situation like that cannot continue indefinitely.

The ship is going down and I cannot see anything that tells me this is not so!

“A French downgrade has been on the cards for some time and the market has already positioned itself ahead of an eventual downgrade but it will increase pressure on policy makers to reassess the scope of the rescue fund,” noted Peter Chatwell, fixed-income strategist at Credit Agricole.

The fund depends on guarantees from members for its own rating and S&P had warned that an EFSF downgrade would follow any similar adjustment in the ratings of the countries that guarantee the fund, namely Germany and France.

The EFSF would then have to pass on those higher borrowing costs to countries such as Ireland and Portugal, making it even harder for them to reduce their budget deficits as planned. A downgrade for the rescue fund would also crimp its firepower, making it difficult to intervene if larger economies such as Italy and Spain find themselves shut out of the market.

The yield on the 10-year Italian bond remains worryingly close to the psychologically important 7% mark that in the past toppled Greece, Ireland, and Portugal and forced these countries into seeking external assistance. Italy plans to sell a total of EUR440 billion of bonds and treasury bills in 2012, the highest issuance volume in the euro zone.

-By Nick Cawley and Neelabh Chaturvedi, Dow Jones Newswires; + 44 (0)207 842 9374; nick.cawley@dowjones.com

http://online.wsj.com/article/BT-CO-20120113-708737.html

Just to illustrate the dimensions of General Government Debt and how it can mask total debt incurred, as pointed out, links by obsessivemathsfreak et al to Noonan Q’s

“Please note that bank recapitalisations paid out of NPRF funds (amounting to EUR 20.7 billion over the period) does not add to General Government Debt, as no new liabilities are incurred.”

Well, I would consider raiding debt NPRF as part of GGD, this was money set aside for the future welfare of taxpayers.

Plus I recall the demands made in initial negotiations that bank recapitalisation would have to come from a large part of this piggy bank, before the Troika would put money down, another failure in negotiating terms.

NAMA as well 🙁

The EFSF ¢85bn bailout of Ireland the Troika come to check if we are following terms of means we get the ongoing release of funding from that source.

EFSF was stated to be AAA, but downgrades to EFSF countries apparently could see the cost of our bailout going up from 6%.

Anybody with more concrete info on this?

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