Category: Banking Crisis

BIS on Financial Sector Rescue Programmes

The BIS has released a new comparative study of the impact of the different types of financial sector rescue programmes pursued across countries: you can read it here.

Abstract:

We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers’ default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and participation rates across countries. We then consider the effects of the programmes on banks’ risk and valuation, looking at the behaviour of CDS premia and stock prices. We then proceed to analyse the issuance of government guaranteed bonds by banks, examining their impact on banks’ funding and highlighting undesired effects and distortions. Finally, we briefly review the recent evolution of bank lending to the private sector. We draw policy implications, in particular as regards the way of mitigating the distortions implied by such programmes and the need for an exit strategy.

NAMA Pricing: Let’s Focus on the Real Issue

Two days into the public debate about the implications of the proposed NAMA legislation, I have been extremely disappointed at the approach taken by the government to debating the key questions raised by this policy.

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Lucey on NAMA Legislation

Today’s Irish Times features a very clear and well-argued op-ed by Brian Lucey on the NAMA legislation. Link here.

The Morning After

The Minister for Finance appeared on Morning Ireland today.  A strict interpretation of his comments would suggest that NAMA is going to apply a very large haircut.

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BaNama Republic

Well, the legislation is out though I’m not sure we’re really much the wiser.  Needless to say, my favourite bits have already been highlighted by commenters in our long-term valuation thread.

(a) a reference to the current market value of the property comprised in the security for a credit facility that is a bank asset is a reference to the estimated amount that would be paid between a willing buyer and a willing seller in an arm’s length transaction where both parties acted knowledgeably, prudently and without compulsion,

(c) a reference to the long-term economic value of the property comprised in the security for a credit facility that is a bank asset is a reference to the value that the property can reasonably be expected to attain in a stable financial system when current crisis conditions are ameliorated and in which a future price or yield of the asset is consistent with reasonable expectations having regard to the long-term historical average.

I could rant on about the craziness of paying according to (c) rather than (a) but it pretty much speaks for itself and, in any case, you already know what I think.  What about the rest of you? What do make of paying according to (c) rather than (a) and is there much else in the legislation that you found interesting?