The Irish Economy

An Integrated Framework for Financial Positions and Flows on a From-Whom-to-Whom Basis: Concepts, Status, and Prospects

Post author By Philip Lane
Post date February 27, 2012

The interpretation of sectoral debt data is a major issue in understanding the Irish economy – this new IMF WP should be helpful.

Summary: The global crisis of 2008 highlighted the need to understand financial interconnectedness among the various sectors of an economy and between them and their counterparties in the rest of the world. However, application of this kind of analysis has been hampered by the lack of adequate data. This paper sets the background for promoting internationally coordinated efforts for compiling and disseminating data on sectoral financial positions and flows on a from-whom-to-whom basis within the framework of the System of National Accounts. It draws on actual experiences in compiling these kinds of data and provides guidelines for their development in the future.

Pillar of Salt? Two reactions to the BOI Report

Post author By Stephen Kinsella
Post date February 27, 2012

David McWilliams is out of the blocks describing the latest report from Bank of Ireland in less than stellar terms:

The report shows that only 14 per cent of Bank of Ireland’s total owner-occupier mortgage book is in such a healthy situation. When we examine its buy-to-let portfolio, we see that only 6 per cent of these mortgages are in such a healthy situation. In total, 12 per cent of mortgage holders have a ratio of less than 50 per cent.

Seamus Coffey has a longer study of the report. From his piece:

In total, the loan-to-value of BOI’s owner-occupied loan book is estimated to be a rather convenient looking 100%. The negative equity of the €10,567 million of loans with LTVs of greater than 100% is estimated to be €2,474 million. The aggregate loan-to-value of the loans in negative equity is 131%. On the other hand the aggregate loan-to-value of loans not in negative equity is 81%. Finally, here is the spread of arrears and impairment across the different LTVs.

Unsurprisingly, arrears and impairment are more likely amongst those loans that are in negative equity though almost one-third of those in arrears are not in negative equity. The portion of the loan book that has a loan-to-value of more than 181% has arrears of 15.5% by loan balance compared to just 4.8% for all loans which are not in negative equity.

Overall, not great news. However, Seamus continues:

If the €2,474 million of negative equity on mortgages in BOI’s owner-occupied Irish mortgage book then, being 18.4% of the total market, this would imply that the level of negative equity in the residential mortgage market is around €13,500 million. As BOI’s loan book is better performing better than the rest of the market, and also has loans from before 2002 that newer entrants to the market do not have, this is likely to be an estimate from the lower range.

Worth discussing on this site: if Bank of Ireland is the least worst bank we have, and the bank’s own estimates don’t look that credible, what does this mean for the banking system as a whole?