Moving Deposits

I am trying to get my head around the Anglo/Irish Nationwide “deposit sales”.   The collective wisdom of this blog might help set things straight.   (Useful reporting by Simon Carswell and Mary Carolan here and here.)

A few initial comments/questions:

First, I think term deposit sale (or selling the deposit book) creates a lot of confusion.   I think it is better to think of what is happening as asset sales, but where part of the price is taking on existing liabilities to depositors.   From the purchaser point of view, another perspective is that it is a purchase of assets that comes with a certain amount of pre-arranged funding (i.e. the deposits). 

Second, there seems to be a view that it is a good thing to retain the deposits in the Irish banking system.  But then there is also a view that Ireland needs to deleverage – essentially sell assets to reduce outstanding liabilities.   The ECB wants this to happen because it is afraid it will be further called on as lender of last resort if those deposits later flee.   What are your thoughts on selling the assets to (and retaining the deposits with) other Irish banks? 

Third, in terms of the total being exchanged for the deposits (mainly NAMA bonds and cash), what is the inference about how the bonds are being valued?   I’m sure someone has done these calculations.    Are the implied valuations related to the fact that the asset sales have been made to other Irish banks — one 92.8 percent State owned, the other privately owned?