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Thread: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

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    Default NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    http://www.reuters.com/article/2011/...74C1OR20110513

    NTMA borrowing from Peter Public to pay Paul Private this week. The Sunday Business Post reports that the NTMA will withdraw 19 billion from bank deposits this week. This money will need, to provide liquidity (cash in ATMs) to be replaced by the ECB or the ICB. The money was lodged by the NTMA in April, reducing dependence on ECB borrowing.

    Irish banks are being required by the Troika to recapitalise to an extent that Honohan plainly thought was crazy. The EU/IMF agreement made by FF included provision to shrink and recapitalise the Irish banking sector. The agreement required 25 billion recap with a 10 billion euro buffer. This is an extremely costly measure for with

    The 19 billion appears to be a present from the public to the banks, which are still not fully nationalised in a way that would secure a return to the public purse of any future profits.

    According to the SBP, Noonan said that the surplus 16 billion euro would be used to plug the hole in the budget while we are locked out of the markets and can't borrow.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    I feel ill.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Jus shifting the hole around in the eonomy until it runs out of slots. Isn't this again state aid to banks in breach of European Competition Law?
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Quote Originally Posted by Captain Con O'Sullivan View Post
    Jus shifting the hole around in the eonomy until it runs out of slots. Isn't this again state aid to banks in breach of European Competition Law?
    Worse than that surely ?

    What certainty is that this cash won't go from the public purse to benefit the eventual private owners of the Irish banks ?

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Quote Originally Posted by Captain Con O'Sullivan View Post
    Jus shifting the hole around in the eonomy until it runs out of slots. Isn't this again state aid to banks in breach of European Competition Law?
    The laws are out the window at this stage.

    Wait till the end of the week when Irish 2 year bonds are racing back up towards 17%.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Looks to me like NTMA has utilised part of the IMF drawdown so this may not breach EU Competition Law. This is a bit of a puzzle though as this money would have been drawn down at an interest rate of over 5% whereas it was announced last week that Ireland's repayments would be renegotiated to something like 3.5%? Does this mean that the drawdown of 19billion happened at 5% interest or 3%- a big difference in fairness.

    Either way it is just shifting money around in a ponzi scheme so it matters not. I couldn't help noticing in the Reuters article there that "Ireland's six domestic banks, two of whom are being shut down after casino-style lending practices, have lost over 90 billion euros in mainly corporate deposits since the end of 2008, when the banking crisis first gripped."

    Lucky we are an island. Could you imagine how bad it would have been in we'd been joined to the European landmass. We'd have all had to line up at the border with butterfly nets to catch them pesky Euros trying to flutter past to safety.

    Good man Sir Dead Lenihan. The man with no current pulse had his finger on the pulse alright there.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Isn't this the type of naughtiness that got Anglo and Irish Nationwide into trouble?

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Quote Originally Posted by yehbut_nobut View Post
    Isn't this the type of naughtiness that got Anglo and Irish Nationwide into trouble?
    No. What is going on is that the EU/ECB/IMF terms of agreement last year included a requirement to stuff the Irish banks full of cash, beyond the norm, to make them attractive to private buyers. The terms of agreement require that we shrink the banking sector and sell it off.

    So, we are having to use our own funds and borrow at high interest rates in order to dress up these banks ready for a fire sale.

    It seems certain there will be a large handover of public money/assets to the private sector, if this goes ahead.

    http://www.politicalworld.org/showthread.php?t=5824
    Last edited by C. Flower; 24-07-2011 at 08:11 PM.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Quote Originally Posted by C. Flower View Post
    It seems certain there will be a large handover of public money/assets to the private sector, if this goes ahead.
    Absolutely. Followed by the inevitable re-bailout and re-acquisition of the self same banks in a few years' time, when economic growth fails to re-materilize, there is a massive oil shock, and more bad debts come home to roost.

    The only thing I can see that might mitigate against this scenario is the fact that Irish banks are currently being treated like medieval lepers......I'm seeing a lack of buyers as a positive thing, at this point. BoI has given up on flogging ICS, for example.

    At least if our glorious leaders get to hang on to them, we might at least reap the benefit, in the unlikely event that they return to profit. In a more likely scenario, at least they could be deterred from taking stupid risks, or encouraged to lend into strategically important sectors (renewable energy?), if the Oireachtas is still footing the bills.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    From tonight

    Banks
    It’s hard to imagine a more detested word in this country than… ‘bank’.
    A key challenge set out by the Government was to make our banking system an engine of economic recovery by (i) restoring public and market confidence in its financial health, (ii) ensuring management competence and (iii) restoring lending to the Irish economy.
    By the end of July, we will have recapitalised the state supported banks in line with the recent Central Bank stress tests. This will further underpin the stability and the financial health of the banks.
    Management and board renewal across the banking system is proceeding at a strong pace.
    By end of the year, we will have completed the replacement of all non executive Directors originally appointed before the night of the guarantee at the end of September 2008. Only four remain. Moreover, already almost 90% of the directors no longer serve on the boards.
    Even as our two pillar universal banks – Bank of Ireland and AIB – dramatically shrink in size by selling overseas assets from now until 2013, they are committed to supporting economic activity at home. As part of the recapitalisation and restructuring announcements in March they can now lend at least €30 billion in new loans to Irish home-buyers and SMEs over the three year period of downsizing from this year.
    The Government intends to hold the senior management and boards of these banks to account for delivering on these commitments.
    But bank lending terms and conditions must remain fair. Banks cannot simply blame the private sector for not making loan applications or refusing ones with overly tough conditions.
    Of course, there are two sides to every coin. Those clamouring for new lending must remember that lending would be greatly facilitated if more Irish business leaders listened to Ireland’s call instead of U.S. ratings agencies and left their corporate deposits in Irish banks, which are now among the best capitalised banks in Europe.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    http://www.thepost.ie/news/ireland/s...nks-57685.html

    Between €17 and €19 billion of state funds will be transferred to AIB, Bank of Ireland and Irish Life & Permanent by the end of this week, completing the recapitalisation of the banks mandated under the EU/IMF agreement.

    The agreement stipulates a deadline for July 31 for the completion of the recapitalisation programme, and a spokesman for the Department of Finance and the National Treasury Management Agency (NTMA) confirmed that the transfer of funds would take place in the coming days.

    Under the revised capital requirements for the banks agreed with the EU, the agreement set aside some €24 billion to be ploughed into the banking sector.

    However, imposing losses on some sub-ordinated debt holders has reduced this amount by €5 billion. Further capital raising exercises by Bank of Ireland may reduce the amount further.

    Last week Irish Life & Permanent shareholders voted against accepting state funding but the Minister for Finance is likely to seek court approval to impose the recapitalisation on them this week. Informed sources said they expected the IL&P transaction to be completed this week.

    Figures provided by the Department of Finance show that the total capital injected by the state into the banking system at the start of this year was €46.3 billion, of which Anglo Irish Bank is by far the largest component at €29.3 billion.

    This week’s injections will bring the total cost of taking over the banking system to somewhere between €63-65 billion, although the state hopes to recoup some costs through eventual sales.

    The bulk of the cash for this week’s recapitalisation will come from the cash reserves held by the NTMA.

    In recent months the agency has been liquidating its positions - selling shares and cashing in other investments - to provide cash for the bank bailout.

    The agency raised some €10 billion by selling investments in February and April to provide cash for the banks. According to NTMA statements, the fund has €5.3 billion left in nonbank investments.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    Those clamouring for new lending must remember that lending would be greatly facilitated if more Irish business leaders listened to Ireland’s call instead of U.S. ratings agencies and left their corporate deposits in Irish banks,
    Thats interesting. So it isn't foreign multinationals involved in the capital flight- that is the first comment I've seen saying it is domestic capital leaving the country.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    RBS according to Golem http://golemxiv-credo.blogspot.com/

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    A must-read post by NAMAwinelake - 6 reasons why we should not recapitalise now.

    http://namawinelake.wordpress.com/20...nks-this-week/

    After the slap in the face deftly delivered last week by the French, in the form of wringing concessions on corporate tax arrangements out of Ireland as a condition for granting the exact same deal as gifted to Portugal without any condition, you might be forgiven for thinking Ireland might adopt a more cynical approach to recapitalising its busted banks so that those same banks can repay bondholders, many of whom are understood to be French.

    For all the talk of billions and billions being shovelled into the banks, in reality just €18.4bn has in fact been paid in cash to the banks so far, comprising €15.4bn paid to the banks directly and a further €3bn in funding promissory notes – the written Dail reply above set out the position in January 2011 and other than the €3bn contribution to the promissory notes in March 2011, there hasn’t been any other State funding activity since. Where is the other €50bn of funding to make up the much vaunted €70bn, I hear you ask? About €28bn is still outstanding in promissory notes and the plan is for the State to stump up €3bn a year in cash to honour these. Much of the remainder is to be shovelled into the banks this week.

    You might recall that the original plan under the bailout was to recapitalise the banks in February 2011, and the then-Minister for Finance, the late Brian Lenihan decided that he didn’t have a mandate to effect the recapitalisation in the middle of a general election, and left the task to the new administration (though he did offer at the time to complete the task early if the leaders of Labour and Fine Gael wrote to him in those terms, which they didn’t). And upon assuming power, Labour and Fine Gael pointed to their election promise to wait until the end of March 2011 when the stress test results were to be published, before recapitalising the banks. On 31st March 2011, the “mother of all stress tests” indicated that our banks needed another €24bn (including buffers) so as to reach a standard of capital which represented 10% of the assets of the banks. And then Minister Noonan considered the €24bn cost, and the plans to extract a contribution from subordinated bondholders and he decided to wait until the end of July 2011 before injecting €24bn (less the subordinated bondholder contribution) into the banks. After this morning’s Bank of Ireland announcement it now looks like the banks need approximately €18bn of capital rather than €24bn. And according to yesterday’s Sunday Business Post “a spokesman for the Department of Finance and the National Treasury Management Agency confirmed that the transfer of funds would take place in the coming days.”

    When the Minister shovels another €18bn into the banks, he crosses a Rubicon because that €18bn represents real sovereign funding which will inextricably tie sovereign debt to bank debt.[B] Here are six reasons why the Minister for Finance should hold on to his cheque book for the time being:[/B]

    (1) He doesn’t have to recapitalise the banks now
    . The original Memorandum of Understanding with the IMF/EU stipulated that the recapitalisation was to have taken place in February 2011 but that was seemingly waived. Following the announcement of the March 2011 stress test results, an intention was signalled to recapitalise by the end of July 2011. Certainly the IMF, EU and ECB want Ireland to recapitalise by the end of July 2011, as was clearly urged at the conclusion of the recent review mission. But the IMF and EU will not be back for the next review until October 2011. And although the ECB use their provision of non-standard liquidity as a stick, the ECB has committed to maintaining that liquidity to October. So as long as the recapitalisation takes place before October, what would be the consequence of a further deferral now? Might an act of defiance with low-value negative consequences signal a more confident stance on negotiating other obstacles, for example the burning of senior unguaranteed unsecured bondholders at Anglo and INBS?

    (2) Bondholders inLondon and New York are praying that the Minister recapitalises now. Because without the recapitalisation, our covered banks are effectively insolvent. A case can be made for Bank of Ireland, but truth be told, without the State guarantee, even that bank would become illiquid rapidly and consequently would become insolvent after a fire sale liquidation of assets to secure alternate liquidity. When this €18bn is shovelled into the banks, the banks will be solvent and the claim for 100% repayment by bondholders will move up to a whole new level. Not recapitalising now, strengthens the Minister’s hand in any future negotiations.

    (3) As part of the banking restructuring announced in March 2011, an intention was signalled that Irish banks would undergo significant deleveraging. A long-held concern on here is that deleveraging would mean that new lending inIreland contracted, in much the same way as the 2000s saw an expansion of lending enabled by bondholders lending colossal sums to Irish banks. And in the 2000s that bubble of credit led to economic expansion and inflation. The concern is that deleveraging will have the opposite impact. Recently questions were put to the Central Bank of Ireland (CBI) and the Economic and Social Research Institute (ESRI) asking how their economic forecasting models would account for the announced deleveraging. The CBI did not respond but the ESRI did respond to say that it has not yet forecast the economic outlook taking account of deleveraging but its next forecast using its HERMES model would. It is worrying that Ireland may not at this point have examined the impact of deleveraging €70bn of assets from its banks – some will be foreign held but the domestic dimension of deleveraging is likely to contract lending and money supply and economic activity.

    (4) The two “pillar bank” strategy is nonsensical. With a post office and credit union network together with local branches of foreign banks, Ireland can manage with one pillar bank, possibly supplemented by a competition oversight department in the Central Bank/Financial Regulator. The detailed arguments are set out here.

    (5) Ireland’s banks are not lending. Mortgage and other lending statistics from the Central Bank of Ireland confirm that lending is contracting. From home buyers trying to get a mortgage to small businesses trying to get finance, the message appears to be that the banks are not lending. Even the State-operated Credit Review Office seems now to be accepting that lending constraints are at the banks rather than in demand from businesses. One of the pre-election promises to make it into the Programme for Government was the creation of an investment bank which might start with a clean slate and provide lending to businesses untainted with the need to rebuild a tattered balance sheet. Will the €18bn being shovelled into the banks this week improve access to credit? Difficult to say and it will be difficult to untangle future behaviour but it seems from this perspective that a new investment bank starting with a clean slate might be a better proposition.

    (6) Despite protestations to the contrary by the NTMA and the Department of Finance, the economic environment has deteriorated since the stress tests were conducted in March 2011 (or indeed January 2011 when the stress test parameters were set). Last week’s EU crisis summit is unlikely to be the last this summer and now that the smoke is clearing after the hoopla last Thursday the cold reality of funding the EFSF and the remaining debt issues in Greece and elsewhere have to be tackled. A 20% reduction in Greece’s debt will not transform the prospects of that country. A Spanish bank needing €6bn of capital and liquidity funding on Friday last is unlikely to be the only Spanish casualty this summer. Domestically, the evidence points to commercial and residential property declines being more significant than expected. And the buffers built into the stress tests are not as significant as the NTMA or the Department of Finance would have you believe. So before shovelling another €18bn of our funds into the banks, why not validate the March 2011 results using the experience of the last four months. Might we need another €10bn for the banks? And if we do, might that change our position on maintaining two pillar banks or our negotiation stance on senior bondholders?
    I made the point back last November, when the Memorandum came out, that downsizing the Irish banks and selling them off to the private sector will shrink the Irish economy - we will have decreasing revenue with which to pay back our mushrooming debt.

    This week will see the amount we have put into the banks double, and not a squeak out of anyone, apart from Namawinelake and a couple of others.
    Last edited by C. Flower; 25-07-2011 at 10:31 PM.

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    Default Re: NTMA to withdraw €19 billion bank deposits this week, to use to Recapitalise the Banks.

    When will it end?

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