Showing posts with label BOSI. Show all posts
Showing posts with label BOSI. Show all posts

Monday, June 10, 2013

10/6/2013: Did UK Taxpayers 'Rescue' Ireland?..

An interesting story today in The Times. Here's a report on it from The Telegraph (http://www.telegraph.co.uk/finance/business-news-markets-live/10109577/Business-news-and-markets-live.html go to 7:10am post). Emphasis is mine:


"The Times is leading with the story that Britain has given a back-door bailout worth around £10 billion to the Republic of Ireland in an arrangement that was never explicitly approved by Parliament. The money has been pumped into Ulster Bank, a subsidiary of the state-owned Royal Bank of Scotland which was rescued by a public cash injection of £45 billion five years ago."

What's the gist? "New figures show that Ulster Bank, which operates predominantly in the Republic despite its name, has accounted for approximately one in every four pounds of losses at RBS since 2008... Almost one pound in every four injected into the two state-backed banks by the Government has gone directly into the Irish economy, the two lenders' subsidiary accounts show."

How so, may I ask? "Between 2009 and 2011, RBS made "capital contributions" totalling €9.13bn (£7.6bn) to its Dublin-headquartered subsidiary Ulster Bank Ireland. Over the same period, Lloyds transferred £6.41bn to its Irish operation, Bank of Scotland (Ireland), before dissolving the business.
The total – £14bn – amounts to more than a fifth of the £65bn UK taxpayers injected into RBS and Lloyds in 2008 and 2009, and is expected to rise further. Analysts estimate that RBS transferred another £2bn last year."

How so, I ask again?

You see, in reality, there was no £10 billion bailout from the UK to the Republic of Ireland and the money injected into Ulster Bank did not go 'directly into the Irish economy'. What did happen is that a bunch of bondhodlers and interbank lenders to the Ulster Bank were made whole on the liabilities which the Ulster Bank would not have repaid, were the UK taxpayers not pumping money into it. Truth is, the UK taxpayers, like Irish taxpayers, were made subsidies to the international banking funding scheme. Not to the Irish economy or to the Republic of Ireland.

The UK taxpayers did lend money to the Irish Government under the Troika+ 'rescue' deal and we shall say thank you to them for this much, especially since these loans were made on terms that matched fully multilateral loans. But the Republic of Ireland and its economy have nothing to say on the UK taxpayers being wrongfully made pay ever cent on the euro of the Ulster and BOSI borrowings.

Full stop.

Friday, August 20, 2010

Economics 20/8/10: BOSI lessons

Some impressive numbers from BOSI withdrawal from the Irish market are:
  • BOSI holds a €32bn loan book in the Irish market (total Irish market is ca €350bn)
  • BOSI holds a just over 9% market share of total Irish loans market
  • BOSI withdrawal of working capital facilities in Ireland will have immediate impact on 12,000 business customers
  • BOSI also holds €10bn mortgage book, or 7% of all Irish mortgages
  • BOSI holds 5,000 current accounts
  • Amazingly, 44% of the bank’s book was impaired as per H1 2010 generating a write-off of €4bn in loans
  • Per Bloxham stockbrokers: "the move is likely to have a negative impact in the economy where liquidity is still scarce and the closing off of business lines will force some businesses to wall" (sic).
Now, unless we are willing to assume that Irish banks (with such flagships of prudential lending as AIB, Anglo, INBS etc) are massively more brilliant than BOSI in writing loans, we simply cannot avoid translating BOSI impairment rate to their books as well. Which, of course, makes my estimate of 40% across the books losses for the banking system as a whole, peak to trough, rather safe.