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To Cut or Not to Cut, The Irish Threaten To Play Rough With Those Clippers: Threats of Haircuts Rattle the ECB!
Yesterday, I made it clear that “It Looks Like Ireland Is About To Get Those Leprechaun Clippers Ready – Haircuts, Here We Come!” Today, in the news we see that…
Anglo Irish Bank Posts Record Loss
Anglo Irish Bank said its net loss
widened to a record €17.65 billion last year, reflecting the heavy
discounts on the transfer of its bad property loans to the government’s
asset-management agency.
Ireland May Merge Two Banks as Stress Tests to Trigger More Aid
The government is considering folding
EBS Building Society, the fifth-largest, into Allied Irish Banks Plc
(ALBK), the second- largest, according to two people with knowledge of
the situation. An announcement may come today after the central bank
publishes the results of bank stress tests at 4:30 p.m. in Dublin, said
the people, who declined to be identified because the matter isn’t yet
public….
Ireland’s banks were reliant on the European Central Bank for 88.7 billion euros of funding at the end of last month,
the Irish central bank said today. They may have borrowed as much as an
additional 70.1 billion euros in exceptional liquidity from the Irish
central bank, according to figures on March 11.
The government may have to
inject 27.5 billion euros extra into the banks in total, according to a
survey of 10 analysts and economists by Bloomberg News.
This would exhaust about 80 percent of the bank fund set up last year as part of Ireland’s bailout by the European Union and International Monetary Fund. The fund includes 17.5 billion euros from Ireland’s own resources….
Armed with the stress tests results,
Ireland’s month-old Fine Gael-led government will seek to reopen the
terms of the country’s 85 billion-euro bailout inked in November. Noonan
will bring the results to a meeting of European finance ministers in
Budapest starting on April 8 as he pushes for a reduction in the 5.8
percent interest rate on the loans.
The government also said it wants the ECB to provide longer-term financing for the banking system, and
is seeking permission to share losses with senior bank bondholders.
European policy makers are opposed to imposing losses on bank
bondholders, on concern that it may reignite a banking crisis across the
euro region.
Irish authorities also want fellow
euro members to take direct stakes in the banks or provide insurance
against losses for them as it tries to find buyers for lenders.
As a natural result, the ECB members are balking. As reported by ZeroHedge:
There has been disagreement in ECB governing council over new liquidity facility
ECB will not announce plans for a new liquidity facility to help Irish banks on Thursday
I present to you a historical dance through why this was not only
highly visible from afar, but practically unavoidable. Its as simple as
this… There is a gigantic capital hole and structural imbalance in many
European nations and someone is going to have to pay the piper. Here are
my thoughts starting July 2010:
- Death
by a Thousand Irish Cuts: The Poster Child of Austerity Measure
Success Gets Downgraded After Several Devastating Expenditure
Reductions That Really, Really Hurt the Irish People! Monday, July 19th, 2010 - Many Are Still Underestimating the Damage That Can Be Done By Ireland’s Bank Troubles Wednesday, September 8th, 2010
- As We Have Clearly Anticipated Since Early 2010, Ireland is About to Go Monday, November 15th, 2010
- Erin Gone Broken Bank: The 2nd EMU Nation That Didn’t Need a Bailout Get’s Bailed Out Within Months, Next Up??? Monday, November 22nd, 2010
- The BoomBustBlog Contagion Model: How We Predicted 9 Months Ago That The UK and Sweden Would Rush To Bail Out Ireland, and Why Friday, November 26th, 2010
- Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor! Monday, November 29th, 2010
- A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina Wednesday, May 26th, 2010
For our professional and institutional subscribers, the Ireland Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts are available online. All subscribers have access tos the 
Irish Bank Strategy Note which adequately warned before Irish banks dropped 85% in value. The Ireland public finances projections is also available to all paying members.
For those who don’t believe haircuts are possible, remember Denmark
already took the clippers out. Ireland looks like they may be bluffing,
but suppose their bluff is called???
From Bloomberg Today: Bondholder Haircut from Ireland May Shut Italy & Spain Out of Funding Markets
Ireland making good on its threat to
impose losses on senior bank bondholders would precipitate a funding
crisis for lenders across southern Europe, according to CreditSights
Inc. “The fallout would be big and it would be bad,” said John Raymond, a
London-based analyst at the independent research firm. “The senior
unsecured market would shut down, at least for a while. Right now, the
bigger and better Spanish and Italian banks can still access the market.
That could end.”
The Irish Central Bank will today
publish the results of stress tests, requiring the banks to raise
another 27.5 billion euros ($39 billion) of capital, according to the
median estimate of 10 analysts surveyed by Bloomberg News. At the same
time, the nation’s new government, led by Enda Kenny, is seeking to
extract better terms on its bailout loan and secure medium-term funding
from the European Central Bank to avoid a fire sale of lenders’
assets, threatening to burn bondholders.
Irish banks had about 16.4 billion
euros of senior unsecured, unguaranteed bonds and another 20.9 billion
euros of government-guaranteed notes outstanding as of Feb. 18,
according to the Central Bank of Ireland. While governments have
typically stepped in to prop up distressed lenders before senior
creditors lose money, that has been changing after the cost to
taxpayers of the 2008 financial crisis.
… Pressure on bondholders to
share the burden of banks’ losses is growing. In Denmark, the
government inflicted so- called haircuts on senior creditors and
depositors of regional lender Amagerbanken A/S, which failed after
losing money on investments including real-estate loans. Moody’s
Investors Service cut ratings of five Danish banks, including Danske
Bank A/S, the country’s biggest, pushing up funding costs. Ireland’s
government has similar powers to Denmark’s under the terms of its
banking act.
And in news just breaking… Ireland Says Four Lenders Need $34 Billion After Stress Tests :
Irish regulators instructed four banks
to raise 24 billion euros ($34 billion) in additional capital following
stress tests on the nation’s lenders.
Allied Irish Banks Plc (ALBK),
the biggest lender during the decade-long economic boom, requires 13.3
billion euros, the central bank in Dublin said today after publishing
the results for four banks. Bank of Ireland Plc must get 5.2 billion
euros, while Irish Life & Permanent Plc and EBS Building Society
make up the remainder, the central bank said.
“Banks will be capitalized as the additional capital requirements
announced today provide for future loan losses over the course of the
three years on a scale that is unlikely to occur and an additional
buffer for subsequent events,” Governor Patrick Honohan said in the statement.
Additional links of relevance:
- Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?
- Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!
- Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe
- Beware of the Potential Irish Ponzi Scheme!
- Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor!
- advertisements -
"Irish banks had about 16.4 billion euros of senior unsecured, unguaranteed bonds and another 20.9 billion euros of government-guaranteed notes outstanding as of Feb. 18"
intended The above quote is from the article. Could someone please explain more about the difference between "senior unsecured, unguaranteed bonds" and "government-guaranteed notes". Who are the "senior, unsecured bondholders" in a bank, and who are the holders of the "government-guaranteed notes". Indeed, WHY are some bonds issued by banks guaranteed by any government?
save the world, hang a banker
it sure was smart of them to save themselves and their economy by backing the banks a couple of years ago...that really stemmed the tide didn't it. After much misery, they are back where they would have been then...eff the clippers, get out the chain saws...
Dear Ireland, Spain, Portugal, US homeowners, etc:
Who's got the power here? Don't pay the banks or bondholders another cent. What can they do? None of these countries have armies any more.
Better yet. Con the bankers into lending you more and more, then default. You're insolvent anyway, so go full tilt and stiff em.
"Armed with the stress tests results, Ireland’s month-old Fine Gael-led government will seek to reopen the terms of the country’s 85 billion-euro bailout inked in November. Noonan will bring the results to a meeting of European finance ministers in Budapest starting on April 8 as he pushes for a reduction in the 5.8 percent interest rate on the loans."
This is their tough negotiating stance? The ECB printed that fucking money for nothing. Any interest rate over zero percent is a fucking racket and a ripoff. They should start with that premise, offer zero interest AND bondholder haircuts. THAT would be indicative of a gov't that is serious about fixing the problem.
oh yeah i still; like a fool, have " by the people for the people " ringing in my head.
didnt ireland reprint their whole currency a few years ago after some robbers stole a massive amount from a bank?
well whats different this time?
This time, as I know nothing about the last time, the Irish government was in cahoots with the robbers...Do you see the subtle difference there?
The Irish government will NEVER cut their links with EU on their own initiative. So the only option is negotiating a deal with Merkel which is acceptable to her that will mean Haircuts for German/UK banks as well as huge sovereign debts for Ireland. Where the dividing line lies, will be ultimately determined by Benocide and ECB TOGETHER, as the Euro/USD are interlinked in the Oligarchy game of avoiding assets meltdown worldwide.
We don't know how this will pan out. Merkel wants this to go on to 2013. She has already said it. By then US monetary strategy will have come to an unsustainable level. Which will make the intercontinental game between Euro and USD clearer. China is also an unknown quantity that supports Euro as alternative reserve currency. So China can also blunt speculative attack on Euro. Ireland in itself is no big deal. But if the HF/PD speculation unwinds fast EU sovereigns, it will become unacceptable to ECB and it will be open war with FED. Not the current phony war about phony monies where they collaborate and also fight indirectly by proxy moves. So wait until 2013 is her strategy. Act NOW is strategy of HF/PDs in USA... Lets see if ECB's current superb dismissal of Euro troubles can last against the speculative tsunami of US HFs. If ever the interest rates rise in USA it's game over USD...Euro weakness is being sucked into sovereign quagmire by the leveraged HF. So interest rates rising will kill the current HF strategy against Euro. Keep eyes open.
everyone and their cat is predicting the Euro will go before the US Dollar ...the assumption is so widespread and pervasive both sides of the pond it makes me wonder if we have a black swan event coming up ....Europe afterall has more assets to fall on to bailout the leaking hull while the US Govt are already at 5 minutes to midnight with their debt ceiling!
Reggie,
By my count the ECB (sometimes via the ICB) has already poured in 140 Billion in new bits and bytes measured in Euros into the Irish Banks. As recently as a few weeks ago those self same zombie banks issued another 17 Billion in debt which they swapped / sold amongst themselves. Add another X billion that the gov has pledged to backstop the banks using Irish citizens pension funds (I can't remember the number off hand what the value on that was). Anyway, when this mess was first revealed it was under a 100 billion.
Do you have a number in mind as to how much it actually is? because the numbers reported seem to be getting bigger by the day.
The funny thing about all this is it's in the hands of the politicians not the bankers. The Politicians only really care about scoring points against each other. Frau Merkel seems to want to die on the hill of corporate taxes. The Irish politicians know it's the only thing keeping them afloat. Apple, Google etc will fire their couple of thousand employees and head for the hills. They have literally nothing invested there that they didn't get for half nothing thorough subsidies for building and employees.
The squealing bondholders remind me of the whining Lloyds "Names" who didn't want to pay up insurance claims. I bet some of them are in this game too. Why don't we identify it as the organised crime that it clearly is.
doesn't matter, reggie. investigate the RUT... 842....
...843, 844, 845, 846, 847, ......
praise be the bernank. may the numbers be humongous forever.
Me being a bit Scottish, and the head Int. banking Mafia boss being a Brit named Rothschild, me brotheren in Ireland please me to no end in choppin' a few inches off tops of bloody bankers who been chopin' meters off our asses in wars for profit for centuries. G'Day Maties...
+
Reggie,
The "New" Irish Government is following the path set out by the "Old" Irish Government which is the one set out by the ECB/EU.
The "New" Irish Government has renegade on the promise "We will not put one more cent into failed banks".
Sovereign default seems inevitable. It may take a year or two.
Todays "announcement" should not calm markets in any way.
Default bitchez! Just do it! Send the bankers to the gallows!
+ a few Trillion Euros and Dollars
Before the leprechaun produces the scissors, perhaps a libation is in order. It could be a long, painful process.
http://tremendousnews.com/wp-content/uploads/2009/05/beautiful-irish-gir...
must be a picture of Irish bondholders (for now) coz it sure ain't one of Irish taxpayers!
Quite right, Reggie, but how is that inflationary? Have to stick with the party line;)