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Lehman 2: Anglo Irish To Be Split Into A Funding Arm And An Asset Recovery Bank
News out of the Irish government is that Anglo Irish bank will be split into a funding bank and an asset recovery bank, saying that the bank's "own plan in its current form does not provide the most viable and sustainable solution." Those who are familiar with Lehman will recall that this was a plan expected to be put into place for Lehman, in which a CRE-asset holding division would be spun off and allowed to roll off its assets. This plan was scrapped as it was deemed unviable. Glad to see it will work in Ireland.
Full statement on Anglo Irish:
Statement – Anglo Irish Bank
The Minister for Finance today briefed his Government colleagues on the strategic options for the future of Anglo Irish Bank. The Minister conveyed to the Government the views of the Board of Anglo Irish Bank, the Central Bank, the National Treasury Management Agency, the Department of Finance, the EU Commission and his own assessment of the position.
The Government decided that Anglo Irish Bank will be split into a Funding Bank and an Asset Recovery Bank. Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case. It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time.
The guaranteed position of depositors will be unchanged by the new arrangements and no action is required of them as a result of today’s announcement. The depositors will become customers of the Funding Bank which will be fully capitalized and continue as a regulated bank.
In order to restore the reputation of the Irish Financial System it is essential to bring finality to the problem of Anglo Irish Bank – our most distressed institution.
The Government’s primary objective in dealing with Anglo Irish Bank has been to minimise the cost of this distressed bank to the Irish taxpayer.
The Board of Anglo Irish Bank submitted its preferred option to the Minister and to the European Commission at the end of May for consideration under State Aid rules. The board’s plan envisaged splitting the bank into an asset management company and a new good bank. The asset management company would have managed out over time the bank’s lower quality assets remaining after the transfers to NAMA. The new good bank would have managed the remaining share of the loan book, retained the bank’s deposit funding and sought new lending opportunities to grow the bank.
The Minister acknowledges the good faith and hard work of the board in producing a credible proposal for the future of the bank.
However, the Government has concluded that this plan in its current form does not now provide the most viable and sustainable solution to ensure the continued stability of the Irish banking system.
Resolution Proposal
In these circumstances, the Government has decided to opt for a variation of the board’s restructuring proposal. The Government’s decision does not affect existing guarantee arrangements.
Under the restructuring plan, the Funding Bank will be a Government-backed/guaranteed specialist deposit bank which will contain the bank’s deposit book. It will be a stand-alone, regulated bank, completely separated from Anglo’s loan assets and it will be owned directly by the Minister for Finance. This bank will not engage in any lending, but will provide a secure home for Anglo’s depositors and any new customers who wish to deposit their funds with it. Depositors with the Funding Bank will be completely insulated from the future performance of the rest of the current Anglo Irish Bank loan book.
The Asset Recovery Bank will also be a licensed regulated bank. Its dedicated focus will be on the work-out over a period of time of the assets not being transferred to NAMA in a manner which maximises the return to the taxpayer.
Costs
The Government believes that it is essential to identify, with as much certainty as possible, the final cost for the restructuring and resolution of the bank. This will underpin international financial confidence in Ireland. Accordingly, the Central Bank will determine the appropriate levels of capital needed in both institutions. Its decision will be announced by October.
EU Commission
The Department of Finance has conducted intensive discussions with the EU Commission in recent weeks about the future of Anglo Irish Bank. The Minister for Finance met Commissioner Almunia last Monday to discuss the issue. A formal detailed plan is being prepared for submission to the Commission for approval.
The Minister said:
“Today’s decision by the Government will provide certainty about the future of Anglo Irish Bank. Resolution of this, our most distressed institution, is essential to the promotion of confidence and stability in our financial system.”
8th September 2010
ENDS
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Did they pass the 'stress test'...ohhh....2 months ago?
I thought everyone passed the stress test. No bank left behind!
They weren't tested.
They are trying to pretend mathematics does not exist.
+ Leibniz!
I think you mean + Chandrasekhar.
http://en.wikipedia.org/wiki/Black_hole
It doesn't when you're in Anglo in Wonderland.
Oh, I get it! If we "carve out" the "bad" assets into a different entity, then, the problem will just go away? Crikey, why didn't they just do that from Day 1?
Genius!
Its basically a wind up. You'll end up with one bank with no business model ("I'm sorry sir, we may be a bank, but you don't think we lend money, do you?"), waiting for someone to buy them to prop up their own balance sheet and another gradually being wound down as efficiently as possible until their net liabilities are equal in worth to the brand, the staff and the buildings. They'll get bought as well then. Oirish oyes won't be smylin when they work out the cost to get to that point.
Out of interest, which bank do existing CDS apply to? Just a thought.
I'm not disagreeing with your comment, but I don't see how this accomplishes anything. It's a nationalized bank. Therefore, the Irish government owns both parts. To split them up - that does nothing at all. Just some smoke and mirrors for the bondholders? The Irish taxpayers must be getting pissed.
Glad to see all is fine in Europe today.
What a joke. Everywhere in the world nothing is allowed to fail. How does this "save" the Anglo bank in the end? So essentially you have one divison stuffed full of shit, non-performing assets and on the other side you have a healthy, well functioning bank? This is baffoonery. We're just kicking the can down the road, trying our darndest to avoid the day of reckoning. God forbid the global elite are forced to recognize losses. Makes me sick.
I believe you're looking at this wrong. The goal isn't to save the Bank. The goal is to save the political leaders' power. Unfortunately, this approach has been quite effective, so far. Across the globe. And very expensive.
"liqour in the front, poker in the bank"
"This is baffoonery"
No it's "Biffoonery".
After our Dear Leader.
Big Igroant Fucker From Offally.
Any why in the hell is the euro not plunging on this wonderful news?
Because uncle ben needs this market to climb and to do this he needs a strong euro.
I think you will see a ramp job today and after Obama's speech tonight...
Whatever, The Dow is up 60. To the Fed that's all that matters. Once again, Bernanke bitched slapped all his critics.
60? hah...60 is chump change. With this news we'll easily see triple digits.
Like i said, Bernanke is like superman. He can change the course of Mighty rivers, Bend charts with his bare hands. He also parted the Red sea.
ShitCo. Goes Gaelic
The Anglo Irish debt represents €6m per person in Ireland!
Ok that is a bit freaky.
That would be €27 trillion.
You might want to check your figures.
Ummmm....I am no expert...but the term that repeats in my head is FRAUD...I think that if this is an acceptable precedent would this 'restructuring strategy' be available to all? - Boy ohhh Boy I bet this is really pissing off Ol' Bernie Madoff - if he could have lasted a bit longer this would have been a great approach - What would Dick Fuld do?
Bernie Madoff screwed up royally, and the only reason I think he might have confessed is that he pissed off the wrong people and wanted the safety of a prison cell. Otherwise, tell his investors the market has become illiquid, deny redemption requests in perpetuity, and continue living the high life. What a doofus he was.
Dickie Fuld woulda taken all the bad shit, dumped it into a box of mouldy cardboard, shaken it well, wrapped it tightly in the duct tape of the ratings agencies and stuffed the AAA and AA rated pieces into the Fed's discount window.
No need for the bad bank good bank bullshit in the US, the Fed just did the simpler, cheaper and more efficient method of accepting securitizatized garbage as collateral.
Surprise, Fuld ya'.
Sounds great! NOT!
Just came back from a visit in Ireland recently....the economy there is non-existent. Once a "Celtic Tiger" now...more of a "Paper Tiger."
pun definitely intended (hyperinflationary money printing, LOL)
Isn't that what was supposed to happen over at Pandit's House of Horrors? Good bank/bad bank?
BIG BAD DEBT WOLF
http://williambanzai7.blogspot.com/2010/09/whos-afraid-of-big-debt-wolf....
They have the wrong name for bank number 2. It should not be called the Asset Management Bank but the Liability Management Bank. It is the Taxpayers that are on the Asset side of that n'est-ce pas?
deleted
"The Minister acknowledges the good faith and hard work of the board in producing a credible proposal for the future of the bank."
The Minister must be Yogi Berra!!!
The Minister's name is Brian Lenihan.
Also know as Lendahand.
His brother Conor Lenihan is know as Crazyhorse.
http://judiciary.senate.gov/hearings/hearing.cfm?id=4771
Oh...so this is what they call good bank / bad bank now?
This is another european joke. Nothing can fail. Lying about debt, ECB snapping up all the soverign bond issues, then calling auctions a success. This is a big fucking sick joke. Markets up on shit data & news. We are living in The Twilight Zone boys....how the world financial system doesn't eventually blow sky high is beyond me.
Wait, why was it wrong for Enron to do this? Seems a perfectly acceptable accounting procedure endorsed by the various CB's the world over.
Looks like the market loves Lehman part 2 though look at that pig fly
Yield on Irish 10 year down from a day high of 6.05 to 5.991.
http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND
I’ll give you three guesses on who is buying the 10 year.
Exactly how does this improve anything?
BAIB Proposal:
Gov't Variation:
Deposits Safe + No New Lending = ?????
The "Funding Bank" (Deposits) will lend money to the Asset Recovery Bank.
You really couldn't make this shit up.
The Irish government is trying to prevent a run on Anglo-Irish's deposits with this move.
What's not stated in the press release is how much capital will be required. Since the Irish Central bank can't print euros the capital will need to come from somewhere...
The Government (yes we do have one) will issue promissory notes. No need for the printing press when you can just keep promising to pay everyone and their dog.
Nice article thanks.
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