US retail investors and financial media tend to be a little... well... US-centric. They tend to ignore a lot of international happenings even though these events can, and often do, have a direct impact on the immediate US financial situation. I have ranted, raved, preached and prognosticated on the interconnectedness, and the inherent risks therein, of the global banking system. From my highly analytical ravings on Bear Stearns (pre-bust Is this the Breaking of the Bear?) to my more free form rants on Lehman (pre-bustIs Lehman really a lemming in disguise?), I think I have proven that being the lone voice in the investment wilderness is not necessarily an indicator of that voice being wrong. See Who is Reggie Middleton? for more on that topic. For now, let's continue where we left off in "Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You" wherein I'm about to clearly demonstrate how contagion easily traipsed through geographic borders from Ireland to the UK to the US, and how this big bank seemingly omitted the evidence of such.
Note to professional and institutional subscribers: Please download the supporting documents for this report from BoomBustBlog’s subscription archive and depository - Ulster Bank/RBS Supporting Charge Documents. This file contains several hundred pages of documentation to support the assertions and allegations contained in this report (clickhere to subscribe).
|Founded||Belfast, United Kingdom of Great Britain and Ireland (1836) as the Ulster Banking Company|
|Headquarters||Dublin, Republic of Ireland|
|Website||www.ulsterbank.ie for RoI orwww.ulsterbank.com for NI|
Ulster Bank Ireland Ltd, has charges registered (seeSupporting Charge Documents) with the Irish Companies Registration Office (CRO). The bank gave a first floating charge in favour of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland encompassing “all its right, title, interest and benefit, present and future, in and to each of the securities of such a class or description as may from time to time be designated by the European Central Bank as eligible for sale and/or purchase, as the case may be, by the Bank under its standard form for the time being of Master Repurchase Agreement, which specification may be made by reference to particular classes of repurchase transactions, and which are included in the schedule of Eligible Securities provided to the Bank from time to time.”.
These charges were registered with the CRO on 15th February 2008, yet there is no mention whatsoever of these charges in the Banks 2008 Annual Accounts (seeattached).
Ulster Bank is a 100% Owned Subsidiary of the UK (now taxpayer owned) Institution - The Royal Bank of Scotland (RBS)
This affects US investors as well and this piece should be well read by anyone in the US, UK or Ireland who has lost money investing in RBS/Ulster Bank Group.
In 2008, RBS traded ADR’s in the U.S. under the symbol .NYSE:RBS. These ADR’s were traded OTC. This gives the SEC jurisdiction over the companies US securities.
What happened behind closed doors?
Ulster Bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland. U.S. investors would have had to rely on the contents of The Royal Bank of Scotland's 2008 Annual Accounts which apparently (in my opinion) concealed the existence of the CRO registered charges to the Bank of Ireland.
I also attach charge documents that Ulster Bank entered into with Pfizer International Bank. I cannot find these charges in any disclosures.
If you look at the attached charge documents from Ulster Bank to the Central Bank you will see that the wording is different when compared to the charge documents of the other Irish Banks. It specifically states that a first floating charge was created by the Deed of Floating Charge over Eligible Securities for Liabilities Arising in Target2-Ireland. Having said that I can see no mention of these charges in the Annual Accounts for 2008. On page 72 (28) of the Annual Accounts it gives the only details that I can find of charges registered. It states that A registered charge exists over the assets of the Group, securing all borrowings and other obligations in whatever form that relate to the Group's use of the Euroclear system, that are outstanding to Morgan Guaranty Brussels and to any other office of Morgan Guaranty Trust Company of New York. This looks as if it could be a double encumbrance of certain assets for the charge to the Central Bank of Ireland features very similar, all-encompassing language for Ulster Bank, which is a fully owned subsidiary of RBS. Although I'm not an international banking attorney, my layman's eye sees double counting of collateral barring a clause that somehow excludes that covered by the charge over Ulster Bank.
These charge documents are also not apparent in the recent bank ‘stress testing’ conducted by the European Banking Authority, at least not in the summary results that the EBA have made available, reference RBS Stress Test.
I cannot see how the charge documents are disclosed in theRBS annual accounts (annual report). I see it mentions that the Bank provides collateral in the form of securities in repurchase agreements (footnote page 41). On page 60 it states the Group engages in securitization transactions of its residential loans which are generally transferred to a special purpose entity. This likely relates to the cashflows and not the principal. The charge documents relate to the principal (the actual loan). The registered charge (page 72) exists over the assets of the Group, securing all borrowings and other obligations whatsoever that relate to the Group's use of the Euroclear system (privately owned by J.P.Morgan,http://en.wikipedia.org/wiki/Euroclear).
The charge documents are not covered in the Ulster Bank Annual Accounts or the SEC Group RBS Annual Report. I think that this is a serious misrepresentation of the Accounts/Annual Report. The charge is a floating charge over Secured Obligations (Repo Agreements) which means all present and future liabilities of Ulster Bank (100% owned by RBS). As stated Target2 is only a payment system. The true reasons for the charge increasingly appear to be that of emergency funding, for it also appears as if Ulster Bank was bust. This information should have been included in the SEC Group RBS Annual Report, especially when ADR's were being traded.
RBS Stress Tests
The afore-linked copy of theRBS Stress Testresults do not make it possible to determine whether the charge documents were included in the Stress Test, however it is worth pointing out that the charges do not appear in the annual accounts, so one could assume that they were not included in the stress test. The information is based on data supplied by each bank, via its respective national supervisor. Accuracy of this data is primarily the responsibility of the participating bank and national supervisor. This information has been provided to the EBA in accordance with Article 35 of EU Regulation 1093/2010. The EBA bears no responsibility for errors/discrepancies that may arise in the tables.
A Short Traipse Through Recent History & The Expense That Ultimately Befalls The UK Taxpayer
In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.
It was the UK taxpayer that footed the bill for this nationalization - as per Wikipedia:
The bonus payments paid to RBS staff subsequent to the 2008 United Kingdom bank rescue package have led to controversy. Staff bonuses were nearly £1 billion in 2010, even though RBS reported losses of £1.1 billion for 2010. More than 100 senior bank executives were paid in excess of £1 million each in bonuses. Consequently, former CEO Fred Goodwin was stripped of his knighthood in mid-January, and newly appointed CEO Stephen Hester renounced his £1 million bonus after complaints over the bank’s performance.
82 percent of RBS' shares are now owned by the UK government, which bought RBS stock for £42 billion, representing 50 pence per share.In 2011, the shares were worth 19 pence, representing a taxpayer book loss of £26 billion ($40B). Historically, the RBS stock price went from a high of over 700 pence in early 2007 (taking into account a 3 for 1 stock split that took place later that year) to around 20 pence in late 2011.
... the UK Government (HM Treasury), as of 31 March 2012, holds and manages an 82% stake through UK Financial Investments Limited(UKFI), whose voting rights are limited to 75% in order for the bank to retain its listing on the London Stock Exchange. In addition to its primary share listing on the LSE, the company is also listed on the New York Stock Exchange. The group is based in Edinburgh, Scotland. In 2009, after the financial collapse, it was briefly the world's largest company by both assets (£1.9 trillion) and liabilities (£1.8 trillion). In 2012, the UK government announced plans to bid for the rest of the RBS shares that it did not own, as it felt that "while the taxpayer owns over 82pc of the bank following a bailout in 2008, they bear 100pc of the bank's huge liability risks".
Part and parcel of the RBS problems was its purchase of Ulster Bank and its exposure to the Irish lending issues!
The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS. Click here and scroll halfway down the page to access the bailout cost app!
I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!
Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.
In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:
In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.
Indications of capital shortfalls in the Ulster Bank arrangement:
RBS had paid a total of €9.13 billion to Ulster Bank in capital contributions, in order to safeguard the bank’s capital reserves after writing off billions in impaired loans to Irish borrowers.http://businessetc.thejournal.ie/british-banks-bailed-ireland-out-e16bn-762258-Jan2013/. 24th Feb. 2012
ULSTER BANK’S parent company, Royal Bank of Scotland (RBS), injected as much as £4 billion (€4.7 billion) into Ulster Bank last year, bringing its total investment in its Irish subsidiary to £10 billion (€11.8 billion) since 2008.
If you have believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message.
Those of you in Ireland who may not want to get "Cyprus'd", ie. have your bank accounts fund another bailout, should contact the Office of the Director of Corporate Enforcement.Click this link, and tell them Reggie from NYCsent 'ya. Seriously! The reason why Irish banks haven't been reformed was because not enough light has been shown on the activities. See avalid attempt at such here. This is the time, for the tea leaves foretell the next bank collapse & bailout will be funded directly out ofyourbank accounts, reference Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You for those who don't believe me. See Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" for an example of a bank statement of a Cypriot who didn't take the regulation of his bank seriously!!!
We intervene when firms:
- treat consumers unfairly
- behave in ways that risk the integrity of the market
We supervise firms differently depending on their size and the nature of their business. This includes:
- continuous conduct assessment for large firms and regular assessment for smaller firms
- monitoring products and other issues to ensure firms play fair and don’t compromise consumer interests
- responding quickly and decisively to events or problems that threaten the integrity of the industry
- ensuring firms compensate consumers when necessary
Well, straight from the horse's mouth. Have at 'em. They should do the right thing, and EU media should pick up on this as well. You don''t want your 2,000+ pound/euro bank bailout investment to be handled solely by a blogger from NYC, do you???!!!
For paid subscribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). Over the next 36 hours or so, I will be releasing an even bigger scandal that is even more far reaching. Stay tuned!!!
Other hard hitting pieces on the resurgent EU banking crisis
- Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
- Mainstream Media Says Cyprus Salvaged By…
- Economic Depression Is The New Success
- The Canadian Government Offers "Bail-In"…
- EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation
- Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
- As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
- Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
- Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
- Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
- Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
- The Next Leg Of That Counterparty Led European Bank Run Has Put On It's Running Shoe