The AIB Discussion Thread

Hanley

-mr.x- wrote: »

right so the government take on 80% of each loan (risky)
any loan that the government take on that is paid back they keep as a reward.
the bank pays back say 20% of their profits each year untill all the government losses have been paid back.
eventually after maby 20 yrs who knows , the bank has no debts and would be back on track

80% of the full amount, or 80% of the impaired amount?

Bearcat

interesting note re bad bank scenario etc from Davys re morning report.
http://www.rte.ie/business/2009/morningrep/download/0310davy.pdf

Compak

Speak of the devil

Judging from Lenihan’s comments, the creation of a bad property
company to solve the problem of toxic assets is officially gaining
credibility. So how would the plan work and what are its merits?

One detailed proposal within official circles centres around the
Minister’s suggestion. Under the option being considered, the banks
would move capital equal to 30 per cent of the value of their toxic
loans to the “bad company” to cover them.

This closely follows the Swedish solution used to fix its banks
following their collapse in the 1990s.

By removing the bad loans, the Government, as the instigator of the
scheme, would create good banks out of the troubled lenders.

This would reduce the taxpayer’s exposure under the State guarantee as
the cleansed banks would be regarded as lower risk by bond and debt
investors in the lenders.

Without bad loans weighing them down, the institutions would be more
profitable as they would no longer have to continually set aside more
and more in provisions to cover rising loan losses. They would grow
their capital ratios and become freer to provide more new loans.

By moving capital to the bad property firm, each lender would take a
stake in the venture. The Government would take “a special share”,
which gives the taxpayer a stake in any potential profit made on
working out the bad loans. Each bank would relocate a team of lending
managers to work out the loans in the bad company.

The key to the scheme’s success is two-fold – the guaranteed lenders
must move all possible toxic assets to the company and the Government
must set the right “transfer value” on the assets. If this value is
set correctly, the Government will ringfence any capital it has
invested in the banks and put a floor under the capital requirements
for the entire sector.

However, if, at 30 per cent, the Government sets the wrong capital
weighting against the bad assets and property values fall further,
Lenihan can raise more capital for the bad property company by levying
the entire sector and investing this in the company.

A valuation committee comprising accountants, auctioneers and the
Financial Regulator could assign a value on the assets. Auditors at
present are battling with “point in time” or “through the cycle”
valuations. Moving toxic assets would allow values to be assigned over
time without leaving banks hamstrung in the interim.

Difficulties arise with “co-mingling” bad assets from the various
lenders. However, dealing with the same type of bad loans in one
entity would create a unified solution to an industry-wide problem.

http://www.irishtimes.com/newspaper/finance/2009/0310/1224242572348.html

-mr.x-

+1

ranger4

How long would it take to actualy set up this bad bank and start injecting bad debt from aib-boi, 3 months or more.

-mr.x-

i wouldnt think it would take too long,(alot of planning though).
however it would prob take longer under this government:)

daveirl

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ranger4

-mr.x- wrote: »

i wouldnt think it would take too long,(alot of planning though).
however it would prob take longer under this government:)

Thats what i am afraid of they couldnt orginise a piss up in brewery, If they were to pull their finger out and get serious with setup of potential bad bank for debt and start by making an anouncement that this is chosen plan then i feel we could see stablisation with our bank system and the return abit slowly with home and foreign investors buying stock with our banks.

Compak

daveirl wrote: »

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And this is the number one problem with these banks. The guaranteeing government.
No faith will be restored until they snap into gear. If they could possibly convince our pension funds to purchase bonds, this is the only way we can restore confidence I feel.

Off course we could get nationalised by Germany also.

The one time we could of really done with a strong Irish descendentt US president to adopt us.

SEPT 23 1989

[QUOTE
A valuation committee comprising of auctioneers and the
Financial Regulator could assign a value on the assets[/QUOTE]

is this some sort of joke?

Mikel

Mother of Jebus.
'Bad Bank' is just the latest buzzword that people like to say because they think it makes them sound intelligent.
Sweden my foot, was every bank in the world sinking underwater at the time?
No, so that's pretty irrelevant.

ranger4 wrote:

If they were to pull their finger out and get serious with setup of potential bad bank for debt and start by making an anouncement that this is chosen plan then i feel we could see stablisation with our bank system and the return abit slowly with home and foreign investors buying stock with our banks.

That's what you said about nationalising Anglo, and recapitalising the banks.
We're always just one 'statement' away from stabilising the sector and justifying your investment aren't we?
Now it's a 'bad bank' you're crying out for?

Like daveirl says, every Joe Soap is an expert on 'bad banks' and knows that this is what we need.
I've got people telling me every day what our CDS spread is who wouldn't know a CDS from a kick in the balls.

That article is just a kite flying exercise.
They don't know what to do so by floating the idea indirectly they're hoping someone will tell them what to do.

the Government must set the right “transfer value” on the assets....
A valuation committee comprising accountants, auctioneers and the
Financial Regulator could assign a value on the assets.

You couldn't make it up

Compak

Mikel wrote: »

You couldn't make it up

Educated or not, a debt cover of some type appears to be the only way out for this country.
The details noone knows, however debt insurance is undesirable as noone believes the government.
Second one must be careful taxpayers are not footing an almighty bill while bansk think they can hum a tune and go back to making money

ranger4

Mikel wrote: »

Mother of Jebus.
'Bad Bank' is just the latest buzzword that people like to say because they think it makes them sound intelligent.
Sweden my foot, was every bank in the world sinking underwater at the time?
No, so that's pretty irrelevant.

That's what you said about nationalising Anglo, and recapitalising the banks.
We're always just one 'statement' away from stabilising the sector and justifying your investment aren't we?
Now it's a 'bad bank' you're crying out for?

Like daveirl says, every Joe Soap is an expert on 'bad banks' and knows that this is what we need.
I've got people telling me every day what our CDS spread is who wouldn't know a CDS from a kick in the balls.

That article is just a kite flying exercise.
They don't know what to do so by floating the idea indirectly they're hoping someone will tell them what to do.

You couldn't make it up

What idea would you put forward to help stablise our banks? It doesnt take an expert to see that the gov has made a complete balls of dealing with our finacial turmoil, I suppose we will hear another ham fisted plan anounced prior or on paddys day from the dail bar.

silverharp

ranger4 wrote: »

What idea would you put forward to help stablise our banks?

Time I'm afraid , the banks will stabilise when asset prices stop falling, no gov plan can possiby make a difference apart from making it work, simple as

ranger4

silverharp wrote: »

Time I'm afraid , the banks will stabilise when asset prices stop falling, no gov plan can possiby make a difference apart from making it work, simple as

agree, Recovery will take time, I am convinced that some kind of entity setup possibly to house and sell at some later stage bad debt from our main two banks would be seen as a posstive step to dealing with the unfolding problem going forward also we are a small country and have nowhere near the bad subprime levels of debt that the uk and us have, Its about time some possitive steps are taken by our gov with a comprehensive plan been put forward that would dampen down some of the bears out there.

silverharp

ranger4 wrote: »

we are a small country and have nowhere near the bad subprime levels of debt that the uk and us have, Its about time some possitive steps are taken by our gov with a comprehensive plan been put forward that would dampen down some of the bears out there.

I dunno , it depends how many 1000's of houses are left empty and a whole generation of under 40's that will be stuck with negetive equity for a decade at least, throw in commercial property, credit card debt...... The country will have to get to that point where all the debt that is going to be defaulted on is and then you can start to pick at the bones that are left. and oops where I said make it work should have been make it worse. There seems to be a hope/need for the gov. to do something , I'd say there is a misplaced faith in gov. at this point

daveirl

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Compak

daveirl wrote: »

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did work a treat initially until people realised government cant fund 400billion so not worth the paper its written on. If they could well yes it would work a treat as seen by the initial huge deposit growths in our banks

However if we take 27billion plus bad loans into property company and get it backed by bonds from Irelands pension reserves as well as banks it would achieve full international recognisation and stability.

Off course Im aware of why would pension reserves do it, what is profitablity, how can we assure proper value, proper return, proper price, proper fees etc.

Not saying its perfect and am keenly open to a better suggestion.

ranger4

NTMA looking at french model to extend bank guarantee, interesting.

Mikel

Compak wrote: »

did work a treat initially until people realised government cant fund 400billion so not worth the paper its written on....
However if we take 27billion plus bad loans into property company and get it backed by bonds from Irelands pension reserves as well as banks it would achieve full international recognisation and stability

So the deposit scheme didn't work because it's backed by the Government (ie taxpayers) and we don't have enough money to fund it.

And the solution is to borrow the money from pension funds (ie taxpayers) to fund the potential large black hole which may be left by the guarantee, leaving a large potential liability to the taxpayers which will be repaid with the money we don't have.

This is a solution to what exactly?

ranger4 wrote:

I am convinced that some kind of entity setup possibly to house and sell at some later stage bad debt from our main two banks would be seen as a posstive step to dealing with the unfolding problem going forward also we are a small country and have nowhere near the bad subprime levels of debt that the uk and us have, Its about time some possitive steps are taken by our gov with a comprehensive plan been put forward that would dampen down some of the bears out there.

At the moment the taxpayer is liable for the bad debts on the bank's balance sheets.
If an entity is set up to house them, who is liable?
The same taxpayers.
You seem to be clinging to the belief that the Government can issue some kind of statement that they have a plan and the markets will breathe a sigh of relief.
It won't happen, no matter what plan they come up with the taxpayer will be left holding the baby.
It will all have to be borrowed regardless of how you rearrange the liability.

ranger4

Mikel wrote: »

So the deposit scheme didn't work because it's backed by the Government (ie taxpayers) and we don't have enough money to fund it.

And the solution is to borrow the money from pension funds (ie taxpayers) to fund the potential large black hole which may be left by the guarantee, leaving a large potential liability to the taxpayers which will be repaid with the money we don't have.

This is a solution to what exactly?

At the moment the taxpayer is liable for the bad debts on the bank's balance sheets.
If an entity is set up to house them, who is liable?
The same taxpayers.
You seem to be clinging to the belief that the Government can issue some kind of statement that they have a plan and the markets will breathe a sigh of relief.
It won't happen, no matter what plan they come up with the taxpayer will be left holding the baby.
It will all have to be borrowed regardless of how you rearrange the liability.

Mikel, what possitive steps do you propose which could help our banking sector and economy, seems like you want nationalisation with all our banks, surly this would be seen as an extreamly negitive outcome by foreign envestors and would only prolong the resession much further.

-mr.x-

ya i would have to agree with ranger, its like you arent open to suggestions on the topic.it sounds like you think you know it all..
trust me you DONT

Compak

Mikel wrote: »

So the deposit scheme didn't work because it's backed by the Government (ie taxpayers) and we don't have enough money to fund it.

And the solution is to borrow the money from pension funds (ie taxpayers) to fund the potential large black hole which may be left by the guarantee, leaving a large potential liability to the taxpayers which will be repaid with the money we don't have.

This is a solution to what exactly?

you do realise private (not government) pension funds job is to invest? you do know they buy bonds for return?

And you are knocking my solution to buy Irish bonds instead of perhaps German ones when a better return can be agreed is why exactly?

So your solution is ........

ali1971

Why has there never been a rights issue with AIB?

woodseb

ali1971 wrote: »

Why has there never been a rights issue with AIB?

very difficult to raise the 2-3bln needed when the stock price is at 500mln. there is no stomach in the market to subscribe to such an rights issue and the inevitable dilution

daveirl

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daveirl

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-mr.x-

daveirl wrote: »

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this is BULL

daveirl

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Compak

daveirl wrote: »

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Yes from the Jan highs the sp hit, not his buy price.

Expected you to be better than to fall for newspaper sensationalism