Why did IL&P deposit 6 billion euro with Anglo?

stevedublin

I dont understand why they did this, whats in it for them?
I understand that it would be in Anglos interest to appear to have more money on deposit but how did IL&P benefit?

nesf

One bank going down could potentially destabilise others as investors could decide where there's one bad apple there's more and start heavily shorting otherwise healthy banks.

IL&P depositing money at Anglo wasn't that weird, the way they deposited it is the problem.

Time Magazine

Moved from Economics.

Pal

stevedublin wrote: »

I dont understand why they did this, whats in it for them?
I understand that it would be in Anglos interest to appear to have more money on deposit but how did IL&P benefit?

I agree.
This makes no sense (and I know how money markets work).

There is no reason known yet why Permo did this.

Which may raise the scandal stakes considerably.
The whole sorry mess could go higher

Pythia

This is hopefully what will come out of the investigations.

Zaph

stevedublin wrote: »

I understand that it would be in Anglos interest to appear to have more money on deposit but how did IL&P benefit?

My understanding is that it doesn't really make much difference to IL&P, although presumably there was some sort of margin paid to them. Anglo placed deposits with IL&P, which in turn placed lent the money to a non-banking subsidiary, Irish Life Investment Managers, who then gave it back to Anglo Irish. Anglo and IL&P are subject to scrutiny by the financial regulator, however as a non-banking subsidiary the intermediate company isn't. This means that IL&P show corporate loans of €7 billion on their balance sheet, and Anglo show corporate deposits for the same amount, but Irish Life Investment Managers don't have to report their balance sheet to the Central Bank at all. Interbank and corporate loans and deposits are treated differently for liquidity reporting (Basle II requirements) and while Anglo clearly needed to shore up something in their accounts, it may have suited IL&P to get involved depending on the state of their own balance sheet.

Rockshamrover

stevedublin wrote: »

I dont understand why they did this, whats in it for them?
I understand that it would be in Anglos interest to appear to have more money on deposit but how did IL&P benefit?

As far as I know, most of the banks are heavily invested in each other. IL&P would have invested millions of Euro in buying shares in Anglo.
They would realise that once Anglo was nationalised, they would make a massive loss on the shares that could no longer be sold.

Perhaps they were trying to stave off nationalisation of Anglo in the hope that they could ride out the storm and get something back on the shares.

It's the only thing I can think of that makes any kind of sense of the whole thing (99.9% wrong I would think) Hopefully all will be revealed sooner rather than later.

Has anyone figured out what interest the 7 billion earned for that week?