"Toxic bank" for AIB and BOI

-mr.x-

Do people think the toxic bank solution, as discussed on prime time would work best/or not for Ireland?

Do people think the toxic bank would benifit investors in these banks?
:rolleyes:

Hanley

Investor =/= someone who bought shares in a bank at the height of the boom

-mr.x-

After watching prime time i think the government will go for somthing like the bad bank approach.
im holding shares in both AIB and BOI and hope this will have a decent out come

LuckyCharms

The whole bad bank idea is the best one we have at the moment and should have been decided upon the day they nationalised Anglo Irish, the longer we wait the more money we end up throwing at the vacuum that is our banking system currently.

Daragh101

i reckon the gov will go for the toxic bank scheme , its about time aswell:rolleyes::rolleyes::rolleyes::rolleyes:

hobochris

Please excuse my lack of knowledge on this but what is a Toxic bank? (I've never herd the term & google has many links to people thoughts on the concept but not much definition)

ppthink

Daragh101 wrote: »

i reckon the gov will go for the toxic bank scheme , its about time aswell:rolleyes::rolleyes::rolleyes::rolleyes:

Take all the bad debt from the banks!!!
They dont know how much bad debt they have yet.
The gov. will have to make sure they know how much is in the banks books before the give any assurance to banks that hey would take it.
When it comes to that point they would have to draw the line or the banks wii keep puttin the ongoing bad debt in as there wont be any reason to make any effort to have loans that go into arrears for any period

Daragh101

well whatever solution the government go for, they will not no how many bad debts they will have to write off. If the government go for a toxic bank it should minimise the tax payers looses.
If the gov nationalise they take on everything.


A bad/toxic bank would be a company that would be set up to take on AIBs and BOIs riskey loans.
the idea is that the banks could be turned into good ones after they are free from there bad debts

Idu

A bad bank is going to affect taxpayers in the same way as nationalisation. The only winners in this plan are the banks and their shareholders as getting the toxic assets off the books will make everything seem rosy in the garden of Irish banking again.

Did I see it mentioned somewhere here that they plan to use the pension fund to guarantee this plan?? Sweet Jebus:eek:

ranger4

Daragh101 wrote: »

well whatever solution the government go for, they will not no how many bad debts they will have to write off. If the government go for a toxic bank it should minimise the tax payers looses.
If the gov nationalise they take on everything.


A bad/toxic bank would be a company that would be set up to take on AIBs and BOIs riskey loans.
the idea is that the banks could be turned into good ones after they are free from there bad debts

Yep, and house bad debt in toxic entity selling off sometime in the future, Aib-boi woint be nationalised, the gov were dragged kicking and screaming into nationalising anglo and doint want in a million years to nationalise aib-boi, think of the extreamly negitive view such a move would send out to foreign investors, If investors are willing to hold stock for a while i doint see why aib-boi would potentaily be a great investment in time.

ppthink

Daragh101 wrote: »

well whatever solution the government go for, they will not no how many bad debts they will have to write off. If the government go for a toxic bank it should minimise the tax payers looses.
If the gov nationalise they take on everything.


A bad/toxic bank would be a company that would be set up to take on AIBs and BOIs riskey loans.
the idea is that the banks could be turned into good ones after they are free from there bad debts

You can call it a company for want of a better word, but bottom line it will be run by the government and civil servants. Even if you employ "independent people" there wont be any pressure on them to clean up the debt. It will be minor damage limitation that will be asked of them. It leaves the banks with a clean slate virtually.
The government need to check all the banks transactions for whatever perod of time they see fit.
In the U.Ss they have the S.E.C. to walk into financial institutions unannounced to do this.
Two months before the Irish government send the fraud squad in after Anglo Irish was nationalised.
They need to find out exactly what is at stake before they take it on.
That is what would happen in the private sector.
But then we are talking about civil servants!! Right?

ppthink

Idu wrote: »

A bad bank is going to affect taxpayers in the same way as nationalisation. The only winners in this plan are the banks and their shareholders as getting the toxic assets off the books will make everything seem rosy in the garden of Irish banking again.

Did I see it mentioned somewhere here that they plan to use the pension fund to guarantee this plan?? Sweet Jebus:eek:

Des anyone know how much was put into the "pension fund" and how much is actually left of it. I am assuming it was invested in the markets or was some of it invested in the famous "credit default swaps" whiich would make it part of the toxid debt?

Daragh101

Idu wrote: »

A bad bank is going to affect taxpayers in the same way as nationalisation. The only winners in this plan are the banks and their shareholders as getting the toxic assets off the books will make everything seem rosy in the garden of Irish banking again.

Did I see it mentioned somewhere here that they plan to use the pension fund to guarantee this plan?? Sweet Jebus:eek:

The bad bank would have similar effects to nationalisation, but there are better reasons to use the bad bank than nationalisation.

1. if nationalisation happened, investment in the country would be rare to say the least.

2. the government dont want to be resposible for the running of one never mind three banks.

3.government may have to pump more capital into the banks if nationalisation happens.

I just think nationalisation would bacially affect or international confidence even more for the worse.

ppthink

Daragh101 wrote: »

The bad bank would have similar effects to nationalisation, but there are better reasons to use the bad bank than nationalisation.

1. if nationalisation happened, investment in the country would be rare to say the least.

2. the government dont want to be resposible for the running of one never mind three banks.

3.government may have to pump more capital into the banks if nationalisation happens.

I just think nationalisation would bacially affect or international confidence even more for the worse.

For the forseeable future there is no real sign of investment from abroad.
Unless the government is not telling us something we dont seem to be as badly off economically as the countries that invest in us.
I seriously doubt we are not that bad as we are getting very little information from our leaders.
The gov. will have to pump more into the banks eventually.If you look at britain per capita they have pumped a lot more into their banks and they are still giving out risky loans i.e. Northern Rock.
We are way behind in sorting out the problem so we should be learning from other countries mistakes. WE`RE NOT.
They need to find out what they are dealing with first as regards the Irish banks.
Our main trading artners can bring bank C.E.O`s in front of a committee and grill them on whats going in their respectve banks live on camera. that woud start to put them on the spot.
We dont do these things in Ireland because bank chiefs and politicians are best of friends and dont want to disturb the arrangement.
People are slowly withdrawing their money from the banks. I am not trying to cause a run on the banks but it is happening.
Banks are a necessity for every country but would you believe what they tell you.
Their business dealings need to be investigated.

griffzino

There can be NO nationalisation of the banking system in Ireland as 100% owned state banks would have a political agenda and not an economic mandate when making commercial finance decisions.

Could you imagine an entreprise approaching a state owned bank and being turned down. They could go straight to the media and claim that the government is not promoting enterprise. The flow of capital cannot be controlled by the government in a capitalist open free market.

As for these so called 'toxic assets'. It amazes me how they portray these assets as something that you wouldn't touch with a barge pole. Yes they have broken down as the economic engine goes into reverse all over the globe and the most open economies are hit hard, but these land and development assets are located in a small island country that is forecast to increase its population by over 50% in the next 30/40 years. Thjese assets will have value in an Ireland that once again becomes and attractive base for industry. Companies will expand again. The current rationalisation of labour is inevitable in a climate of reduced demand and profits, but yet again global growth will rebound and companies will grow once again. Ireland with its merits (English speaking workforce, highly educated graduates, membership of EU, low corporation tax, favourable regulation) will become a location for global business.

Ireland can do very little about its unempolyment crisis. It is open to world economic performance. Most redundancies at this stage are transnational companies and consumer facing businesses. What little can be done is through stimulative measures to boost consumer spending within our borders, but yet the government is doing the opposite. The current account deficit needs managing, but we have the ability to borrow our way out of the global recsssion due ot a 30% debt to GDP ratio. Why not just trim the excesses and gradually shift the tax system back to a more sustainable level. Another April 7th shock will derail consumer spending further and the cycle of lost demand and resulting unemployment will spiral higher.

As for promoting lending. Is this not what led to this problem? Ireland already has a high level of personal debt and lending will naturally have to contract in order to bring this into equilibrium. What not just let the banks get on with their business and ride out the current recession. The worst case capital test assume property values drop by 50% -80% across the residential and commercial spectrum. I find it hard to believe that they can drop by that much and maintain that low level for any significant period of time. Banks in my opnion are sufficently capitaqlised. They can buy their non-equity tier 1 and tier 2 debt for around £700M each in cash and boost equity tier 1 by around 200 bps each. Let them operate through the cycle and as the global economy recovers so too will the Irish situation.

In times of 'irrational psessimism' it rarely gets as bad as most people expect.

Daragh101

*quote*It amazes me how they portray these assets as something that you wouldn't touch with a barge pole.

True, when property prices rise thats when the banks will recover.
the banks need cash at the moment.
property cant be easilly turned into cash at this time so this is why property for the banks is unattractive

*quote*As for promoting lending. Is this not what led to this problem?

That is correct but them loans where millions to builders, who had risky plans.
If banks dont lend to small businesses these businesses cant expand and will eventually run out of cash, causing in clousure and job loose, even though a business might be only looking for 100,000 grand to buy more printers.

Again the banks want to store their money away for a rainy day and dont want the gov to get involved with their lending...etc

ppthink

griffzino wrote: »

There can be NO nationalisation of the banking system in Ireland as 100% owned state banks would have a political agenda and not an economic mandate when making commercial finance decisions.

Could you imagine an entreprise approaching a state owned bank and being turned down. They could go straight to the media and claim that the government is not promoting enterprise. The flow of capital cannot be controlled by the government in a capitalist open free market.

As for these so called 'toxic assets'. It amazes me how they portray these assets as something that you wouldn't touch with a barge pole. Yes they have broken down as the economic engine goes into reverse all over the globe and the most open economies are hit hard, but these land and development assets are located in a small island country that is forecast to increase its population by over 50% in the next 30/40 years. Thjese assets will have value in an Ireland that once again becomes and attractive base for industry. Companies will expand again. The current rationalisation of labour is inevitable in a climate of reduced demand and profits, but yet again global growth will rebound and companies will grow once again. Ireland with its merits (English speaking workforce, highly educated graduates, membership of EU, low corporation tax, favourable regulation) will become a location for global business.

Ireland can do very little about its unempolyment crisis. It is open to world economic performance. Most redundancies at this stage are transnational companies and consumer facing businesses. What little can be done is through stimulative measures to boost consumer spending within our borders, but yet the government is doing the opposite. The current account deficit needs managing, but we have the ability to borrow our way out of the global recsssion due ot a 30% debt to GDP ratio. Why not just trim the excesses and gradually shift the tax system back to a more sustainable level. Another April 7th shock will derail consumer spending further and the cycle of lost demand and resulting unemployment will spiral higher.

As for promoting lending. Is this not what led to this problem? Ireland already has a high level of personal debt and lending will naturally have to contract in order to bring this into equilibrium. What not just let the banks get on with their business and ride out the current recession. The worst case capital test assume property values drop by 50% -80% across the residential and commercial spectrum. I find it hard to believe that they can drop by that much and maintain that low level for any significant period of time. Banks in my opnion are sufficently capitaqlised. They can buy their non-equity tier 1 and tier 2 debt for around £700M each in cash and boost equity tier 1 by around 200 bps each. Let them operate through the cycle and as the global economy recovers so too will the Irish situation.

In times of 'irrational psessimism' it rarely gets as bad as most people expect.

My opinion is banks will eventually be nationalised. Hope i am wrong.
With China hinting at not investing in U.S. treasuries and also devaluing the Yuan, where does that leave Ireland. Not much to say if that happens. Ireland is slashing its spending in next budget. Seems the only country that is. That is the right thing to do but not if most of the other countries are injecting money directly into the economy as well as banks.
Other countries are stimulating their economy by injectin money into it.
What do we do. Close off the drip and comatose the economy.

Daragh101

nationalisation is alast resort for the Government, the could be nationalised but only if the toxic bank or the insurence scheme or whatever fails, which is unlikly unless the american plan fails as it would have knock on affect to us..

NEDDURC

Can anyone explain in detail to me how a toxic bank works?
If for example the government now used Anglo as a toxic bank, would AIB and BOI transfer all the assets they have fully impaired to Anglo for a fee or would they pay Anglo a fee for this?
I reckon this is a fairly simple move that may restore market confidence in the banks and Anglo would do well out of it as they would follow up these loans that would not all be bad.

Daragh101

if anglo were to take on all these loans that are pretty certainly not going to be paid back, AIB and BOI will be paying back huge sums to the bank,ie taxpayer for a long time, this might work as the banks wont be under too much pressure to come up with cash quickly.

daveirl

This post has been deleted.

ppthink

It seems this evening the U.S. market is becoming wary of the announcement on toxic debt after a huge rally in financials in anticipation of and after the announcement.
They are also starting to worry about the insurance companies that carry the cds`s.
Hopefully the Irish Gov. will learn from the American failure to deal with the problem and not make the same mistakes or stop making them!