Inevitable nationalisation?

Amhran Nua

Looks like those who were saying that we'd have to nationalise the banks anyway were one step closer to being correct with this morning's news from the Times...

State to take bigger share in banks as capital needs increase

THE STATE could end up effectively nationalising three more financial institutions this week following a series of official announcements tomorrow evening which the Government hopes will draw a line under the banking crisis.

The Government is finalising details with the Financial Regulator and the National Treasury Management Agency (NTMA) on the co-ordinated announcements that will lead to the State taking far greater ownership of the banking sector.

Taxpayers are likely to take a stake of about 40 per cent in Bank of Ireland and a significant majority shareholding in Allied Irish Banks (AIB) of more than 70 per cent – which would effectively nationalise the bank – as the Republic’s two largest lenders are forced to boost capital levels.

Such is the scale of capital required at the EBS and Irish Nationwide building societies that the State would take control of both lenders.

AIB is fighting a rearguard action in last-ditch discussions with the Government, the regulator and the NTMA, seeking time to raise capital on its own through private means and avoid greater State ownership.

The bill for further capital at AIB, Bank of Ireland, nationalised Anglo Irish Bank, and the EBS and Irish Nationwide could run to well in excess of €16 billion.

Part of this may still be raised privately and some of the State’s €3.5 billion indirect stakes in AIB and Bank of Ireland could be converted to direct shares to bolster capital.

The State has a 16 per cent stake in Bank of Ireland, a 25 per cent indirect stake in AIB and full ownership of Anglo, after pumping €11 billion into the three banks last year.

The recapitalisation plan would give the Government a much greater say in the running of Bank of Ireland and would keep Anglo afloat. It will also dilute shareholders’ investments in both AIB and Bank of Ireland.

Green Party minister Eamon Ryan said the recapitalisation of the banks would be “strong” to end uncertainty on the international markets.

The capital required by the lenders will be determined by the losses on the loans moving to the National Asset Management Agency (Nama), the Financial Regulator’s assessment of losses on non-Nama loans and the new thresholds set by the regulator on the minimum capital the banks must hold by the end of this year.

The three issues will be addressed tomorrow in statements from Nama, the regulator and the Minister for Finance, Brian Lenihan.

The first loans will start to transfer to Nama tomorrow, with Irish Nationwide and EBS moving loans linked to the top 10 developers, followed by Bank of Ireland later in the week.

Nama had planned to unveil the discount on their loans today but decided over the weekend to delay this until markets close tomorrow evening to coincide with statements from the regulator and Mr Lenihan.

The delay will force Bank of Ireland to postpone the publication of its latest results until Wednesday.

Nama will also unveil in its statement the discount applying to the bank’s first tranche of loans, some €2.2 billion, to be transferred. The announcement will be followed by the statement from the regulator on the capital thresholds for the banks.

The Minister will then tell the Dáil how much capital the five lenders will require and the stakes to be taken by the State in each lender.

The Government’s “once-and- for-all” solution for the banks will undermine AIB’s “self-help” plans to boost capital by selling assets and raising cash from investors.

A spokeswoman said that the bank’s discussions with the regulator, the Department of Finance and the NTMA, which is leading the recapitalisation, were ongoing.

Mr Ryan said that he didn’t think the State taking a large majority stake in AIB was unexpected, given that the banks were always going to need more capital. Bank of Ireland is facing a discount of about 35 per cent on the first loans it is selling to Nama, while AIB faces a discount of more than 40 per cent and Irish Nationwide as high as 60 per cent.

So along with NAMA and the recapitalisations, we're going to end up owning the banks by the most tortuous and circuitous route possible, rather than what shouldhave been done in the first place, temporary nationalisation and a debt for equity swap with senior bondholders, which is pretty much standard practise for these situations.

The_Honeybadger

Amhran Nua wrote: »

Looks like those who were saying that we'd have to nationalise the banks anyway were one step closer to being correct with this morning's news from the Times...


So along with NAMA and the recapitalisations, we're going to end up owning the banks by the most tortuous and circuitous route possible, rather than what shouldhave been done in the first place, temporary nationalisation and a debt for equity swap with senior bondholders, which is pretty much standard practise for these situations.

I think the dogs on the street knew this was going to happen, its no surprise but we have paid out enormous sums and done it the most a**eways route possible, for what reason I don't know. I read recently that the Gov plans to borrow money from our own banks in the coming years, money raised through the ECB bonds that will be issued in exchange for the NAMA loans, (i.e. the gov will borrow this money back instead of it being loaned into the economy). Anybody know if there is any truth in this? We would then end up paying this money back twice, unless of course NAMA makes a profit, which I think everybody agrees will not happen.

jmayo

How does this work in with the supposed NAMA plans of someday hitting the banks for any losses incurred in the buyout of all the debts ?

After all we will own the banks, it won't be some other mythical group that we are actually demanding payback from, but ourselves :rolleyes:

Or will we try and float the banks or sell them off and tell the buyers that it comes with a hefty payback bill ?

If AIB is fully nationalised can we expect pay increases for indispensable people or those who have just gotten new qualifications. :rolleyes:

jmayo

mickeyk wrote: »

I think the dogs on the street knew this was going to happen, its no surprise but we have paid out enormous sums and done it the most a**eways route possible, for what reason I don't know. I read recently that the Gov plans to borrow money from our own banks in the coming years, money raised through the ECB bonds that will be issued in exchange for the NAMA loans, (i.e. the gov will borrow this money back instead of it being loaned into the economy). Anybody know if there is any truth in this? We would then end up paying this money back twice, unless of course NAMA makes a profit, which I think everybody agrees will not happen.

The government and the NAMAers (I have been fed this line by a few pro NAMA posters) have claimed that by leaving the banks as private institutions they could off and raise funds themsleves.
One little problem with this is that nobody wants to touch Irish banks so we have to pony it all up.

Dannyboy83

http://www.irishtimes.com/newspaper/breaking/2010/0329/breaking15.html

Bank shares slump in early trade

CIARA O'BRIEN
Shares in AIB fell more than 18 per cent today amid speculation that the State will take a majority stake in the bank.

Not looking good.