When will we realise the extent of the bank liabilities

Slideshowbob

Ok so I hear another 13bn had to be pumped into AIB this week.

I now wonder, approx 3 years after the recession started, when oh when will we know the full extent of liabilities.

Every few weeks it's something new, stress test, IMF visit, etc.

I realise things are uncertain and hard to predict regarding growth but I gather in relation to the banks, the main thing is to calculate the extent of deficits of their loans books and that's what will need to be supported or written in some way!?!

I further assume that means calculating what each piece of property is really worth against it's book value?!? ie is that 1 bed apartment in Tallaght now worth 150k or 30k? Is that field in Leitrim now worth 100k or 10k?!?

Surely it's possible to compare property prices now in say Manchester and Dublin and factor in say salary levels etc to come up with some current values and work from there??

Although if all these figures are being looked at ultimately by the same cluster of professional property valuers who got things so wrong in the first place, then I'm not surprised they may be struggling 1. To do the math 2. To get it right and 4. To tell the truth!!

Then with those property values handed to the moppets still left in the likes of Anglo to put together reports for whoever, god knows what they do next!!

So what y'all think?!?

Debtocracy

Wait till the accountants find out that a substantial amount of the bank’s assets consist of CDOs that aren’t worth the paper their written on. Not only will Irish banks have to deal with one of the greatest property bubbles of all time, they will also have to deal with the atomic explosion in the derivatives markets. It'll be the most expensive two pillar banking bailout in history.

Slideshowbob

Debtocracy wrote: »

Wait till the accountants find out that a substantial amount of the bankÂ’s assets consist of CDOs that arenÂ’t worth the paper their written on. Not only will Irish banks have to deal with one of the greatest property bubbles of all time, they will also have to deal with the atomic explosion in the derivatives markets. It'll be the most expensive two pillar banking bailout in history.

I don't know what a CDO is!!

Slydice

if we don't actually have to... then we won't

if some politician can find a way to put it off and kick the can down the road.. then that will happen.

so... it'll probably happen if and when there is absolutley no way to postpone or avoid it

Dannyboy83

Q.When will we realise the extent of the bank liabilities

Impossible to answer. It's a moving target, not a stationary one.

It's a bit like trying to give the precise location of a train, using smoke signals as the communication method. By the time the other party receive the message, the position is long out of date.

Crazy Horse 6

I've said it before and i'll say it again, the elite will look after themselves and their friends at all costs, all costs. This will never end.

Tea drinker

So at what point would it have been cheaper to dissolve the banks, pay the first 20-50K of depositers and burn bondolders and anyone else? Isn't that what they are doing in real countries like Norway (2 this year)

Sand

People are asking the answer to questions to which no one can quantifiably know the "correct" answer because the inputs are shifting constantly. Liabilities arent fixed - every loan is worth *something*. What that something is shifts with the ability of the borrower to repay, and the supply/demand for any underlying assets which the banks might sieze.

So then trying to have a balance sheet of options with fixed costs is not workable - all we have to make decisions at these points is estimates based on experience, and priniciples.

The response so far has ignored estimates based on experience (instead preferring estimates based on long term drug abuse) and has been wholly unprincipled.

hinault

How does any business know the extent of their liabilities?

My business sells product A, if we don't get paid within 90 days for that product
we provide the full amount of that value by way of a provision.

The banks have liabilities with regard to the deposits taken from customers but the difficult bit is trying to estimate what number of loans (assets) will become unserviceable and will also become liabilities too.

Scofflaw

When it was announced in April that the covered banks needed another €24bn, the money was not put in straight away. This money:

Ok so I hear another 13bn had to be pumped into AIB this week.

is part of that €24bn:

In March of this year the Central Bank ordered four of the country’s main lenders to raise €24 billion to bolster confidence in the financial system.

In total AIB will require €13 billion, Bank of Ireland €5 billion, EBS – which is being folded into AIB – €1.5 billion and Irish Life and Permanent €4 billion.

The €13bn being put into AIB, then, is not "new" - it is the money AIB was announced as needing back in April, which has now been authorised.

Whether it represents the "final bill" is another matter. As far as we know at this point in time, it does - the €24bn was the outcome of stress tests specifically for the Irish banks back in March, and the most recent round of stress tests have added nothing to it.

I'm a little surprised nobody thought to clarify that.

cordially,
Scofflaw

hinault

PCAR tests stipulated that the "adverse" scenario had been adopted so €24 billion figure was pragmatic/conservative.
This applies to loans to customers on the banks books.

But does the PCAR figure take account of deposits being withdrawn from AIB?
If a deposit is withdrawn, the liability becomes zero but the bank has a liquidity problem if sufficient deposits continue to be withdrawn.

Scofflaw

hinault wrote: »

PCAR tests stipulated that the "adverse" scenario had been adopted so €24 billion figure was pragmatic/conservative.
This applies to loans to customers on the banks books.

But does the PCAR figure take account of deposits being withdrawn from AIB?
If a deposit is withdrawn, the liability becomes zero but the bank has a liquidity problem if sufficient deposits continue to be withdrawn.

Sure - as I said, I'm just commenting on the fact that the €13bn mentioned by the OP was money already known to be committed as part of that €24bn, rather than new money.

Having said that, and looking at the covered banks' aggregate balance sheets, I don't really see a pattern of continuing deposit flight in the last 4-5 months. Still, time will tell.

cordially,
Scofflaw

hinault

Scofflaw wrote: »

Sure - as I said, I'm just commenting on the fact that the €13bn mentioned by the OP was money already known to be committed as part of that €24bn, rather than new money.

I agree 100%.

Scofflaw wrote: »

Having said that, and looking at the covered banks' aggregate balance sheets, I don't really see a pattern of continuing deposit flight in the last 4-5 months. Still, time will tell.

Indeed.
The situation is though that if loan defaults continue to rise more provisions have to be made which means more recapitalisation.
And/or if deposit withdrawals re-commences this too means more recapitalisation.

For €13billion, a completely new bank could have been created, capitalised and have commenced trading.:o