Category: Finance

Was the guarantee a panicked decision?

It has been a common narrative since 2008 that the decision to guarantee the banks was a late night decision, taken perhaps in the heat of the moment for fear of the entire banking system collapsing if we did nothing (or acted on a set of alternative proposals provided by Merrill Lynch).

However in another tape released by Tom Lyons and me yesterday in the Sunday Independent this narrative is somewhat dented. In the days prior to the guarantee, and in a phonecall likely made between September 24-26, 2008, John Bowe from Anglo spoke to a senior official in the Central Bank.

Bowe: …[The Regulator has been asking]’So when are you going to run out of money’? And this is our best guess as to how these things unfold.
Official: Right.
Bowe: Making assumptions obviously contractual stuff is rolling off and then we’ve made assumptions around the customer stuff. And that, that if you like gives us a point of time which is, which is Monday.
[Silence]
Official: That, that by Monday you will be out of collateral?
Bowe: By Monday, we would, yeah, exactly.
Official: Ok, em.
Bowe: We will be out of cash and collateral.

Anglo were projecting they would run out of money on Monday, September 29, 2008, and if they survived Monday via money market funding they said they would certainly be in trouble on Tuesday September 30, 2008. How well prepared was the Department of Finance for this eventuality? How did they factor this news in, if at all? How panicked was the decision to guarantee?

This information is by no means a smoking gun, but it does add to our understanding of events that week.

The IBRC plan 2011-2020

Last year we wrote about an unredacted document we obtained that showed IBRC’s winddown plans up to 2020. Now that IBRC is in liquidation we are publishing the document in full, and much of it is still relevant in terms of the loanbook:



Department of Taoiseach contracts in relation to EU presidency

There are the contracts awarded by the Department of the Taoiseach as a direct result of the planning and administration of Ireland’s Presidency of the EU 2013. Costs include the website http://www.eu2013.ie/, which cost €244,741.71.

Thanks to Vinnie O’Dowd for obtaining the data.

ECB refuses access to Trichet/Lenihan bailout letter

The European Central Bank has refused to release a letter sent to former Finance Minister Brian Lenihan in November 2010, stating that the release of the letter’s contents would “undermine the protection of the public interest as regards the monetary policy of the Union and as regards the stability of the financial system in a Member State”. I submitted a request to the ECB for all letters sent to Brian Lenihan or his office in November 2010.

In April last year the contents of an interview between Dan O’Brien of the Irish Times and the late Brian Lenihan were published, in which Lenihan said Ireland had been “bounced” into the EU/IMF bailout and that the first hard indication he had of the ECB wanting Ireland to accept a bailout came in a letter he received from the head of the bank, Jean-Claude Trichet, on November 12. In the letter, according to Mr Lenihan, Mr Trichet “raised the question about whether Ireland would be participating in a programme at that stage”.

In its decision not to release the letter, the ECB said:

The letter, dated 19 November 2010, is a strictly confidential communication between the ECB President and the Irish Minister of Finance and concerns measures addressing the extraordinarily severe and difficult situation of the Irish financial sector and their repercussions on the integrity of the euro area monetary policy and the stability of the Irish financial sector.

Furthermore the letter states:

The ECB must be in a position to convey pertinent and candid messages to European and national authorities in the manner judged to be the most effective to serve the public interest as regards the fulfilment of its mandate. If required and in the best interest of the public also effective informal and confidential communication must be possible and should not be undermined by the prospect of publicity.

In this case, the confidential communication was aimed at discussing measures conducive to protecting the effectiveness and integrity of the ECB’s monetary policy and fostering an environment that ultimately contribute to restoring confidence among investors in the overall solvency and sustainability of the Irish financial sector and markets, which, in turn, is of overriding importance for the smooth conduct of monetary policy.

We should like to draw your attention to the fact that in line with Article 10 of the ECB Decision on public access to ECB documents “documents released shall not be reproduced or exploited for commercial purposes without the ECB’s prior specific authorisation. The ECB may withhold such authorisation without stating reasons.”

I intend appealing this decision.

Here is the letter, along with the only other letter received by Brian Lenihan in November 2010:


Anglo Irish/INBS restructuring plan 2011-2020

TheStory.ie has obtained a confidential plan submitted by Anglo Irish Bank/Irish Nationwide to the European Commission, which was put together by a working group from the Department of Finance, the NTMA, the Central Bank, Anglo and INBS.

The plan, dated January 31, 2011 was submitted to the European Commission for approval and was guided by the agreement reached between the Irish authorities, the EU, the IMF and ECB in November 2010. It outlines in detail the workout plan for the IBRC entity from now until 2020, under two headline scenarios – a base and stress scenario.

  • Under the the base scenario, IBRC says it could lose €3.5bn between 2011 and 2020, while under the stress scenario it could lose €8.1 billion. The bulk of these losses would be incurred in 2011/2012. It projects a loss of at least €400m between 2016 and 2020.
  • IBRC’s residential loan book will be prepared for eventual sale, probably in 2015. A 30% haircut is expected in the stress scenario leading to a loss to the taxpayer of €300 million.
  • Under a stress scenario outlined by the bank, IBRC will need an additional €3.2bn of equity capital which will be ‘drip fed’ across the plan period. The injections are required to keep an 8% total capital ratio. This drip feeding will be done in tranches of €1.7bn, €1.3bn, €0.01bn, €0.04bn and €0.2bn.
  • IBRC will be reliant on the Central Bank/ELA funding for the duration of the plan, right up to 2020. IBRC will need €36.7bn funding from the CBI/ELA by 2015 and €15.9bn by 2019 under the base case.
  • IBRC had to fund €18bn of non-Euro exposure (out of €49bn total from CBI/ELA), which was 60% sterling and 40% US dollar
  • The total cost to the taxpayer for IBRC under the stress case is estimated at €35.8bn (this includes INBS and Anglo remember).
  • Operating costs for IBRC were €405m in 2010 (Anglo and INBS before they were merged), with projections for operating costs of between €217m and €250m in 2012. The largest savings are expected from staff reductions of 39% to 1,075. Wealth management will be sold or wound down over a period of five years.

    I intend releasing the full 66 page plan on TheStory.ie.

    • Where does your money go?

    Have you ever wondered what happens when you pay taxes? Ever wonder when it disappears from your pay slip, where exactly it goes? I often do, indeed, I believe citizens have a right to see where it all goes.

    This handy flowchart from the Department of Finance gives us an idea of exactly what happens our taxes, and indeed the money we borrow. I will make a clearer digital copy soon.


    Judge Kelly on Anglo and the ODCE

    I couldn’t let this pass without putting it in full here (emphasis mine):

    JUDGMENT of Mr. Justice Kelly delivered on the 10th day of May, 2011

    Introduction

    The collapse of Anglo Irish Bank Corporation Limited (Anglo) has had profound and serious consequences for the economic wellbeing of this State and its’ citizens. It has caused much hardship to many small shareholders who invested in it in good faith. It played no small part in seriously damaging Ireland’s business reputation throughout the world.

    In such circumstances, one could reasonably expect that the relevant authorities in the State would carry out a comprehensive investigation so as to ascertain whether any breach or breaches of the criminal law might have occurred in respect of the activities of Anglo and those who were responsible for it.

    Continue reading “Judge Kelly on Anglo and the ODCE”

    More Anglo subsidiaries

    Some have come up before, and some are new:

    Anglo Irish Bank Corporation Limited
    Anglo Irish Bank Limited Anglo Irish Assurance Company Limited Anglo Irish Corporate Bank Limited Anglo Irish International Finance
    Anglo Irish Asset Management Limited
    Buyway Group Limited
    Pagnol Limited Anglo Irish Nominees Limited
    Anglo Irish Bank (Nominees) Limited
    Geranth Limited Pegasus Nominees Limited
    Anglo Irish Bank ESOP Limited
    Anglo Irish Capital Partners Limited
    Anglo Irish Administration Limited
    Anglo Irish Financial Services Limited
    CF Limited
    Modify 5 Limited
    Anglo Irish International Financial Services Limited
    Ansbacher Bankers Limited
    IBOC Limited
    Irish Buyway Limited
    Knightsdale Limited
    Sparta Financial Services
    Fitzwilliam Leasing Limited
    Anglo Irish Mortgage Bank
    Anglo Irish Funding 1 Limited
    Anglo Irish Funding 2 Limited
    Anglo Irish Funding 3 Limited
    Anglo Irish Funding 4 Limited
    Anglo Irish Funding 5 Limited
    Anglo Irish Funding 6 Limited
    Gertonabbey Limited
    Aragone Limited
    Tincorra Investments Limited
    Filipa Limited
    Castle Farm Telford Nominees Limited
    Colmore Square No. 1 Limited
    Colmore Square No. 2 Limited
    D MacDonald Estates (Limerick) Limited
    Georges Square Property No. 1 Limited
    Georges Square Property No. 2 Limited
    Manchan Limited
    Tuscanan Limited
    Wentbridge Properties Limited
    Exhort Limited
    Moschus Limited
    Phaenom Limited
    Anglo Irish Bank Corporation Limited
    Anglo Irish Capital Funding Limited
    AIT (Nominees) Limited
    Anglo Irish Holdings IOM Limited
    Steenwal B.V.
    Anglo Irish Bank Corporation (International) PLC
    Anglo Irish Nominees (IOM) Limited
    Anglo Irish Trust (IOM) Limited
    Alexan Limited
    Beaugrand Sarl
    Belalan Bischoffshein Freehold SPRL
    Belalan Bischoffshein Leashold SPRL
    Belalan Holdings SPRL
    Belalan Louise Freehold SPRL
    Belalan Louise Leashold SPRL
    Belalan Meir Freehold SPRL
    Belalan Meir Leashold SPRL
    Berala Sarl
    Castle Farm Campus (Telford) Limited
    Erste DIG Vermogensverwaltungs GmbH
    Chancery Place Limited Sarl
    Fellstar Limited
    Fenlay Limited
    Finsbury Dials Sarl
    Harpen Ostenhellweg GmbH
    Heywood Park Limited
    Kernesk Limited
    Ladyland Limited
    Moreton Limited
    Newbury (GP) Limited
    Petersen Limited
    Portwall One Limited
    QBC Czech SRO
    QDH Czech SRO
    Racol Sarl
    Sajola Sarl
    Salado Enterprises Limited
    Sheps (PHFL) Limited
    Starcrest Limited
    Talca Enterprises Limited
    Tarnold Holdings Sarl
    West Port Sarl
    Westow Limited
    Woolgate SA
    Zeus Investments 1 SPRL
    Zeus Investments 2 SPRL
    555 NMA Investors LLC
    Alpha Ceres GP LLC
    Alpha Ceres REIT, Inc.
    Beta Ceres GP, Inc.
    Delta Ceres (STAP), Inc.
    Gamma Ceres GP, Inc.
    Zeta Ceres Capital, Inc.
    Zeta Ceres GP, Inc.
    Zeta Ceres New York LLC
    Zeta Ceres REIT, Inc.
    Zeta Ceres, Inc.
    Anglo Irish Boston Corporation
    Anglo Irish New York Corporation
    Anglo Irish Chicago Corporation
    10 South State Street Holdings LLC
    10 South State Street Property LLC
    Mainland Investments GP Inc
    Mainland Ventures Corp
    Project B Investor Limited Partnership
    Project B Investor II Limited Partnership
    MBB Investment Partners Limited Partnership
    CWB Holdings Limited Partnership
    CWB Hotel Limited Partnership
    CWB Retail Limited Partnership
    CWB Apartments Limited Partnership
    Beta Ceres Limited Partnership
    Gamma Ceres Limited Partnership
    Zeta Ceres Limited Partnership
    SEAPORT CPA Limited Partnership
    10 South State Street Property Investor, Limited Partnership
    Mainland Investments 625 NMA, Limited Partnership
    TA Newbury Street Fund Investor, Limited Partnership
    10 South State Street Property GP, LLC
    Anglo Irish Equity Limited
    Anglo Irish Private Capital Limited
    Anglo Irish Leasing Limited
    Berfors Nominees Limited
    Finance 2000 plc
    Clickinput Limited
    CDB (UK) Limited
    Anglo Irish Property Lending Limited
    Anglo Irish Property Investors Limited
    Anglo Irish Finance Limited
    Anglo Irish Credit plc
    Anglo Irish Commercial Properties (No.1) Limited
    Anglo Irish Commercial Properties Limited
    Anglo Irish Carry Partner Limited
    Anglo Irish Capital GP Limited
    Anglo Irish Asset Limited
    Anglo Irish Asset Finance plc
    Amblepath Properties Limited
    Argyle Investment Finance Limited
    Anglo Irish Treasury Financing Limited
    Anglo Irish GP Holdings Limited
    Anglo Irish Property Investors GP Limited
    Sutherland Finance And Leasing
    Anglo Irish Covered Bonds Limited Liability Partnership
    AALP Guernsey Limited
    AALP Galashiels Limited
    AALP England Limited
    AALP Sunbury Limited
    IFT Nominees Limited
    CDB Investments Limited
    Industrial Funding Trust Limited
    Anglo Irish German Retail Limited
    Soundbow Limited Liability Partnership
    Anglo Irish Covered Bonds Finance Limited
    Moorevale Investments Limited
    Moorevale Investments (Brigade House) Limited
    Carisbrooke Anglo Ventures Limited
    Carisbrooke Property Investments Limited
    Carisbrooke Properties Limited
    Carisbrooke Properties (Barry) Limited
    Carisbrooke Central Investments Limited
    Carisbrooke Properties (Basingstoke) Limited
    Carisbrooke Central Limited
    GPF Investments Limited
    Carisbrooke Lime Street Limited
    Countryroad Investments Limited
    Taurus Euro Retail Holding Sarl
    Taurus Euro Retail Finance Sarl
    Taurus Euro Retail Investment Sarl
    T-R RE-Fund 1 GmbH
    Monument Securitisation (CMBS) Limited
    Monument Securitisation Holdings Limited
    Monument MT No.2 Limited
    Monument Securitisation (CMBS) No.2 Limited
    Monument Securitisation Holdings No.2 Limited