Newbridge credit union

Further reports today indicate that an average of €76k was being withdrawn every day from Newbridge CU since 27th July. In 1 week alone from July 27th to August 02nd there was a daily average of €536k leaving the CU.

Was this caused by the Central bank being involved. Is the run on deposits the cause of the current crisis? That's a heck of a lot of money to be haemorrhaging.

If the company had gone into liquidation would it have cost less than the 53 million to the Irish taxpayer.
 
The contention is that by liquidating the credit union, the value of the loan book would have been lower in a fire-sale resulting in a high cost to the taxpayer.

It would not appear that the situation has improved in Newbridge since the special manager was appointed however it can not be assumed that it would be any better if they had been left alone.

If property values recover, many of the issues are greatly reduced. It is this aspiration that encourages the 'kick the can down the road' approach rather than taking immediate action.

Newbridge were making some large commercial type loans with bullet payments, it is fair to say that they had wandered far from the core market of credit unions. Credit unions are going to have a challenging and expensive journey to find where they fit in to the financial services industry in the future.
 
Was this caused by the Central bank being involved. Is the run on deposits the cause of the current crisis? That's a heck of a lot of money to be haemorrhaging.

If the company had gone into liquidation would it have cost less than the 53 million to the Irish taxpayer.


This is the article Bronte [broken link removed]

The board of Newbridge CU issued a statement yesterday indicating that they are considering legal action against the Central Bank [broken link removed]
 
This is the article Bronte [broken link removed]

I see that part of the problem is that the building is overvalued on the balance sheet. But isn't that the same story with Irish banks. That they are not putting a true value on the properties they have in NE? How come that's ok for the banks but not a credit union?

How come Newbridge were giving out loans to property developers. Did this money come from the deposits of the shareholders? Did they make any money on these loans ever? Was this distributed as a dividend to the shareholders?
 
I see that part of the problem is that the building is overvalued on the balance sheet. But isn't that the same story with Irish banks. That they are not putting a true value on the properties they have in NE? How come that's ok for the banks but not a credit union?

How come Newbridge were giving out loans to property developers. Did this money come from the deposits of the shareholders? Did they make any money on these loans ever? Was this distributed as a dividend to the shareholders?

Banks don't really care about negative equity with regards to the value of their assets on their balance sheet. The asset is the mortgage, not the house. Negative equity only comes into play when looking at potential losses.

It would be like BOI saying their headquarters is worth the same today as it was in 2006 and not writing down the value.
 
HI Bronte

The value of buildings for most banks is not material. They could probably write them off and they wouldn't affect the reserves significantly.

The problem with Newbridge is that the building cost €15m which is a very high proportion of their total assets. The nominal value of their loans was €140m, but this seems to have been written down to around €90m.

Brendan
 
Banks don't really care about negative equity with regards to the value of their assets on their balance sheet. The asset is the mortgage, not the house. Negative equity only comes into play when looking at potential losses.

.

Are you sure about this, don't they have to put down the true value of assets, in order to determine if they are liquid or not. I don't see how morgages are assets. If I own my house but it is mortgaged 100% I don't really have an asset. And doesn't the central bank decide how much a bank is worth based on actual assets less liabilities.
 
The problem with Newbridge is that the building cost €15m which is a very high proportion of their total assets.

Isn't the 15 million their only 'physical' asset. Why did all the reports hone in on this aspect. Just because it's now worth about 3 million, that's twopence in relation to the real issues. So far all I'm seeing is smoke and mirrors. I'd like to know what the central bank and the judge based the decision on. Which I would have hoped was cold hard figures. And I don't understand if a solution had to be found, why it took years to do so. Surely the geniuses in the CB have solutions on their fingertips, they've been dealing with the Irish bust for long enough. We know they were incompetent during the boom.
 
Are you sure about this, don't they have to put down the true value of assets, in order to determine if they are liquid or not. I don't see how morgages are assets. If I own my house but it is mortgaged 100% I don't really have an asset. And doesn't the central bank decide how much a bank is worth based on actual assets less liabilities.

A mortgage is an asset to the bank just like any other loan. Just like deposits are liabilities. The book value of the asset on the balance sheet is the mortgage less any provisions or writedowns. If my house was worth €1m and I had an outstanding mortgage of €100k, you wouldn't expect the bank to claim they had a €1m asset on their books. Same principle applies to negative equity.

The case with newbridge and their office is that they weren't writing down the value of their OWN premises.
 
Isn't the 15 million their only 'physical' asset. Why did all the reports hone in on this aspect. Just because it's now worth about 3 million, that's twopence in relation to the real issues. So far all I'm seeing is smoke and mirrors. I'd like to know what the central bank and the judge based the decision on. Which I would have hoped was cold hard figures. And I don't understand if a solution had to be found, why it took years to do so. Surely the geniuses in the CB have solutions on their fingertips, they've been dealing with the Irish bust for long enough. We know they were incompetent during the boom.

Because it meant they were overstating their assets and therefore their solvency. The building didn't cause the crisis. It just meant the credit union were no where near as strong they were claiming. I agree about the CB. This has been going on for years.
 
To be fair to the Central Bank, they will get abuse whatever they do in a situation like this.

At what stage does the Central Bank intervene? Intervene early and they cause a run on the bank. Intervene late and they are accused of doing nothing.

Back in 2010, the Board of Newbridge were still talking about declaring dividends. I don't know if they did or not.


The CB didn't agree with the provisions in the 2010 accounts. They appointed their own independent people to look at them, and their loss estimates were much higher.

The Directors of Newbridge are still saying that there was no need for the CB to intervene.

It is understandable that the CB had no confidence in the directors to resolve the problem.

They thought that the Special Manager might be able to resolve it and keep the CU independent.

When they realised that this was not going to work, they tried to get Naas to solve the problem for them. When Naas pulled out, there was a mini-run on the deposits and so the CB had to get stuck in.

It's a pity that there is not some mechanism other than appointing a very expensive manager to run the CU. If they could appoint a voluntary board to replace the existing board. But that would be a thankless task for the new board.

The other big issue for Newbridge was that they were not part of the ILCU which has a fund to help CUs facing liquidity issues. There was no backstop for Newbridge as it was in CUDA.

Brendan
 
The problem is that the CB seems to always come out afterwards and say we had concerns. They did the same with RSA this week. The only time I have seen them act aggressively and promptly because of concerns was against Quinn Insurance. No wonder he thinks there was a vendetta against him.
 
There is no way that any Credit Union should ever be loaning multi-million euro loans, that is not their purpose.

It seems that there were numerous loans of this type and that the €3.2m loan was not an outlier.

The Board is just deflecting with all this rubbish, they made numerous poor decisions relating to huge loans that must have been authorised outside of their normal lending criteria.
 
Questions;Comments

1. Newbridge was a stand alone entity , so why not liquidate?
(savers were covered up to k100 in any event)
2. Once other Customers in other Credit Unions knew their deposits were safe , there would be no run on deposits.
3. @ worst , one Union fails.
(nearly all Banks have failed)
4. Even if 20 more fail there are still 380.
5. Newbridge fails so we give it to a failed Bank ?
6. Leave each Credit Union alone , like any franchise some will fail .
eg if one Spar shop fails , Spar keeps going.
7. Our proven incompetent Central Bank is taking control ?
oh dear me !
Sunny, the Regulators had previously penalised Quinns , so they did not act agressively when they moved on Quinns, had Regulators kept an eye on Quinns as they probably should have , Quinns might still be going.
I do accept that after Quinn it appears Central Bank have reverted to type in not picking up RSA.

Enlightenment would be appreciated !
 
1. Newbridge was a stand alone entity , so why not liquidate?

In effect, that is what is happening. Their loans and deposits have been transferred to ptsb.

When that has been done, the CU will be put into liquidation and no depositor will have lost any money.

It's likely that ptsb will recover far more from the loans, than a very expensive liquidator would.

Brendan
 
It is not really a liquidation as the entire operation is being transferred from my understanding of it.

Commitments to employees are transferring. Is it a TUPE process? Will PTSB be responsible for redundancy when they realise that they do not need 40-50 staff in Newbridge? I am guessing that all the other creditors and suppliers are being paid. Have PTSB taken over maintenance contracts for IT systems etc? Is there anybody taking a financial hit from the liquidation? (apart from obviously every taxpayer :-()
 
To be fair to the Central Bank, they will get abuse whatever they do in a situation like this.

At what stage does the Central Bank intervene? Intervene early and they cause a run on the bank. Intervene late and they are accused of doing nothing.

Back in 2010, the Board of Newbridge were still talking about declaring dividends. I don't know if they did or not.


The CB didn't agree with the provisions in the 2010 accounts. They appointed their own independent people to look at them, and their loss estimates were much higher.

The Directors of Newbridge are still saying that there was no need for the CB to intervene.

It is understandable that the CB had no confidence in the directors to resolve the problem.

They thought that the Special Manager might be able to resolve it and keep the CU independent.

When they realised that this was not going to work, they tried to get Naas to solve the problem for them. When Naas pulled out, there was a mini-run on the deposits and so the CB had to get stuck in.

It's a pity that there is not some mechanism other than appointing a very expensive manager to run the CU. If they could appoint a voluntary board to replace the existing board. But that would be a thankless task for the new board.

The other big issue for Newbridge was that they were not part of the ILCU which has a fund to help CUs facing liquidity issues. There was no backstop for Newbridge as it was in CUDA.

Brendan

Say no more Brendan. Understood!!!


http://www.independent.ie/irish-news/wanted-firm-to-eavesdrop-for-the-central-bank-29756404.html
 
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