FT: AIB, BoI, EBS and PTSB Downgraded to Junk

[Lightning]

Moody’s cuts Irish bank ratings to junk status

http://www.ft.com/cms/s/0/66fd4684-35c8-11e0-b67c-00144feabdc0.html?ftcamp=rss#axzz1DgKethOw

http://www.breakingnews.ie/business/moodys-cuts-ratings-for-irish-banks-to-junk-status-493122.html

This follows similar action by Standard & Poor’s last week.

Moody’s said recent announcements “call into question the government’s willingness to provide additional support to the banks beyond that which has already been provided to date, and reflect the increasing risk of some type of burden-sharing with senior creditors.”

 

[Lightning]

This cannot end well ... there is now €191.1bn in emergency liquidity in the Irish banks ...

http://namawinelake.wordpress.com/2...use-another-ruse-to-replace-fleeing-deposits/

Overall therefore it seems that Irish banks’ reliance on ECB, CBI and self-issued debt has increased to €191.1bn at the end of January 2011 compared to €183.1bn at the end of December, 2010. Here are the numbers (they may be updated if the CBI formally update their website later today – the second Friday of the month is supposed to be the day when Table A2 gets updated)

 

[kdoc]

Below is from an article on the same issue in today's Irish Times.

"Moody’s also cut its ratings on the senior debt of KBC Ireland, which is owned by Belgium’s KBC, again citing “reducing support” for the Irish banking system. The new Baa3 rating (down from Baa2) continues to incorporate a high level of support from KBC’s parent, Moody’s said."

 

[Knuttell]

This cannot end well ... there is now €191.1bn in emergency liquidity in the Irish banks ...

Good money after bad...into a black hole.... never to be seen again,someone is gonna have to call stop to this madness.

 

[Lightning]

Good money after bad...into a black hole.... never to be seen again,someone is gonna have to call stop to this madness.

Agreed, the more I read about this the more I agree with Gurdgiev, who said this is now likely to end in a chaotic default rather than planned debt restructuring.

 

[camlin90]

Agreed, the more I read about this the more I agree with Gurdgiev, who said this is now likely to end in a chaotic default rather than planned debt restructuring.

You think the Germans will allow a sovereign default in their currency? Would be interesting to see alright

 

[Knuttell]

You think the Germans will allow a sovereign default in their currency?

We have a population roughly the same size as Birmingham,the amounts are simply staggering...really sincerely staggering,Its not a question of if its more a question of when...the sooner the better,

 

[Bigmc]

the more i read what you informed people are saying i totally agree ''BUT'' this talk is scaring the hell out of me. where will this all end?

 

[Jim2007]

In fact it would appear that emergency liquidity actually dropped by €12b last month, at least according to Barclays.

Jim

 

[monagt]

Shane Ross says we gonna default in todays Indo, others say the same, but can anyone tell me exactly what it means to the ordinary person?

So we look for more money, IMF 2 but we cannot pay IMF1 so what happens?

No money available in banks or ATMs? (a barter society in modern Europe?)
I can't access my deposits?
We drop out of EURO with PUNTs reissued at 2 (or 3) per EURO?

WHAT??????????????Happens????????

Can I assume it ONLY affects Bondholders and not me??

 

[MysticX]

Some people will probably outrightly panic but my own thoughts on this are:
-The rating was applied in the context of the senior bondholders getting burnt, for normal depositers there's no direct implications? They're on lifesupport from the EU / IMF bailout fund and a rating downgrade is not going to cut that off since they can't get funding from the markets anyways.

-Rating is based on speculation, wait to see who gets into government before deciding whether it's going to have an impact. As far as I know the only party outrightly signaling that they'll burn the bondholders is SF and they're not doing well overall in gathering support. FG is doing well and have a clear lead over Labour. Both parties indicate a more open renegotiation of the bailout as opposed to SF uncompromising stance on the bondholders. Likely will have some form of FG - Labour government and a less likely possibility of a FG - Independent government (given surge Independent support and FG's obvious stance that they'd prefer independents over Labour)

-I don't think the EU will allow our banking system to collapse given the theoratical exposure of e.g. German and French banks to Irish banks. So the EU if not for us than for their own interests will step in even if we prove unable to do so ourselves.... hardly surprising since NAMA both saved and wrecked our banks... got rid of a lot of toxic assets but adds a whole new level to "holes" in balance sheets.

 

[camlin90]

-I don't think the EU will allow our banking system to collapse given the theoratical exposure of e.g. German and French banks to Irish banks. So the EU if not for us than for their own interests will step in even if we prove unable to do so ourselves.... hardly surprising since NAMA both saved and wrecked our banks... got rid of a lot of toxic assets but adds a whole new level to "holes" in balance sheets.

Agreed. What do you think will happen in Germany if they switch on their TV and see little old ladies begging in the street because they lost all their deposits in the EXACT SAME CURRENCY as Dieter has in his pocket?
When they hear that German banks lent to these banks?

There may well be a debt restructure, but banking collapse ain't gonna happen unless we're turfed out of the EU (which in itself would make Dieter pretty hot under the collar but that's another story...) But let's not spoil the wet dreams of those who insist on posting about inter-bank bond ratings on a message board that has nothing whatsoever to do with inter-bank bonds.

 

[monagt]

"But let's not spoil the wet dreams of those who insist on posting about inter-bank bond ratings on a message board that has nothing whatsoever to do with inter-bank bonds."

Everything is connected - if I had taken action to protect my pensions and investments when I saw Northern Rock investors going into panic, I would be a less poorer man today.

We were warned about sub prime years ago, we were warned about the inverse yield on the bonds, we were warned by Morgan Kelly (2006).............................................

Its all about Lemmings

 

[Lightning]

In fact it would appear that emergency liquidity actually dropped by €12b last month, at least according to Barclays.

Jim

You cannot look at one of the elements in isolation.

There are 3 elements to emergency liquidity
1) Emergency liquidity from the Central bank of Ireland.
2) Emergency liquidity from the ECB.
3) Self insurance.

Full details here:
http://namawinelake.wordpress.com/2...use-another-ruse-to-replace-fleeing-deposits/

The sum total of all 3 elements has increased month on month and is now 191,000,000,000 EUR. A telephone number.

 

[NAMAwinelake]

In fact it would appear that emergency liquidity actually dropped by €12b last month, at least according to [Independent article - see Jim's post].

Jim

Hi Jim,

The Independent article you attach is from Friday morning before the Central Bank of Ireland issued its data for January 2011.

The nature of the €14bn of self-issuance (that is, issued by the bank to itself) is not entirely clear at present. As far as I can tell at this stage, the self-issuance is a technical device which substitutes a sterling-backed security which is not repoable at the ECB with a euro-denominated security which is. The self-issuance seems to have taken place on 26th/27th January 2011 and at this stage, it is unclear if these Fixed Rate Notes were in play on 28th January, 2011 which was the cut-off for the January, 2011 data produced by the CBI.

So at this stage, the report from the CBI says that there was €51bn of "other assets" at the end of January, 2011 most of which is likely to be ELA. In addition there was €126bn of lending by the ECB to "Irish" banks (all financial institutions in the State including those that don't service the domestic economy). We do not yet know what the total amount of lending of the ECB to the 20 domestic Irish financial institutions (NAMA banks, ILP, credit union, post office, "foreign" subsidiaries like KBC, NIB, Rabo - this was €94.6bn at the end of December 2010) and of course we never get data from the CBI on the six State-guaranteed financial institutions (AIB, Anglo, BoI, EBS, ILP, INBS).

The entry on NAMAwinelake referred to by Ciaran above, has been updated to reflect the uncertainty of the nature of the self-issuance and its issuance timing in the context of the CBI cut-off date. I am veering towards believing that lending by the CBI and ECB in fact may have dropped by €6bn from €183bn to €177bn in January, though because there is no split of lending between domestic and other banks in the State, I am not sure there is any call for complaceny or believing the liquidity crisis is at an end.

I am veering towards believing the self-issuance will not impact upon the ECB/CBI liquidity numbers because I believe at this stage that the €14bn was simply moving sterling-backed security which was securing €14bn of ELA at the CBI with €14bn of euro-backed security which will secure lending from the ECB. We should find out when the February 2011 data is released by the CBI mid-March 2011.

 

[Lightning]

Welcome to Askaboutmoney Namawinelake. Thanks for your detailed explanation.

Let's hope the February 2011 data from the CBI does indicate a reversal of the liquidity crisis. Somehow, I doubt it.