Further reports today indicate that an average of €76k was being withdrawn every day from Newbridge CU since 27th July.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.
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?
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.
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The problem with Newbridge is that the building cost €15m which is a very high proportion of their total assets.
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.
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.
Enlighten away; http://www.bloomberg.com/news/2013-...ays-expressed-concern-over-rsa-in-august.htmlI 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?
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
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