what interest rate is gov charging to banks for bailout

[8till8]

Does anyone know what rate will the government charge the banks for bailout/support?
I heard someplace on the BBC that the UK government was charging 12% then trying to insist that the banks charge the public 6% to get credit markets rolling again

 

[jhegarty]

There isn't an interest rate because the Irish government has not given the banks any money.

It's basically just gone guarantor on all the loans the bank has, it won't cost anything unless a bank goes bust.

The UK government on the other hand has handed over piles of cash.

 

[z109]

Something of the order of €500 million a year to guarantee €440 billion euro of debt.

That's 0.12%, if my maths is correct.

Still, it is only an insurance policy and it must be risk-weighted, mustn't it? It's not like any of the banks are going to go bust and need the government to pay their debts. Sure what do those international investors know, charging 4 and 6% (and more) to insure Irish bank debt? They must all be begrudgers!

In the UK, the situation is a little bit different. The UK government has recapitalised the banks with preference shares and common equity. They are looking at a 12% return on it if it works out, but the difference is, this is money that the banks are going to use to pay off their losses and shore up their working capital. This means the banks will be able to borrow at better rates on the international markets, so the money the UK banks use to lend will be borrowed at less than 6% and lent out at 6%. (Say at 3% plus an insurance cost of 1.5% leaving a margin of 1.5% - not the real prices, but to give you an example). That's the idea of a well-capitalised bank, anyway.

 

[JohnBoy]

There isn't an interest rate because the Irish government has not given the banks any money.

It's basically just gone guarantor on all the loans the bank has, it won't cost anything unless a bank goes bust.

The UK government on the other hand has handed over piles of cash.

On the contrary, the guarantee is already costing the Irish taxpayer. The massive risk that is being borne by the taxpayer has resulted in Irish soverign debt becoming more expensive to issue.

 

[Guest124]

We are once again being called a banana Republic - our reputation every day is sinking further. Everybody should have an interest in this.

 

[leahcim]

We are once again being called a banana Republic

In one of the articles in Saturdays Independent they said that there is a joke doing the rounds in the financial district of London along the lines of.

Q. What is the difference between Iceland and Ireland?
A. One letter and six months.

Its amazing how quickly we are loosing our reputation as a successful economy.