We’re still working our way through the Irish banks’ stress tests results. But there’s already a conundrum in assessing the severity of the tests.
Severity being the essential variable here — a severe test underlines Ireland’s vulnerability to restructuring and makes the case to outside actors that they need to provide backstop funding, and allow (bank) bondholders to be burned, while exposures are removed from Irish banks. We’ve noted this dynamic in the way capital and deleveraging are finely balanced in the tests, too. Read more
BURP, for short.
Oops. Excuse us. Manners. Read more
By this point, we know a few things about how Irish banks are getting emergency liquidity assistance from their national central bank (even though officially, this is all rather hush hush).
The ‘penalty’ rates on this assistance, for instance. (Low, compared to ELA elsewhere.) A possible exit strategy for ELA, too. (And on which, further key details here.) Read more
Eonia went a bit doolally at the end of January.
Many blamed a lack of front-loading in bank liquidity management as they watched Europe’s key overnight lending rate drift above one per cent for the first time since June 2009. Read more
This, from the Irish Independent, is very interesting:
IRISH banks are paying an interest rate of less than 3pc on the €51bn of ‘emergency liquidity assistance’ (ELA) that has been sanctioned for them by the Central Bank of Ireland. Read more
Willem Buiter wants you to familiarise yourself with the ELA.
That’s the Emergency Liquidity Assistance that the eurozone’s national central banks (NCBs) are able to provide their local banks under some legal fuzziness in the eurozone. The acronym has managed to grab a few headlines over in Ireland, but for the most part ELAs remains relatively unknown. Soo too, do the details of them. Read more
The Irish Independent last week drew attention to a much-missed detail in the execution of Ireland’s emergency loan programme.
As it turns out, the Irish central bank has been partly financing the programme’s loans with the printing of its very own euros. Read more
What on earth has been going on in Anglo Irish’s derivatives book?
Irish citizens might want to find out, now that they’re guaranteeing it. Read more
Statement released late on Sunday night, in which Ireland’s (ahem) strongest lender says it will try to raise €2.2bn from existing shareholders, internal capital management and in the markets.
But just in case it should fail (and note there’s a few other Irish lenders that need to raise some cash sharpish) the government and its SWF are standing by ready to make up the shortfall. (emphasis ours). Read more
Another €8bn needed, according to the Central Bank of Ireland to get core Tier One capital up to at least 12 per cent — with the possibility of more to come post the March 2011 stress test.
From the Prudential Capital Assessment Review (PCAR) released on Sunday evening (emphasis ours): Read more
Denial. Anger. Bargaining. Depression. Acceptance:
The intention is and the expectation is, on their [the IMF's] part and personally on my part, that negotiations or discussions will be effective and a loan will be made available and drawn down as necessary… Read more
Ireland’s economic crisis has left one in every 20 mortgages in arrears, according to Central Bank of Ireland data, reports the FT. However, the figure is lower than many economists had predicted. According to Wednesday’s data, 40,472 Irish mortgage borrowers are more than three months behind on their interest payments. Rising unemployment and a squeeze on household budgets saw the number in arrears jump 11% in the third quarter, representing €7.8bn worth of mortgages. Brian Lenihan, the finance minister, said the arrears rates were “below the industry average base loss rate” used by the regulator to assess banks’ capital needs, and “well below” the worst case projected in the banking stress tests.