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Further Worrying Data Regarding Irish Banking Sector

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Your comments please!

Irish house prices are down about 7% in the last year.

Now if you bought a property about year ago with no deposit, that costs 8 times your income (ie you have no hope of ever repaying the loan), and the price of the property has dropped 7%, there's a big incentive to walk away from the debt.

I expect the Irish crash will make the US sub-prime disaster look like a tea party.

Edited by BandWagon

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Irish house prices are down about 7% in the last year.

Now if you bought a property about year ago with no deposit, that costs 8 times your income (ie you have no hope of ever repaying the loan), and the price of the property has dropped 7%, there's a big incentive to walk away from the debt.

I expect the Irish crash will make the US sub-prime disaster look like a tea party.

Unless the ECB is the pot of gold at the end of the rainbow??!?!? :lol:

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http://www.sbpost.ie/post/pages/p/story.as...0869-qqqx=1.asp

Northern Rock losses added to ISTC downfall

02 March 2008 By Kathleen Barrington

International Securities and Trading Corporation (ISTC), the financial institution which has a deficit of €655million, invested in bonds issued by Northern Rock, the British bank that only avoided collapse when it was nationalised by the British government last month.

ISTC, headed by former Anglo Irish banker Tiarnan O’Mahony, also invested in securities issued by IKB, the German bank rescued by the German taxpayer, according to documents prepared by examiner John McStay and seen by The Sunday Business Post.

The company’s exposure to investments in these troubled financial institutions was among the reasons it got into serious financial difficulties.

ISTC’s €655 million deficit represents a major fall from grace for the company, which only last year was estimated to be worth as much as €650 million based on the price at which its shares traded on an informal grey market. It had been expected that ISTC would float on the stockmarket this year.

McStay is now proposing to sell ISTC to British investment bank Collins Stewart for €5 million. This would be subject to obtaining the approval of ISTC’s creditors for a scheme of arrangement. The creditors are meeting to discuss the proposal on Tuesday.

Under the proposed scheme of arrangement, the unsecured creditors will get back a maximum of 12 cents in the euro, while the subordinated creditors will get nothing at all.

The unsecured creditors list reads like an international Who’s Who of the financial services world. They range from ABN Amro to West LB.

The only Irish banking creditors are AIB International Financial Services and Bank of Ireland Global Markets. Ironically, the unsecured creditors also include credit rating agencies Fitch and Moody.

Others owed money include law firm Matheson Ormsby Prentice, the Dublin and Luxembourg offices of Price Waterhouse Coopers and public relations company Drury Communications.

The subordinated creditors include Friends First Managed Pension Funds, Nationwide Life Insurance Company, CUNA Mutual, CUMIS Insurance Society, the Guardian Life Insurance Company of America and Goodbody Stockbrokers.

Oops

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I cannot believe the exposure this bank has to the property sector (UK & Ireland) and the commercial property sectors!!! Your comments please!

http://www.thebusiness.co.uk/news-and-****...f-ireland.thtml

Is this the lot that are providing the Post Office 100% deals that Vince Cable and C****** have been banging on about?

EDIT. Yes. It is. Another state sponsored attempt to ramp property and push dodgy credit in trouble!

http://www.postoffice.co.uk/portal/po/jump...ediaId=58200695

Post Office® mortgages are provided by Bristol & West Mortgages.

<snip>

Post Office Ltd is an an appointed representative of Bank of Ireland. Bristol & West Mortgages is a trading name of the Governor and Company of the Bank of Ireland. Bank of Ireland is authorised by the Irish Financial Regulator and the Financial Services Authority; regulated by the Financial Services Authority for the conduct of UK business.

Edited by Timm

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While mortgage lending has slowed since the middle of last year, lending to builders and developers continues to grow rapidly and now stands at almost €100 billion, an increase of €20 billion on last October.

To put these numbers in perspective, €20 billion is twice the market value of Bank of Ireland shares; while €100 billion is the approximate value of all public deposits with retail banks. Effectively, the Irish banking system has taken all its shareholders' equity, with a substantial chunk of its depositors' cash on top, and handed it over to builders and property speculators.

In fact, if you leave out the quarter of mortgages that are for buy-to-let property, itself a small time form of property speculation, lending to developers is now €20 billion more than lending to people to buy their own homes. >>>>

Just How Sound is the Irish Banking System?

Morgan Kelly, Professor of Economics, University College Dublin.

http://www.ucd.ie/economics/staff/mkelly/papers/solvency.pdf [adobe acrobat required]

Irish property developers now owe more than €100 billion to the country's banks, new figures show.

Private-sector credit figures released by the Irish Central Bank yesterday showed that by the end of last year, the total amount that banks had lent for real estate dealing and property development had hit €105.8 billion.

In the course of last year, bank lending to these two property-based sectors grew by €22.5 billion, or 27 per cent. This equated to 80 per cent of the money lent by the banks to business last year.

In total the loans advanced by the banks to business or the "productive sectors" increased by €28.2 billion.

The news came as international credit watchdog Fitch Ratings warned that the amount of money Irish banks have tied up in property leaves them vulnerable if there is a severe downturn in the market. >>>>

Property developers owe over €100bn to banks

Barry O'Halloran and Paul Tansey

http://www.ireland.com/newspaper/frontpage...3619239456.html

Banks are closing in on property developers who are in financial difficulty because they cannot sell new homes in the current slowdown.

In a further indication of economic gloom, industry sources said banks are renegotiating credit terms with well-known construction firms which are struggling to repay huge loans accumulated during the housing boom.

Short-term construction loans are being converted to mortgages, effectively forcing developers to "buy back" their own properties which they are then renting out.

Banks are also sending in their own "troubleshooters" to effectively take over the running of some constructions firms which are under pressure. >>>>>

Developers struggle to repay loans to banks ...

http://www.independent.ie/national-news/de...ks-1303667.html

Wealth warning: Do not have your life savings in Irish banks.

On top of this Irish banks also have exposure to the UK property market through specialist lenders and BTL as well as property funds backing UK commercial property.

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Irish house prices are down about 7% in the last year.

Now if you bought a property about year ago with no deposit, that costs 8 times your income (ie you have no hope of ever repaying the loan), and the price of the property has dropped 7%, there's a big incentive to walk away from the debt.

I expect the Irish crash will make the US sub-prime disaster look like a tea party.

That 7% drop is based on random selections by Permanent TSBs marketing department, it is not based on actual selling prices which according to estate agents I've spoken to are actually 15% down over peak in 2006, and the volume of transactions has also fallen substantially.

I agree with you both Ireland and Spain are getting hammered on all sides, including exports due to the fall in dollar and sterling vs the Euro, this is going to be a rough recession.

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On Friday, the Bank of Ireland introduced a 100 per cent 35-year mortgage for first-time buyers - the littlest of the little guys. This move follows the First Active 100 per cent mortgage that was announced two weeks ago.

The bank says that this is necessary, and that most little guys will be able to service the higher borrowings. It has put some fairly cosmetic restrictions on who can qualify, but in reality it is throwing money at anyone who comes through the door.

Rather than making houses more affordable, this type of product simply pushes the price of Irish houses up further, forcing the banks to lend even more cash against the same asset this time next year. Friday’s central bank figures showed more than �2 billion was extended in mortgage credit in June, the highest ever monthly total.

Let’s examine how the credit system works, how loose credit reinforces the upward pressure on house prices and how the banks ultimately become the slaves, rather than the masters, of the housing monster. It might also be helpful to entertain what could happen and who might pick up the tab when things go pear shaped.

The key to the system is collateral, and this is also where the systemic fault lies. When it comes to collateral, the Irish banks have always had faith in the housing market. In recent years, this faith has intensified to blind faith, and now, with a 100 per cent mortgage culture, we are observing new levels of Moonie-style devotion.

Moonie economics is quite straightforward and it works as follows. Take an average person, doing what thousands of Irish people have done in the past few years - buying an investment property.

The latest figures suggests that as much as 40 per cent of houses sold in Ireland in the past 12 months were either second homes or investment properties, so this is a fairly hefty chunk of the market, and by extension, of the banking business in Ireland.

So in this example, a house worth €400,000 is used as collateral to borrow €370,000 to buy another apartment for investment. The extra €370,000 goes into the system. The golden rule of monetary economics is that the more money in the system, the greater the upward price pressures on all other things.

Thus, the extra cash sloshing around in the system puts upward price pressure on houses, because there is too much money chasing too few houses.

This makes the original collateral now increase in 'value’ to €400,000. The bank extends another loan on the same collateral, failing to distinguish the chicken from the egg. This is the blurred hazy world of Moonie economics.

It is a state of mind characterised by financial back-slapping and corporate high-fiving, where each new loan begets another and the banks and the borrowers waltz blindly up a financial cul-de-sac.

Back in the real world, the only fundamental reason for house prices to rise is if the income from rent is rising. This is not the case in Ireland

<snip>

It was interesting last year to hear one of our most senior bankers musing aloud at a conference about the need for Irish banks to remain under Irish management. He made the distinction between ownership and management - which struck me as highly instructive.

He went on to explain why. He suggested that in the event of a property crash we would need a national plan to prevent a credit crunch. It would be the banking equivalent of the countrywide reaction to foot-and-mouth, where everyone would pull together.

In these circumstances, it would be critical that the government could sit down with the country’s main bankers and cut a deal. In the past, countries like New Zealand that allowed its banking system to be taken over by foreigners found that in its property crash of the early 1990s, the foreign owners simply cut lending limits, which had the effect of exacerbating the original downturn. >>>>

How secure will you be when the credit runs out?

August 3rd, 2005

http://www.davidmcwilliams.ie/2005/08/03/h...credit-runs-out

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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