Sunday, March 27, 2011

Who holds Irish bank bonds?

We have made a number of attempts to use Central Bank data to determine the ownership of bonds issued by the Irish banks.  Here are links to some of the posts.

Most of this analysis is at a high level and reaching exact conclusions are difficult.  Getting information to verify these conclusions is even more difficult.  Here is one titbit that ties in with the first claim made above – that the covered banks themselves are substantial holders of bonds in the covered banks.  It comes from Irish Life and Permanent 2009 Annual Report that was released last March.  The bottom of page 209 contains the following:

As at 31 December 2009, debt securities includes €701m (2008: €330m) of securities issued by Anglo Irish Bank and loans and receivables to bank includes loans amounting to €375m (2008: €262m) issued to Anglo Irish Bank.

We don’t have any more recent info but this is only one of the 15 possible inter-relationships between the six covered institutions.  The plural of anecdote is not data and in this case we only have a single source (that is now 15 months redundant) but it does confirm that there is at least some cross-holdings of bonds between the covered institutions.

UPDATE:  From the comments we are directed to the 2010 Interim Report for IL&P (HT yoganmahew).  It can be read here.  Jump to page 97 and we have an update:

As at 30 June 2010, debt securities includes €886m (30 June 2009: €328m, 31 December 2009: €701m) of securities issued by Anglo Irish Bank  and loans and receivables to bank includes loans amounting to €282m (30 June 2009: €nil, 31 December 2009: €375m) issued to Anglo Irish Bank.

Between the end of December 2009 and the end of June 2010, IL&P acquired even more Anglo bonds!


  1. We have a more recent bit of evidence from PTSB - 2010 Interim accounts:
    886 million

    My believe is that these are ELG bonds, but I may just have assumed that.

    We don't know what other Irish bank bond holdings PTSB has, as it appears it only has to report on natinalised bank holdings? A bit of a weakness in the reporting system?

  2. Hi yogan,

    Thanks for that. Nice link. If they are ELB bonds they are unlikely to be included in any burden sharing, but as you say, we don't know this.

    You are right that this is a real weakness in the reporting system. The Central Bank data has become much more useful now that they give a table representing the balance sheets of the 'covered six'. It was by using that, that I estimated there could be c. €15 billion of cross-held bonds but it is real information like that provided here that we need.

    Is there much much of a difference between a nationalised bank (Anglo) and a 92.8% state-owned bank (AIB?) Also, are INBS and EBS not considered nationalised?

  3. "Is there much much of a difference between a nationalised bank (Anglo) and a 92.8% state-owned bank (AIB?) Also, are INBS and EBS not considered nationalised? "
    :D Yep, 7.2%... I would have thought you'd know that, being a sums man and all?

    Seriously, I agree entirely with you, but exposing the cross-ownership would reveal the japanese bank-style pyramid for what it is. So I suppose we have another suspicion to add to our list of reasons that AIB is not fully nationalised. That it is not, though, is undoubtedly complicating haircutting bondholders (whether senior or subordinate). I can't see how they can be haircut while private shareholders retain some ownership.

    There may be some legal legerdemain that the outgoing FMin used to consider INBS and EBS as not related parties, but I don't see how. The outstanding ELG issuance seems to have started in 2010 ( ), and most haven't produced full reports yet. I haven't seen more than slapdash powerpoint presentations from AIB and little better than wishful thinking from the rest. PTSB clearly (is anything clear about this?) hopes to separate itself from the pack by being upfront, so perhaps the best is yet to come...

    It'd almost make you wonder how much of the deposit outflow is the unwind of rehypothecated assets or repo105 type transactions...

    Did you see in the QNA the level of 'other' outflow in the financial account?

  4. We have been using creative interpretations of accounting and legal practices for a lot of the current crisis. I would hope that this is to benefit the State in some way rather than as an attempt to cloud analysis of the situation.

    I did have a look at the BoP data alright. The 'other' outflow of €104 billion in Q4 was colassal alright. This seems to be a flow that has large volatility. However, the annual outturn of €84 billion for 2010 was not that different to the €80 billion recorded in 2009.

    The outflow seems to tie with the €105 billion in non-resident deposits that left Irish banks in the last three months of the year as reported in the Central Bank figures. €50 billion of this was in the non-domestic group (i.e. IFSC). Of the remaining €55 billion, about €32 billion was because of a reduction in non-resident deposits in the "covered six".

    It would be great if the Central Bank's domestic balance sheet data and consolidated bank sheet figures were presented using the same headings. Then we might be able to see how much of this €32 billion was because of third-party withdrawals rather than transfers between domestic and foreign subsidiaries of the banks. I have no idea what kind of assets could be in these flows.