Scotland is making a move for independence from the UK as a sovereign nation. Such an event is bound to be rife with political motivations and ramifications that I'm no where near qualified to gauge or judge. Yet, there is one thing that I can comment on with conviction, and that is the risks that abound in the banking system. You see, with so many political motivations running in several directions, the truth (or even a facsimile of it) will be hard to come by in such a situation, but I believe I can ferret out a nugget or two. Here are a few snippets from an article ran on CNBCcom today: Scotland Independence Could Lead to Cyprus-Style Banking Crisis

An independent Scotland is at risk of a Cyprus-style banking crisis, as its banking sector would be "exceptionally large" compared to the size of its economy, a U.K. government report has said.

"An independent Scotland would have an exceptionally large banking sector compared to the size of its economy - with banking assets of more than 1250 percent of Scottish [gross domestic product] - making it more vulnerable to financial shocks and the volatility of the sector," the Treasury report said on Monday.

The report pointed out Scotland's banking exposure would dwarf that of Iceland and Cyprus, two countries that faced severe banking collapses in recent years. Iceland's banks, for example, had assets equivalent to 880 per cent of GDP, while Cyprus, which faced a banking crisis in March, had total banking assets of around 700 per cent of GDP.

...for Scotland if its banks needed bailing out, posing significant risks to Scottish taxpayers, the report claimed.

The report as cited by the article then goes on to make more direct comparisons to Cyprus, not unlike I did two months ago, but with Ireland (see As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come).

"At the end of September 2012, the two largest banks – the Cyprus Popular Bank and Bank of Cyprus – had assets in the region of 210 per cent and 175 per cent of Cyprus's GDP respectively."

"It is worth noting that, if Scotland became independent, its banking sector would be similarly concentrated (with two large players, Bank of Scotland and Royal Bank of Scotland and a number of smaller firms), and that an independent Scotland's domestic banking sector would be likely to be significantly larger than that of Cyprus (assuming no change to firms' domicile arrangements)."

While there's not a single doubt in my mind that this so-called research paper has distinct political ulterior motives at it heart, a fact is still a fact nonetheless. RBS is still a problem in terms of systemic risk. On Thursday, 11 April 2013 I penned, I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets! wherein I clearly illustrated that RBS is materially understating its liabilities AND even went so far as to include links to the SEC and the UK banking regulator so that US/UK taxpayers and investors can notify our erstwhile regulator(s) to the potential of financial shenanigans. The root of the problem is that RBS has materially under-reported its liabilities (in my oh so humble opinion.) Those that stress tested RBS (the same erstwhile professionals that allowed the Irish banks to pass their stress tests 3 months before they started collapsing) apparently overlooked humongous swaths of liabilities. The charge documents referred to in the aforelinked article are definitively not apparent in the recent bank stress testing’ conducted by the European Banking Authority, at least not in the summary results that the EBA have made available. For those who are still skeptical, I beg thee reference the RBS Stress Test download. I presented ample evidence directly in my previous articles, to wit:

What happened behind closed doors?

Ulster Bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland. U.S. investors would have had to rely on the contents of The Royal Bank of Scotland's 2008 Annual Accounts which apparently (in my opinion) concealed the existence of the CRO registered charges to the Central Bank of Ireland.

Ulster Bank RBS charge doc 2 Page 1

I even included a lawsuit filed in which investors apparently go the message, they just didn't have access to the analyst that I proffered...

rbs litigation

Anyone interested in RBS will be well served to review "I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!" thoroughly! 

To give the prospective Scottish taxpayer a clue as to what surprises may lurk beneath, I post this tidbit from the afore-linked article...

The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS.

I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!

Following up on the post from this morning,"Preparing Resources To Shop For Distress…", I'm releasing the followup t our Distressed Asset Sale Initiative for pro and institutional subscribers (click here to subscribe or upgrade) -  Distressed Sales From EU Sovereigns and Banks V.2.0.

As excerpted:

Update Note - European Bank Deleveraging

In our last report on European Bank Deleveraging in May last year, we had highlighted that the European Banks would be forced to shrink their balance sheet by way of asset-sale, reduction in lending and scale-back of their retail business. We had also mentioned why banks would be required to deleverage, and to what extent European banks have planned their asset sale categorized by:

(1)      Banking Activities (Investment banking, Corporate, Retail)

(2)      Asset Category (Banking, Insurance, Asset Management, etc), and

(3)      Location (Asia, Latin America, EU and North America)

The Global Financial Stability Report (GFSR) released by IMF (International Monetary Fund) in April 2012 had estimated that EU banks (a sample of 58 banks in IMF GFSR April 2012) would reduce assets by $2.6 trillion (under the base policies scenario) over the period from Q3 2011 to Q4 2013 (10 quarter estimate).

Actual data for 5 quarters ending Q2 2012 shows that a number of euro area banks have taken steps in the direction to deleverage although the pace of effort has somewhat slowed down after Q1 2012 due to ECB’s efforts to relieve funding pressure on banks. The assets of the sample banks fell by around $600 million from Q2 2011 to Q2 2012 (source: IMF’s GFSR October 2012 report). The period Q4 2011 accounted for a major share of the above decline.

Which banks actively initiated deleveraging?         

A number of large European banks decreased their exposure during Q4 2011 and Q1 2012. The decline was notably the highest in the peripheral euro area, around 12% in Q4 2011 and Q1 2012 combined, compared to the decline in other regions, namely other advanced regions in Europe, emerging Europe, emerging Asia, Latin America and other parts of the world. The chart below shows the percentage decline in exposure of European banks by regions in Q4 2011 and Q1 2012.

As the equity markets are benefiting from the forced zero rates of central banks world-wide, I remain cognizant that the core problems of the crash five years ago have went absolutely nowhere. As I have demonstrated to all that I am no perma-bear in calling the contrarian pair trade of the decade (short Apple: Deconstructing The Most Accurate Apple Analysis Ever- long Google: Reggie Middleton Goes For 2nd Win On CNBC Stock Challenge & Causes TROUBLE!!!). I'm not pessimistic, I'm realistic! My recent rant on the Irish banks included the post that pretty much laid out the evidence of a potential Irish bank collapse -  "If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... I followed this up with a stern warning to Irishmen - "As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come". Who do you believe, me or your Irish government? Let me give the skeptical readers a little assistance...

Just a month and a half ago, we've had Irish officials proclaiming...

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Hey, ninety days or so later... guess what?

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These banks are likely to need a recap, a recap that will likely get a sloppy and ugly. I visited the UAE this time last year and noticed that would be an excellent source of capital for a shopping spree based upon the EU Bank deleveraging. It prompted me to detail my thoughts to subscribers for I was preparing to raise capital. 

Distressed Sales from European Sovereign Nations and Banks Page 01Distressed Sales from European Sovereign Nations and Banks Page 02Distressed Sales from European Sovereign Nations and Banks Page 03Distressed Sales from European Sovereign Nations and Banks Page 04Distressed Sales from European Sovereign Nations and Banks Page 05

This is just a portion of the report released (subscribers can find the full report in the Global Macro Section of the downloads area). One page in particular was particularly prescient, page 9... Remember what happened two months ago before you read this and be sure to notice the dates on the embedded documents... Bank deleveraging is REAL!!!

• Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
• Mainstream Media Says Cyprus Salvaged By…
• Economic Depression Is The New Success

Distressed Sales from European Sovereign Nations and Banks Page 09

I have updated versions of this distressed asset acquisistion document which I will post for institutional subscribers later on in the day. Any institutions or high net worth individuals interested in my plans should feel free to contact me. 

Who Do Your Believe Reggie Middleton or Central Bank of Ireland

I have spent two week warning Ireland and the world about the Irish banking system, with a summation available in the aptly titled post, If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...Yesterday, the Irish media STARTS to come clean, although they are still not as explicit as the Irish Sun article which put my researched facts front and center...

 Click to enlarge...

SUN-SUN-PAGES-NEWS-MONEY-6066 copy copySUN-SUN-PAGES-NEWS-MONEY-6066 copy copy

From the Irish Times

Yesterday, at the press briefing to discuss the Central Bank’s 2012 annual report, Honohan matter-of-factly told us that the Irish banks would need more funding before 2019 due to changes in capital reporting requirements imposed by the new Basel III accord.

The transition period for these changes to be implemented by banks in the EU is January 2019.

There were more than a few eyebrows raised at this frank admission.

Honohan’s statement is in stark contrast to those of the various Irish-owned banks –AIB, Bank of Ireland and Permanent TSB. In public at least, the banks have maintained that they are adequately capitalised and that they do not envisage having to raise additional capital to bolster their ratios.

From the Independent:

Mr Honohan said the Central Bank was still working towards carrying out stress tests on the banks at the latter part of the year. By 2019, the banks will need more capital under international regulations.

"In an ideal situation, that capital will come from private investors, as is happening all over Europe, all over the world, where bank capital is being pushed up through the market system," he said.

From private investors? Yeah, right! As said private investors are hoodwinked, just like those poor muppets in the US - reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland

In the 2008 Annual Accounts (Irish version of Annual Report) of Bank of Ireland (see attached, page 178) it states the bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland over the Banks ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an Eligible Securities schedule.’

Fact: The BoI 2008 Irish accounts (~annual report) refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities.’

Of paramount importance for US investors and regulators, there is an absolute omission of this information in the Bank of Ireland SEC 20F returns for 2008.

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From the Irish Examiner:

However, banks would need capital over the medium term to comply with Basel III capital requirements by 2019. It is hoped the banks will be able to raise this from private investors, he added. He hoped Ireland would not need the help of the ECB’s outright monetary transaction programme when it exits the bailout programme. However, if it met certain criteria, then it would be able to use the facility. 

But private investors have done so well in the Irish banks, particularly considering their pristine disclosure policies, right??? Again, reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland 2008 Irish Annual Accounts refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities,’ but no mention of ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an EligibleSecurities schedule.’

There is also no mention of any information related to this floating charge in the Bank of Ireland SEC 20F returns for 2008.

It appears that this floating charge was not disclosed at the time of the stress testing of the bank conducted by the European Banking Authority.

It is possible that I may have overlooked such, and because of that possibility I have made the SEC 20F available for all who want to check over my work. Here is the UBI 2008 accounts and here is the SEC 20f-2008 for the Bank of Ireland.

Now of course, to constitute fraud there has to be a loss on the part of the one being defrauded or a gain on the part of the one being defrauded - at least according to Wikipedia. Otherwise, it would be a hoax. That's the Irish banking system, and not this bank in particular. So...

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If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message. 

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

•  EU Bank Capital Confusion, Part 3 - It's BIG! (professional and institutional subscribers only)
•  Ulster Bank/RBS Supporting Charge Documents
•  EU Bank Capital Confusion, Part 2 - Malarkey
•  EU Bank Capital Confusion, Potential Failure

I was recently alerted to an article in Business Insider regarding a Twitter battle between Nasim Taleb and fellow academics, analysts and financial journalists. What caught my attention was:

1. Taleb called out the academics for charlatans, which I felt was quite bold.
2. Two, I agree with him
3. One of the academics, who presided over the US bubble at the Fed AND the Irish banking bubble at the Central Bank of Ireland is also the guy whose proclamations are the antithesis of my recent Irish banking research, see 
   1. As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come
   2. What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?
   3. If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...

I attempted to join the conversation, albeit a little late. See below...

Hey @nntaleb @jsphctrl @dsquareddigest @jsphctrl @lorcanrk @dsquareddigest let's chat, starting with boombustblog.com/blog/item/9067… real talk not BS

— ReggieMiddleton (@ReggieMiddleton) April 25, 2013

@nntaleb @jsphctrl @dsquareddigest @jsphctrl @lorcanrk @dsquareddigest challenge mighty PhDs w/lowly BA, my credentials boombustblog.com/reggie-in-the-…

— ReggieMiddleton (@ReggieMiddleton) April 25, 2013

@jsphctrl @dsquareddigest @jsphctrl @lorcanrk @dsquareddigest So, I join tag team match on @nntaleb side let's dance boombustblog.com/reggie-in-the-…

— ReggieMiddleton (@ReggieMiddleton) April 25, 2013

As you can see, nobody wanted to chat with me, so the following day (this morning), I decided to force the issue with a barage of facts. You know how facts tend to get in the way of a good Twitter flame war, don't you?

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc renown for Irish econ @whelankarl says Ireland rebound? Facts disagree boombustblog.com/blog/item/9046…

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc @whelankarl I ask MSM 2 FORCE TRACK RECORDS 2 FOREFRONT! not PhD but boombustblog.com/reggie-in-the-…

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

If media pundits and government/Central Bank consultants were gauged (and paid) based upon thier track records and successes, methinks this would be a better world to live in.

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc I respectfully challenge @whelankarl to address Irish banks reporting boombustblog.com/blog/item/9063…

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@mandycnbc @sullycnbc @cnbc New Theme! Banks BURN as parlor tricks turn to fraud? ie. sloppy reporting, hide/sausage boombustblog.com/blog/item/9066…?

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@whelankarl @nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc really wanted to debate academics vs reality so I guess I have to force the topic

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc all due respect @whelankarl track record=bursting bubbles everywhere! Fed pre .com, banks!

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc Re: @whelankarl it could be bad luck, but it appears academic leaning collides with prudence

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@jsphctrl @mandycnbc @sullycnbc @cnbc debate @nntaleb & @whelankarl shows Taleb with an unassailable point, academics not=to being right!

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc If results carried more weight than degrees then @whelankarl claim of Ireland collapse market

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc @whelankarlI send these series of tweets with the utmost respect & don't intend to be rude

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc I respectfully challenge @whelankarl to address Irish banks reporting boombustblog.com/blog/item/9063…

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc since I was respectful+evidentiary, we assume silence=acquiescence on part of @whelankarl, ok

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

Well, I haven't heard back from the man thus far, so....

@nntaleb @jsphctrl @dsquareddigest @jsphctrl @lorcanrk @dsquareddigest nothing scream credentials better than results boombustblog.com/reggie-in-the-…

— ReggieMiddleton (@ReggieMiddleton) April 25, 2013

@nntaleb @jsphctrl @mandycnbc @sullycnbc @cnbc 1 more thing, respectfully challenge @whelankarl to address this video youtube.com/watch?v=7gwCdg…

— ReggieMiddleton (@ReggieMiddleton) April 26, 2013

Last week I shocked many with several revelations in the post What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors? Well, there's more to the Bank of Ireland story than evades the eye.

BoI Boucher1-1

His statement appears to ignore the existence of the charges that were clearly delineated and illustrated in my previous post - What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?
Below is a sworn copy of the affidavit for Richie Boucher, the CEO of Bank of Ireland. This relates to reducing the Banks Regulatory capital by almost 4 Billion Euro which was shared amongst its preferential shareholders – at the expense of the common shareholders.

You will see he states that the bank has assets of almost 155 Billion Euro. The bank reported losses of 2.1 Billion euro last week.

BoI Boucher2

Although he states that the bank has assets of almost 155 Billion Euro, it recently reported losses of 2.1 Billion euro, which of course materially reduces capital. This loss had to be visible from within the bank for Citibank (amongst other analysts) had bearish views on the company. I doubt Citi knew something that the bank management didn't!

This bid to raise capital for dividend distribution in the face of apparent and expected losses (Citibank had a bearish outlook on the bank’s operations, as did the CEO himself) appears to fly in the face of prudent operation designed to keep the bank as an ongoing concern. Further investigation supports reason to question this action.

Citi analyst on BoI-144

The institutional bank investor Wilbur Ross bought preferred shares of BoI, and benefitted from a windfall payout as BoI successfully petitioned to reduce its regulatory share capital amongst current and impending losses that it was confident it would be taking.

 Wibur ross butphoto-145

Wilbur Ross, et. al. made off like bandits, with the Bank of Ireland common people shareholders left holding the bag with millions in losses. We calculate Mr. Ross pocketed over $600 million dollars for this 5 month or so trade - and with relatively very little out of pocket expense or risk. He still owns the preference shares, after all - and still got the cash as well! Touche' mister Ross, Touche'. As for the common shareholders nursing that 2.1 billion euro (roughly 4.5B dollar) losse, I say the same to you that the big US bankers said to their clients during the 2008 debacle - Muppets! See Goldman's take on Muppetology to get a firmer grasp on what I mean and how the US banks consider nearly all taxpayers muppets.

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I calculate the Bank of Ireland taking even more aggressive losses in the future. Why? Failure to mark to market means Irish banks are carrying loans whose true saleable value are roughly 27% of book value. This literally means insolvency for many – and that’s without the recognition of the various charge issues illustrated within. I have documentation to back this up as well and will delve into it in a future post. In the meantime, review my previous posts on the topic or subscribe to download some of the speficic charge documents contained in the posts herein.

 Other hard hitting pieces on the resurgent EU banking crisis

• Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
• Mainstream Media Says Cyprus Salvaged By…
• Economic Depression Is The New Success
• The Canadian Government Offers "Bail-In"…
• EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation
• Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
• As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
• Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
• Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
• Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
• Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
• The Next Leg Of That Counterparty Led European Bank Run Has Put On It's Running Shoe
• I Illustrate How The Irish Banking Cancer Spreads to UK Taxpayer & Metastizes Through US Markets
• Allegations Of Big Irish Banks Operating…
• Readers Respond With Evidence That AIB (…

This is likely to be the biggest financial story of the month, a story that's bigger than Cyprus, and a story that you're not going to see in American mainstream media - not by a long shot. Let's take this from the top, for BoomBustBloggers were warned weeks in advanced. On Wednesday, 27 March 2013 I published EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation wherein I explained that the situation of extreme loss faced by Cyprus bank depositors, savers and bondholders will not be a unique story - as excerpted:

The deposit accounts that you were getting just a few hundred basis points for have developed:

1. 1. Liquidity risks: The capital controls that weren't supposed to happen (see No Capital Controls In The EMU? Liar Liar Pants On Fire), happened! See Cyprus Banks Set To Reopen, To Serve As Glorified ATMs With A €300 Cash Withdrawal Limit
   2. Credit risks: Your so-called safe investments will suffer up to a 40% haircut! Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into Depression
   3. and Market risks: Demand depositors have forcibly purchased highly speculative synthetic call options with their haircuts that are unlikely to compensate anyone for anything!

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

The Banks Are Bigger Than Many of the Sovereigns

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 Now, the "Overbanked" article was posted back in 2010. That's right, I warned about the two Irish banks listed in the chart above THREE YEARS ago, You've had plenty of time to mover your money out! Speaking of those Irish banks, I warned the Irish again a few weeks ago as well - with specificity - in Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!! Here, I focused on Anglo Irish, already nationalized and being wound down. I warned that there will be unhappy returns, if there would be any, just like Cyprus - as excerpted:

First Off Let's Make Bank Collapse Real...

To begin with, let's make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:

Later that weekend in the Irish media... As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland

Of course, the story doesn't end with the bondholders. Exactly as anticipated in the articles mentioned above, and as published in the Irish mainstream media over the weekend...

irish pension haircuts copy copy

As you can see, this is actually MUCH WORSE than the deal the Cypriots got. These Irish pensioners are facing a total wipeout - 100% LOSS!!!

If you're not disenfranchised, yet, hold on... It get's worse, much worse. The Irish Examiner published this today... 

ECB gags State on IBRC liquidation

The ECB has gagged the Government from releasing any information in relation to the liquidation of the former Anglo Irish bank, IBRC. A senior official in the Department of Finance told the Irish Examiner they were under strict instructions from the ECB not to release any details to the public. “What they [ECB] have said from an early stage is that if there is any release, at all, then all negotiations are off. They do not want to discuss this in any forum, other than that of a member state and the ECB council,” he said.  The department has received about 16 freedom of information requests in relation to the IBRC liquidation and is now considering adopting a policy position that would allow it to refuse all applications for the release of information. 

Sinn Féin finance spokesman Pearse Doherty said the decision to liquidate IBRC was one of the biggest ever made by the State and he was concerned certain firms may have used insider information to secure payments. “The minister has refused several requests from me for information pertaining to the weeks and months before the event, specifically concerning whether certain sources in the know used confidential information to fast-track invoices in anticipation of liquidation.

So there you have it. Unless you've been hearing a lot about Irish bank collapse lately, it seems if you don't hear it from Reggie Middleton and BoomBustBlog, you're probably not going to hear it at all - so says the powers that be.  

It's not just Anglo Irish Bank, either. I've warned about several other Irish banks. Here's another one I feel likely to give Irish savers a nasty surprise...

You see, the banks can get away with this fleecing because the common person doesn't get a hold of my information and analysis very often, at least not until it's too late. But...... Guess what happened in the Irish mainstream media over the weekend, in the Irish Sun, the most popular rag on the most popular day....

SUN-SUN-PAGES-NEWS-MONEY-6066 copy copy

Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

•  EU Bank Capital Confusion, Part 3 - It's BIG! (professional and institutional subscribers only)
•  Ulster Bank/RBS Supporting Charge Documents
•  EU Bank Capital Confusion, Part 2 - Malarkey
•  EU Bank Capital Confusion, Potential Failure

fraudSince I'm not a securities attorney, let's get a basic understanding of where I'm basing my allegation - after all, I could definitely be wrong as a layman. From Wikipedia:

Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.^[1] Offers of risky investment opportunities to unsophisticated investors who are unable to evaluate risk adequately and cannot afford loss of capital is a central problem.^[2][3]

Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors.

Characteristics of victims and perpetrators

Any investor can become a victim, but persons aged fifty years or older are most often victimized, whether as direct purchasers in securities or indirect purchasers through pension funds. Not only do investors lose but so can creditors, taxing authorities, and employees.

Potential perpetrators of securities fraud within a publicly traded firm include any dishonest official within the company who has access to the payroll or financial reports that can be manipulated to:

1. 1. overstate assets
   2. overstate revenues
   3. understate costs
   4. understate liabilities

Enron Corporation^[27] exemplifies all four tendencies, and its failure demonstrates the extreme dangers of a culture of corruption within a publicly traded corporation. The rarity of such spectacular failures of a corporation from securities fraud attests to the general reliability of most executives and boards of large corporations.

So, with that layman's understanding of what securities fraud is (along with my emphasis added), let's move on. 

The Bank of Ireland

In the 2008 Annual Accounts (Irish version of Annual Report) of Bank of Ireland (see attached, page 178) it states the bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland over the Banks ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an Eligible Securities schedule.’

Fact: The BoI 2008 Irish accounts (~annual report) refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities.’

Of paramount importance for US investors and regulators, there is an absolute omission of this information in the Bank of Ireland SEC 20F returns for 2008.

image006

Other Discrepancies In Disclosure

The Bank of Ireland 2008 Irish Annual Accounts refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities,’ but no mention of ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an EligibleSecurities schedule.’

There is also no mention of any information related to this floating charge in the Bank of Ireland SEC 20F returns for 2008.

It appears that this floating charge was not disclosed at the time of the stress testing of the bank conducted by the European Banking Authority.

It is possible that I may have overlooked such, and because of that possibility I have made the SEC 20F available for all who want to check over my work. Here is the UBI 2008 accounts and here is the SEC 20f-2008 for the Bank of Ireland.

Now of course, to constitute fraud there has to be a loss on the part of the one being defrauded or a gain on the part of the one being defrauded - at least according to Wikipedia. Otherwise, it would be a hoax. That's the Irish banking system, and not this bank in particular. So...

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If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message. 

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

_{Other hard hitting pieces on the resurgent EU banking crisis}

• Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
• Mainstream Media Says Cyprus Salvaged By…
• Economic Depression Is The New Success
• The Canadian Government Offers "Bail-In"…
• EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation
• Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
• As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
• Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
• Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
• Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
• Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
• The Next Leg Of That Counterparty Led European Bank Run Has Put On It's Running Shoe
• I Illustrate How The Irish Banking Cancer Spreads to UK Taxpayer & Metastizes Through US Markets
• Allegations Of Big Irish Banks Operating…
• Readers Respond With Evidence That AIB (…

Entering my third week of publicizing my research into what I see as the potential collapse of the Irish banking system, it is about time to bring the series to a close. Before I do, though, there are a couple of loose ends that need tightening up. One is the assertion that the points that I have made are sensationalist. Anyone who has objectively read the articles I put forth cannot be objective themselves and come to a "sensationalist" conclusion. Secondly, there appears to be some who believe the many charges that I proffered as evidence are not actually evidence of a potentially nefarious plot to collude or misrepresent. Well, I believe the case of misrepresentation was made beyond a shadow of a reasonable doubt in Are You About To Get Cyprus'd in Ireland… 

For those of you who actually think it's acceptable for large, international banks to have to mortgage their entire balance sheets, or the vast amount of their securities and liquid asset holdings to essentially obtain access to what essentially is a cross-border, real time checking account (Target 2), I have this fabulous bridge to sell you in Brooklyn... Real cheap! 

Let's examine the argument that the multiple charges were entered by various large banks for the legitimate purpose of facilitating access to Target 2, and not an emergency dash for liquidity funding from the ECB.

First, as excerpted from Wikipedia, a description of how Target 2 operates in terms of collateral:

Liquidity management in TARGET2

The availability and cost of liquidity are two crucial issues for the smooth processing of payments in RTGS systems.

The cost or liquidity is the pertinent issue here. The liquidity "allegedly" sought by the Irish banks is EXTREMELY expensive for it calls for them to leverage/encumber/pledge practically their entire tradable balance sheet. Contrast this with the US Fedwire, were reserves are put up. Yes, reserves, not ALL of central bank lending-eligible securities AND the liquid payment accounts. One cannot practically classify the Irish set-up as a reserve since it is practically everything that the bank has sans plant, equipment and nigh worthless goodwill. Fedwire is the largest system of it's type in existence, yet it requires less collateralization than it's smaller brethren in Europe, Target 2? Either everybody in Europe knows you can't trust European banks or Ireland was given a back door bailout through the Target 2 collateralization system. No matter which way you look at it (both are probably true), it's not positive! Now, back to the Wikipedia write up on Target 2...

In TARGET2, liquidity can be managed very flexibly and is available at low cost since fully remunerated minimum reserves – which credit institutions are required to hold with their central bank – can be used in full for settlement purposes during the day. The averaging provisions applied to minimum reserves allow banks to be flexible in their end-of-day liquidity management. The overnight lending and deposit facilities also allow for continuous lliquidity management decisions. The Eurosystem provides intraday credit. This credit must be fully collateralised and no interest is charged. However, all Eurosystem credit must be fully collateralised, i.e. secured by other assets.

So, now that we've established that the Irish banks have applied for, and received credit in exchange for pledging practically their entire securities and liquid assets portfolio, it is in no way debatable that these banks a) were (and are still, currently) leveraged to the max and b) tied up all of their assets with a pledge of collateralization to (allegedly) back up participation in this payment system. Back to Wikipedia... 

The range of eligible collateral is very wide.

This is to be read as the quality, saleability and marketability of much of the collateral varies greatly - with much of it being worth considerably less than the claim against which it was pledged...

Assets eligible for monetary policy purposes are also eligible for intraday credit. Under Eurosystem rules, credit can only be granted by the national central bank of the Member State where the participant is established... 

Now let's drill down into how Irish banks, in particular, access Target 2 liquidity as compared to their international brethren. On April 3rd I posted The Unique, Peculiar & Unusual Method Irish Banks Used To Say "We're Insolvent"!!! whose excerpt I present below:

A reader posted the following in reference to Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros... As a refresher, this is the graphical  arrangement of the interconnected dealings between the ECB and the Irish banks... 
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I suspect what you are looking at Reggie is not really an issue for the bank's capital. It looks to me like the ECB is securing itself against the risk that a bank won't voluntarily return a mistaken or fraudulent transfer of funds via Target2. I think in order to participate in Target2, the bank has to contractually give the ECB the right to seize and sell its assets, if that's what it takes to retrieve a mistaken or fraudulent transfer of funds.

This is what reserves are for. By definition, reserves are supposed to be a fractional amount of an entity's holdings to secure against a loss. These Irish banks aren't putting up fractional reserves, they're putting up their entire business. Imagine if you went to a bank to apply for a checking account with real time clearing and a condition of you getting said account was for your to mortgage your house, all of your stocks and bonds, and any other bank accounts. Sounds a bit fishy when put that way, doesn't it?

An amount of readily marketable assets are put up as collateral against the risk described above. If a bank has to put its entire business (after all, a bank's business is money and securities, so these banks put up all of their money and securities) up as a reserve just to essentially participate in a payment system, then it most assuredly...

Tells you something about the level of trust among Europeans. You might want to check other Eurozone banks with US listings and see if all of them don't have this exact same charge filed with the SEC. My guess is they all do.  

Um, no they don't. That was the basis of my claim of misrepresentation and potential fraud. See

• Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
• Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
• Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
• Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You

At first I thought it might be related to the refinancing and emergency liquidity assistance loans AIB has outstanding from the Irish central bank. Collateral is pledged for those which the ICB could sell if it decides not to roll over the funding and AIB doesn't repay. But the reference to Target2 would make no sense if this were about collateral posted to the ICB.

That said AIB is indeed still a mess for a lot of other reasons.

Actually, AIB is a mess for this reason AND many other reasons as well. The inclusion of charges for the purposes of Target 2 is likely a sham. The Irish banks were dead broke, and without a printing press to manufacture funny munny like we do here in the states. They were fresh out of eligible collateral to pledge to the ECB for more emergency loans. Here's evidence that the Irish charge system was not only unique, but not necessary for the purposes of using Target 2 as an excuse to access emergency funding.

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So, here we have a comprehensive charge, all-inclusive, not referencing Target 2 in any way whatsoever, filed on the exact same date as EVERY major bank in Ireland - during the middle of the biggest banking crisis Ireland has ever had. Oh, and by the way... this charge or any reference hereto, is nowhere to be found in the company's reporting to its regulators and/or investors - at least as far as I could determine. Hmmmm... Of course, these banks are healthy. Nothing to see here, move on and continue with your daily dose of state-sanctioned, mainstream media piped, independent thought numbing disinformation and propaganda.

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

_{Other hard hitting pieces on the resurgent EU banking crisis}

• Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
• Mainstream Media Says Cyprus Salvaged By…
• Economic Depression Is The New Success
• The Canadian Government Offers "Bail-In"…
• EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation
• Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
• As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
• Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
• Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
• Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
• Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
• The Next Leg Of That Counterparty Led European Bank Run Has Put On It's Running Shoe
• I Illustrate How The Irish Banking Cance…
• Allegations Of Big Irish Banks Operating…
• Readers Respond With Evidence That AIB (…

Late last week I posted Allegations Of Big Irish Banks Operating Without A License wherein a reader detailed his detailing with AIB and alleged illegal (under Irish law) dealings with the bank. In the article, I asked for comments or criticism since that matter is outside of our expertise and wasn't confirmed. I received several emails on the topic rather quickly. Below is one of the more interesting ones. I find it amazing that AIB is aware of information like this floating around and has not responded with a rebuttal. If the information is accurate, it literally shames the Irish banking regulatory body and press. If it is inaccurate, then AIB should simply issue clarification. 

Hi Reggie,

Attached and below a email from Aib Kathleen Clifford she is the assistant to Aib’s risk director.

The licence has correct company number but Aib Limited was restructured into Aib plc 1982 and doesn’t have any Government or Central Bank stamp?

Below are some the Irish criminal laws breached by AIB plc

Also their ability to trade outside Ireland is dependent on them having a Ratified Irish licence therefore their USA and Eu operations may not be legal.

False claims in performances 
False representation 
Misrepresentation to Central Bank
Fraudulent application or use 
Concealing facts disclosed by documents
Suppression of documents 
False statements to shareholders
Falsification of Financial records 
Liability of officers in respect to financial records 
Furnishing false information 
Operating a Financial institution with out a valid Banking Licence

Everyone a criminal offence.

AIB Banking Licence