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

 

 

 

Published in BoomBustBlog

US retail investors and financial media tend to be a little... well... US-centric. They tend to ignore a lot of international happenings even though these events can, and often do, have a direct impact on the immediate US financial situation. I have ranted, raved, preached and prognosticated on the interconnectedness, and the inherent risks therein, of the global banking system. From my highly analytical ravings on Bear Stearns (pre-bust Is this the Breaking of the Bear?) to my more free form rants on Lehman (pre-bust Is Lehman really a lemming in disguise?), I think I have proven that being the lone voice in the investment wilderness is not necessarily an indicator of that voice being wrong. See Who is Reggie Middleton? for more on that topic. For now, let's continue where we left off in "Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You" wherein I'm about to clearly demonstrate how contagion easily traipsed through geographic borders from Ireland to the UK to the US, and how this big bank seemingly omitted the evidence of such.

Note to professional and institutional subscribers:  Please download the supporting documents for this report from BoomBustBlog’s subscription archive and depository -  Ulster Bank/RBS Supporting Charge Documents. This file contains several hundred pages of documentation to support the assertions and allegations contained in this report (click here to subscribe).

Ulster Bank Limited
Founded BelfastUnited Kingdom of Great Britain and Ireland (1836) as the Ulster Banking Company
Headquarters Dublin, Republic of Ireland
Website www.ulsterbank.ie for RoI orwww.ulsterbank.com for NI

Ulster Bank Ireland Ltd, has charges registered (see Supporting Charge Documents) with the Irish Companies Registration Office (CRO). The bank gave a first floating charge in favour of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland encompassing “all its right, title, interest and benefit, present and future, in and to each of the securities of such a class or description as may from time to time be designated by the European Central Bank as eligible for sale and/or purchase, as the case may be, by the Bank under its standard form for the time being of Master Repurchase Agreement, which specification may be made by reference to particular classes of repurchase transactions, and which are included in the schedule of Eligible Securities provided to the Bank from time to time.”.

These charges were registered with the CRO on 15th February 2008, yet there is no mention whatsoever of these charges in the Banks 2008 Annual Accounts (see attached). 

Ulster Bank is a 100% Owned Subsidiary of the UK (now taxpayer owned) Institution - The Royal Bank of Scotland (RBS)

This affects US investors as well and this piece should be well read by anyone in the US, UK or Ireland who has lost money investing in RBS/Ulster Bank Group.

rbs share price history

In 2008, RBS traded ADR’s in the U.S. under the symbol .NYSE:RBS. These ADR’s were traded OTC. This gives the SEC jurisdiction over the companies US securities. 

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 Bank of Ireland.

Ulster Bank RBS charge doc 2 Page 1Ulster Bank RBS charge doc 2 Page 1 copyUlster Bank RBS charge doc Page 1Ulster Bank RBS charge Doc to Pfizer International Bank Page 1

I also attach charge documents that Ulster Bank entered into with Pfizer International Bank. I cannot find these charges in any disclosures.

If you look at the attached charge documents from Ulster Bank to the Central Bank you will see that the wording is different when compared to the charge documents of the other Irish Banks. It specifically states that a first floating charge was created by the Deed of Floating Charge over Eligible Securities for Liabilities Arising in Target2-Ireland. Having said that I can see no mention of these charges in the Annual Accounts for 2008. On page 72 (28) of the Annual Accounts it gives the only details that I can find of charges registered. It states that A registered charge exists over the assets of the Group, securing all borrowings and other obligations in whatever form that relate to the Group's use of the Euroclear system, that are outstanding to Morgan Guaranty Brussels and to any other office of Morgan Guaranty Trust Company of New York. This looks as if it could be a double encumbrance of certain assets for the charge to the Central Bank of Ireland features very similar, all-encompassing language for Ulster Bank, which is a fully owned subsidiary of RBS. Although I'm not an international banking attorney, my layman's eye sees double counting of collateral barring a clause that somehow excludes that covered by the charge over Ulster Bank.

There are also two charge documents for Ulster Bank to Pfizer International Bank. One is for 2009 and the other for 2010. I can see no mention of these in the 2009 and 2010 Annual Accounts.

These charge documents are also 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, reference RBS Stress Test.

I cannot see how the charge documents are disclosed in the RBS annual accounts (annual report). I see it mentions that the Bank provides collateral in the form of securities in repurchase agreements (footnote page 41). On page 60 it states the Group engages in securitization transactions of its residential loans which are generally transferred to a special purpose entity. This likely relates to the cashflows and not the principal. The charge documents relate to the principal (the actual loan). The registered charge (page 72) exists over the assets of the Group, securing all borrowings and other obligations whatsoever that relate to the Group's use of the Euroclear system (privately owned by J.P.Morgan, http://en.wikipedia.org/wiki/Euroclear).

The charge documents are not covered in the Ulster Bank Annual Accounts or the SEC Group RBS Annual Report. I think that this is a serious misrepresentation of the Accounts/Annual Report. The charge is a floating charge over Secured Obligations (Repo Agreements) which means all present and future liabilities of Ulster Bank (100% owned by RBS). As stated Target2 is only a payment system. The true reasons for the charge increasingly appear to be that of emergency funding, for it also appears as if Ulster Bank was bust. This information should have been included in the SEC Group RBS Annual Report, especially when ADR's were being traded.

RBS Stress Tests

The afore-linked copy of the RBS Stress Test results do not make it possible to determine whether the charge documents were included in the Stress Test, however it is worth pointing out that the charges do not appear in the annual accounts, so one could assume that they were not included in the stress test. The information is based on data supplied by each bank, via its respective national supervisor. Accuracy of this data is primarily the responsibility of the participating bank and national supervisor. This information has been provided to the EBA in accordance with Article 35 of EU Regulation 1093/2010. The EBA bears no responsibility for errors/discrepancies that may arise in the tables.

A Short Traipse Through Recent History & The Expense That Ultimately Befalls The UK Taxpayer

In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.

It was the UK taxpayer that footed the bill for this nationalization - as per Wikipedia:

The bonus payments paid to RBS staff subsequent to the 2008 United Kingdom bank rescue package have led to controversy. Staff bonuses were nearly £1 billion in 2010, even though RBS reported losses of £1.1 billion for 2010. More than 100 senior bank executives were paid in excess of £1 million each in bonuses. Consequently, former CEO Fred Goodwin was stripped of his knighthood in mid-January, and newly appointed CEO Stephen Hester renounced his £1 million bonus after complaints over the bank’s performance.

82 percent of RBS' shares are now owned by the UK government, which bought RBS stock for £42 billion, representing 50 pence per share. In 2011, the shares were worth 19 pence, representing a taxpayer book loss of £26 billion ($40B). Historically, the RBS stock price went from a high of over 700 pence in early 2007 (taking into account a 3 for 1 stock split that took place later that year) to around 20 pence in late 2011.

... the UK Government (HM Treasury), as of 31 March 2012, holds and manages an 82% stake through UK Financial Investments Limited(UKFI), whose voting rights are limited to 75% in order for the bank to retain its listing on the London Stock Exchange. In addition to its primary share listing on the LSE, the company is also listed on the New York Stock Exchange. The group is based in Edinburgh, Scotland. In 2009, after the financial collapse, it was briefly the world's largest company by both assets (£1.9 trillion) and liabilities (£1.8 trillion).  In 2012, the UK government announced plans to bid for the rest of the RBS shares that it did not own, as it felt that "while the taxpayer owns over 82pc of the bank following a bailout in 2008, they bear 100pc of the bank's huge liability risks".

Part and parcel of the RBS problems was its purchase of Ulster Bank and its exposure to the Irish lending issues!

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 my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.

In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:

In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.

image002

Litigation

201294 r01o 09CV00300 Page 01rbs litigation

Indications of capital shortfalls in the Ulster Bank arrangement:

RBS had paid a total of €9.13 billion to Ulster Bank in capital contributions, in order to safeguard the bank’s capital reserves after writing off billions in impaired loans to Irish borrowers. http://businessetc.thejournal.ie/british-banks-bailed-ireland-out-e16bn-762258-Jan2013/24th Feb. 2012

ULSTER BANK’S parent company, Royal Bank of Scotland (RBS), injected as much as £4 billion (€4.7 billion) into Ulster Bank last year, bringing its total investment in its Irish subsidiary to £10 billion (€11.8 billion) since 2008.

http://www.irishtimes.com/business/sectors/financial-services/rbs-chief-insists-11-8bn-injected-into-ulster-bank-was-too-much-1.469092

If you have 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

Those of you in Ireland who may not want to get "Cyprus'd", ie. have your bank accounts fund another bailout, should contact the Office of the Director of Corporate Enforcement. Click this link, and tell them Reggie from NYC sent 'ya. Seriously! The reason why Irish banks haven't been reformed was because not enough light has been shown on the activities. See a valid attempt at such here. This is the time, for the tea leaves foretell the next bank collapse & bailout will be funded directly out of your bank accounts, reference Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You for those who don't believe me. See Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" for an example of a bank statement of a Cypriot who didn't take the regulation of his bank seriously!!!

 And for those blokes in the UK, I suggest you drop a note to the Financial Conduct Authority. You can This email address is being protected from spambots. You need JavaScript enabled to view it. sent you. This was excerpted from their website (emphasis added):

We intervene when firms:

    • treat consumers unfairly
    • behave in ways that risk the integrity of the market

We supervise firms differently depending on their size and the nature of their business. This includes:

    • continuous conduct assessment for large firms and regular assessment for smaller firms
    • monitoring products and other issues to ensure firms play fair and don’t compromise consumer interests
    • responding quickly and decisively to events or problems that threaten the integrity of the industry
    • ensuring firms compensate consumers when necessary

Well, straight from the horse's mouth. Have at 'em. They should do the right thing, and EU media should pick up on this as well. You don''t want your 2,000+ pound/euro bank bailout investment to be handled solely by a blogger from NYC, do you???!!!

For paid subscribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). Over the next 36 hours or so, I will be releasing an even bigger scandal that is even more far reaching. Stay tuned!!!

 Other hard hitting pieces on the resurgent EU banking crisis

Published in BoomBustBlog

In reference to Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros... and Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports? I bring you this letter presented by one of my readers...

Irish bank investogation by Irish police

The Irish authorities have officially indicated that they are looking into the matter. Could this be the reason why Ireland's top bregulator stepped down so quickly that he forgot to take his bonus?

If you have believe that the information below 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 messageFor paid subcribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). Over the next 36 hours or so, I will be releasing an even bigger scandal that is even more far reaching. Stay tuned!!!

Published in BoomBustBlog

On Saturday, 23 July 2011 (nearly two years ago0 I penned the seminal piece "The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!". In it, I ran down the causes of bank runs in both the EU and the US (Bear Stearns/Lehman, both failures I predicted months in advance). I'd like to quote a piece from this article, for yesterday's news brings it to the forefront yet again...

image015image015

The subject of our most recent expose on the European banking system has a plethora of problems, including but not limited to excessive PIIGS exposure, NPA growth up the yin-yang, Texas ratios and Eyles test numbers that’ll make you shiver and razor thin provisions. Focusing on the most pertinent and contagious of the issues at hand leads us back to the initial premise of a European bank run. I laid the foundation for said topic discussion last Thursday in "The Fuel Behind Institutional “Runs on the Bank" Burns Through Europe, Lehman-Style" and the fear du jour is a European version of the Lehman Brothers or Bear Stearns style bank run. The aforelinked at explanatory piece is a must read precursor to this illustration of what can only be described as the anatomy of a European bank run - before the fact. Remember how the pieces of the puzzle were perfectly laid together for a Bear Stearns collapse in January of 2008, two months before the bank's actual collapse? Reference "Is this the Breaking of the Bear?" in which Bear Stearns collapse was illustrated in explicit, graphic detail. Lehman Brothers wasn't impossible to see either (Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008).

.....

The green represents the unseen canary in the coal mine, and the reason why Bear Stearns and Lehman ultimately collapsed. As excerpted from "The Fuel Behind Institutional “Runs on the Bank" Burns Through Europe, Lehman-Style":

The modern central banking system has proven resilient enough to fortify banks against depositor runs, as was recently exemplified in the recent depositor runs on UK, Irish, Portuguese and Greek banks – most of which received relatively little fanfare. Where the risk truly lies in today’s fiat/fractional reserve banking system is the run on counterparties. Today’s global fractional reserve bank get’s more financing from institutional counterparties than any other source save its short term depositors.  In cases of the perception of extreme risk, these counterparties are prone to pull funding are request overcollateralization for said funding. This is what precipitated the collapse of Bear Stearns and Lehman Brothers, the pulling of liquidity by skittish counterparties, and the excessive capital/collateralization calls by other counterparties. Keep in mind that as some counterparties and/or depositors pull liquidity, covenants are tripped that often demand additional capital/collateral/ liquidity be put up by the remaining counterparties, thus daisy-chaining into a modern day run on the bank!

image006image006

I'm sure many of you may be asking yourselves, "Well, how likely is this counterparty run to happen today? You know, with the full, unbridled printing press power of the ECB, and all..." Well, don't bet the farm on overconfidence. The risk of a capital haircut for European banks with exposure to sovereign debt of fiscally challenged nations is inevitable. A more important concern appears to be the threat of short-term liquidity and funding difficulties for European banks stemming from said haircuts. This is the one thing that holds the entire European banking sector hostage, yet it is also the one thing that the Europeans refuse to stress test for (twice), thus removing any remaining shred of credibility from European bank stress tests. As I have stated many time before, Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run!

So, why have I dragged my readers back down this dark corridor of memory lane once again?

Well, Reuters reports: European Union ministers will consider a proposal this week to impose losses on interbank deposits of lenders in dire financial trouble as they shape a draft EU law introducing powers that would also penalize those with big savings.

Such an idea, should ministers back it, could further rattle the confidence of lenders, already nervous about draft legislation to determine who alongside shareholders should suffer losses when a bank gets into trouble.

EU finance ministers, gathering in Dublin this Friday, will discuss how to shape this law that could take effect from 2015, covering what is known as bank recovery and resolution.

The talks follow the recent decision to impose heavy losses on some depositors in Cyprus, in return for an international bailout. That set a precedent, which is likely to be mirrored in these EU rules, making losses for large uninsured savers a permanent feature of future banking crises.

But the ministers will have to tread carefully in their discussions.

ECB President Mario Draghi recently cautioned that Cyprus's bailout was "no template", in a bid to ease market fears that bank deposits would in future be fair game for international lenders supporting struggling euro zone countries.

In a document prepared by government officials in Ireland, which as holder of the rotating EU presidency will chair the ministers' gathering, they write that interbank deposits of less than one month should also be penalized.

Hmmm!!!! It appears as if Irish officials may be prepping for something. I trully wonder what that may be...

The proposal will be part of wider talks to consider when, for example, depositors should be penalized if a bank runs into difficulty. This is known as bail-in.

Shareholders are the first to lose their money, with various rankings of creditors behind them.

Customer bank deposits of up to 100,000 euros would remain protected under an existing EU law and the latest proposals touch on sums above this threshold.

That is, unless EU officials decide to change their mind or coerce EU countries to change the laws. Reference, from just a few weeks ago, 

as excerpted from "Mainstream Media Says Cyprus Salvaged By…": Last week I posed the question "Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?" The country even considering imposing loses on bank depositors over creditors seemed absurd at best. Even the faux consolation of compensating holders of pure liquidity (or at least what was formerly believed to be pure liquidity - banks have been closed for a week now and ATM withdrawals have been limited to 100 euro per day due to the capital controls I clearly warned of last year) was a scheme born out of lunacy, and unlikely to compensate anyone for anything.

"While it is acknowledged that bailing in interbank liabilities may carry certain risks," officials write in the document, seen by Reuters, "on balance, it is preferable ... that these liabilities are not excluded from bail-in".

Such a suggestion will dismay many officials, who witnessed a freeze in interbank lending that the European Central Bank is still struggling to unblock despite having provided more than one trillion euros of cheap funds.

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???

It's not just Cyprus either. The problems that plagued Cyprus banks plague banks in much larger nations within, and around the EU. From Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe you see institutions that are literally too big to be handled safely...

The Banks Are Bigger Than Many of the Sovereigns

image015.png

More on this topic:

Published in BoomBustBlog

reggie middleton on irish banks

Any Irish taxpayer or bank depositor that watches any TV yet fails to view this video is not acting in a prudent manner, in my oh so humble opinion. Any Irish or US bank investor or regulator who ignores this video is not acting in a prudent manner, in my humble opinion.

The video is presented, without further comment...

The posts are presented here which contain all of the documentation referenced in the video:


    1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
    2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
    3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
    4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
    5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
    6. Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
    7. EU Says Bank Money's Safe After Threats To Take It, Ireland Still Looks Next Up, Contagion Ready To Spread To Bigger Countries

Tomorrow, I will release some additional and very controversial informational on other EU banks. Subscribers, stay tuned (click here to subscribe).

Published in BoomBustBlog

Over the weekend, EU's Olli Rehn said big depositors could suffer in future bank bailouts under new law:

Olli Rehn
Olli Rehn.jpg
European Commissioner for Economic and Monetary Affairs and the Euro
Incumbent
Assumed office
9 February 2010

(Reuters) - Big bank depositors could take a hit under planned European Union law if a bank fails, the EU's economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus's bailout model was exceptional.

Okay, I get it now. Cyprus was exceptional, it's just that we are preparing for exceptional to be codified into law to make it common place. Of course!

"Cyprus was a special case ... but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down," Rehn, the European Economic and Monetary Affairs Commissioner, said in a TV interview with Finland's national broadcaster YLE.

The only thing "special case" about Cyprus was that it was first!

"But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of 84,890 pounds is sacred, deposits smaller than that are always safe."

Your "so-called liquid deposits" are absolutely not safe! As explored in "Mainstream Media Says Cyprus Salvaged By…"

Well, this is the latest from Bloomberg:

The revised accord spares bank accounts below the insured limit of 100,000 euros.

I was curious to see how they could impose losses on insured accounts in the first place, after all the accounts were insured basically (through implied backstop) by the same entities (EU/EC/ECB) that were attempting to force the loss, no?

Yes, the powers that be were not only clearly considering the confiscation of so-called insured assets, they actually were moving forward to implement such until the backlash was perceived to be strong enough to consider 'alternative measures'! Mr. Rehn's comments are still quite suspect, after all... Exactly what is the definition of "SAFE"? Does this include the ability to access your money? Again, as excerpted from "Mainstream Media Says Cyprus Salvaged By…"

Last week I posed the question "Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?" The country even considering imposing loses on bank depositors over creditors seemed absurd at best. Even the faux consolation of compensating holders of pure liquidity (or at least what was formerly believed to be pure liquidity - banks have been closed for a week now and ATM withdrawals have been limited to 100 euro per day due to the capital controls I clearly warned of last year) was a scheme born out of lunacy, and unlikely to compensate anyone for anything.

You see, once capital controls (the same capital controls I clearly warned of last yearare placed upon your money in such a fashion as to prevent you from accessing it, is it still really your money??? I guess one can consider it safe, as long as you don't want any of it!!!

Now, I've been warning for the past two weeks or so that more of the same will likely come the way of the Irishman, reference: 

  1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
  2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
  3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
  4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
  5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
  6. Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You

I consider these posts to be a tour de force in investigative journalism and forensic financial analysis. In them, I have named 4 of Ireland's biggest banks as not having properly disclosed charges, borrowings and encumbrances. I actually have significantly more to go - yes, that's right - more banks, and even in more countries. This begs the question, how is it that the Irish people have to hear that their largest banks (several of them, not just one or two) have concealed these issues after extreme austerity and billions upon billions of euros of bailouts 

Hey, I have an even better question. Why is it that the Irish have to hear it and see the proof from a Blogger in NYC versus the (in no particular order):

  1. audit firms that audited the banks;
  2. the banks management;
  3. the sell side analysts that follow these banks;
  4. the politicians who create and oversee legislation regarding these banks;
  5. or the regulatory agencies that oversee these banks!

One would think that the audit firms would really be on the hook, no? I must assume the legal firms in Ireland are in no way as aggressive as they are stateside....

We just had a changing of the guard at the SEC in that states, and this is a perfect opportunity for the new guard to show that they are worth their mettle and represent a significant departure from the less than totally effective bastion of the recent past. You have hundreds of thousands of readers and subscribers watching you guys. Do the right thing!

Anyone who wishes to give the SEC a little nudge can read the links above and submit your thoughts directly. Simply contact the SEC and let them know that Reggie Middleton suggested they look into these articles and the related research. You can actually use this form to convey my message. My next post will reveal a BLOCKBUSTER, linking a bigger more systemic country to  the fray!

      In the meantime, my professional & institutional subscribers can download the relevant info right now - along with several hundred pages of supporting documentation. See 

File Icon EU Bank Capital Confusion, Part 3 - It's BIG! Click here to subscribe or upgrade!

    More on this topic:
  1. Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
  2. Mainstream Media Says Cyprus Salvaged By…
  3. Economic Depression Is The New Success
  4. The Canadian Government Offers "Bail-In"…
  5. EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation
Published in BoomBustBlog

Irish debt time machine. how things looked in 2010Ireland, I Make No Apologies For What I'm About To Show You. You have had a banking crisis that nearly wiped you out. In an attempt to save the banking system (potential mistake #1), you brought the bad debt of private, for profit, risk taking institutions onto the taxpayer's balance sheet - twice! You then conducted sham stress tests to placate the public into thinking the worst has passed. Promptly after nearly all of your banks passed these shams, they started collapsing again. Leprechauns don't really exist, and you can't end insolvency with magic and lucky charms. It was at this point you were coerced/forced to accept the outside aid of the Troika and further in debt your citizens as well as endure extreme austerity. Guess what, it's apparently not over - not by a long shot!

I have spent the last week clearly demonstrating how Irish banks could have passed the stress tests yet fail anyway. See:

  1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
  2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
  3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
  4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
  5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?

 The gist of this reporting is that it appears as if there was a significant amount of debt and/or encumbrances on Irish bank's balance sheets that was:

  1. Not reported to regulators or possibly stress testers and
  2. Material misstatements and/or omissions regarding encumbrances and debt.

In essence, these banks were not as healthy as they claimed! If one were to add the encumbrances and unreported borrowing back on to these bank's balance sheets, then add this (since the Irish government essentially bought many of them) onto the Irish government's balance sheet, what would we have?

My guess is we'd have a country that was forced to go back to the Troika on hands and knees. Worse yet, we'd have the "Cyprus" style of bank recaps become mainstream with Irish bank depositors losing money faster that a floozy loses virginity on prom night. Below is a very extensive financial modelling of the Irish bailout by the Troika - the same model that was used to generate the subscription documents in Beware of the Potential Irish Ponzi Scheme! This is a level of analysis that is simply not available on the web, but I'm making it available as a PSA (public service announcement) for the Irish people. I invite you to, no... I dare those of you who are in the industry to play with it and add back the levels of debt that has been mysteriously disappeared from Irish bank regulatory statements. Go ahead, and see where the country of Ireland really stands. 

I don't think it will be difficult to ascertain that Ireland may very well need another bailout, of both its banks and quite possibly the motherland herself. After Cyprus, we all know who'll pay for the bank bailout, right? Thank your deity that there are no other Irish banks that have somehow concealed their encumbrances, right? We'll see. After all, another big bank with big secrets may be enough to push Ireland over the edge, no?

This app will be available to the public until the middle of next week, after which it will be solely the purview of my professional and institutional subscribers (click here to subscribe). I will place comments from time to time below in the comment section.

If you have believe that the information below 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 messageFor paid subscribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). There will be another bank added within 36 hours.

Here's that interest rate calculator from EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation . It shows how much interest you should be getting in return for the banking risk that you are taking.

As a reminder for those who wish to ignore my banking calls as a frivolous episode of Chicken Little, I suggest you explore the query, "Who is Reggie Middleton?" BoomBustBlog is the place that was the first to reveal:

  1. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear? 
  2. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. 
  3. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
  4. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
  5. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis
  6. Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
Published in BoomBustBlog

On March 31st, I illustrated how the concealment of excessive encumbered items probably contributed greatly to the premise of Anglo Irish bank, not to mention the demise of practically all of that bank's investor's capital as well. On April Fools Day I  illustrated how AIB did the same thing, to the dismay and consternation of all of those who believe that Irish banks are the cleanest institutions in the austerity laden west. Now, it appears that the AIB revelation was quite controversial, with politicians reaching out to me from Germany to Mother Ireland herself. I can understand the feelings of consternation, for unlike Anglo Irish, Allied Irish Banks is still an ongoing concern, taking deposits and making loans as one of the largest institutions in Ireland. 

The problem with both of these companies is that they have instituted blanket charges over the vast majority (if not practically all) of their assets, yet they failed to accurately and clearly state this in their financial reporting. The misrepresentation/omission as I see it, is gross and very, very material - potentially encompassing tens of billions of euros - per institution! I query: How many important (or worse yet, systemically important) banks can one find that have not disclosed such encumbrances fully and accurately to the public before it becomes evident that the public, regulators and quite likely those that conducted the stress tests for said banks, may not have a accurate picture of the Irish banking system's true condition? And if the Irish banking system is more encumbered than previously believed, and if the Irish banking system was bailed out (2x) by the Irish taxpayer, and the Irish taxpayer was bailed out by the EU taxpayer/Troika, then isn't the Irish taxpayer/EU taxpayer potentially unaware of further bank bailout tax bills coming down the pike? Is Ireland as a sovereign nation in much weaker condition than we have been led to believe since it essentially bought these bailed out banks under the (potentially mistaken) guise of having fixed them? Will the Irish get Cyprus'd when those that run the Troika demand more for a kilo of bailed out flesh?

I will explore this question further over my next few posts, but for now I query...

Who's next in line?

About Irish Life and Permanent Plc

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Irish Life and Permanent has charges registered (see documents below) with the Irish Companies Registration Office (CRO).  The bank gave a first floating charge in favour of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland encompassing “all its right, title, interest and benefit, present and future, in and to each of the securities of such a class or description as may from time to time be designated by the European Central Bank as eligible for sale and/or purchase, as the case may be, by the Bank under its standard form for the time being of Master Repurchase Agreement, which specification may be made by reference to particular classes of repurchase transactions, and which are included in the schedule of Eligible Securities provided to the Bank from time to time.”.  

These charges were registered with the CRO on 15th February 2008, yet there is no mention whatsoever of these charges in the Banks 2008 Annual Accounts (see attached).

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In 2008, Irish Life and Permanent traded ADR’s in the U.S. under the symbol ILPYMThese ADR’s were traded OTC, giving the SEC jurisdiction over this company.

The bank gave a first floating charge in favour 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 Anglo Irish Bank’s 2008 Annual Accounts which, in my opinion and according to my research, concealed the existence of the CRO registered charges above. I have made a copy of the 2008 Annual Accounts for this company available for any and all who wish to discover for themselves whether these charges were properly disclosed. After all, you never know... I may have overlooked them.

These charge documents have also presumably not been included in the recent bank ‘stress testing’ conducted by the European Banking Authority. 

If you have believe that the information below 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 messageFor paid subcribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). There will be another bank added within 36 hours.

Here's that interest rate calculator from EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation . It shows how much interest you should be getting in return for the banking risk that you are taking.

 

Published in BoomBustBlog

As was to be expected, the defense of Allied Irish Banks has begun. Let's delve deeper into this bank capital/liquidity thing, shall we? I caution thee, though. Often, the deeper you look, the more you wil find. In response to BoomBustBlogger Andy C20's comment on my article "Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...", as written below:

Reggie,
Perhaps I am missing something. 
I fail to see the charge discrepancy. Firstly we do not have the definition of Eligible Securities as governed by the Floating Charge so it is fair to say these Eligible Securities could be classified as certain segregated securities i.e. they are “certain” segregated securities because they relate only to Eligible Securities and do not include Non-Eligible Securities. Furthermore, while assets may be classed as Eligible Securities it does not mean they have actually been put into use as security.
I really do not understand your reasoning here. Why are you providing links to charge documents relating to AIB's participation in a payment system and then discussing the ins and outs of its repo schemes? They would be two completely separate items.
Perhaps you have other documents to hand but there is nothing posted above from which any conclusion could be made.

Here's how I see things. The following definition of "Eligible Securities" is taken directly from Allied Irish Banks, p.l.c. charge document:

"Eligible Securities" means, at any time, securities of such a class or description as may from time to time be designated by the European Central Bank as eligible for sale and/or purchase, as the case may be, by the Bank under its standard form for the time being of Master Repurchase Agreement, which specification may be made by reference to particular classes of repurchase transactions, and which are included in the Eligible Securities Schedule at such time.
As you can see, "Eligible Securities", in their charge document are not defined in such a way so as to mean "certain segregated securities". The difference between certain segregated securities and all eligible securities is quite clear. It does not mean the same thing. The charge document registered in the Companies Registration Office is the official document. The disclosure in the Allied Irish Banks, p.l.c. annual accounts is not a true representation of the charge document. It is misleading. In relation to Target2: it is only a payment system. The legal instruments that Allied Irish Banks, p.l.c. used in this charge document have been used previously without any mention of Target2. Using Target2 in this document is a red herring (and also misleading), and that's why I have mentioned it in my article.
In the charge document Allied Irish Banks, p.l.c. gave the floating charge to the Central Bank of Ireland and Financial Services Authority (which is really the ECB) over "All rights, title, interest and benefit, present and future in and to each of the Eligible Securities." The floating charge over the Eligible Securities (Repo Agreements) gave Allied Irish Banks, p.l.c. access to aggregated liquidity. Obviously Allied Irish Banks, p.l.c. had no Eligible Securities remaining at this time. This was the only option to access cash. It appears the bank was insolvent in February 2008. This would explain why the Government had to give a blanket Guarantee over Allied Irish Banks in September 2008. Allied Irish Banks had no assets available to access cash. They were completely insolvent. It was not a liquidity problem as being stated by Allied Irish Banks, p.l.c. It was an insolvency problem
I have been stating this for FIVE YEARS!!! Reference this post from Monday, 15 September 2008, One last time: liquidity is not the problem, it is the symptom:
I really think that I will scream if I hear another pundit or regulator comment on how the injection of liquidity will help this or that bank or lending institition. Haven't we all learned by now that the problem is insolvency, not liquidity? The Fed has created an alphabet soup of lending programs, discount windows and mechanisms to provide literally unlimited liquidity to the banks, even the option to offer stock as collateral! That's right, the US government has become the world's largest broker dealer, offering margin lending for stock accounts, mortgage financing and M&A deal finacing and advisory.
Again, as I see it, a depositor recapitalizatio of Irish banks seems very, very likely unless the Troika is willing to carry the entire bailout bill again. Reference "Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros..."
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I will present additional pages of this document because, basically, the more you read the fishier things actually smell. To wit, in my post "Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros..." I included a backgrounder on AIB which included: 

Credit Event occurred

The ISDA Determinations Committee, consisting of 15 USA and European banks, decided that a restructuring credit event occurred with respect to Allied Irish Banks on June 9, 2011

 Hmmm.. A credit event occurred... Notice the red highlights in the charge documents below, particularly the portions read as "Crystallization of Floating Charges" and "Event of Default". BoomBustBloggers are more than smart enough to take it from there....

In addition, there's the portion on "Negative Pledges". If there are negative pledge clauses included and the charge covers "each" eligible security... Then doesn't this somethow get in the way of the securitization business, particularly Irish MBS whose underlying assets must be pledged to a trust which effectively transers ownership? Doens't it also get in the way of hypothecation and rehypothecation? After all, how many times can you encumber a security that has a negative pledge clause attached to it. Again, I'm not an international securities attorney, I'm just saying...

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Published in BoomBustBlog

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. 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.  

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 Target 2.

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It is important not to give theIrish banking system the benefit of the doubt. The banks were dead broke, and apparently encumbered the same set of assets several times over. This is the result, as exerpted from "As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland":

As if on cue, a day after my expose on Anglo Irish Bank and its shenanigans (see Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!), The Irish Business Post announces senior bondholders will get wiped out. That's right, a 100% loss! Zilch! Zero! Nada! Now, that's investing. That's getting "Cyprus'd", plus some!!! From businesspost.ie: IBRC senior bondholders to be burned

anglobondwipeout copyanglobondwipeout copy

If you thought this was interesting, you ain't seen nothing yet. This was just the preamble, I have a whole list of banks, each with a story more ludicrous than the last, each still taking deposits, and yes.... for the US centric Americans, with operations in the US and securities trading on our exchanges. Paying subscribers (at this point, I don't see why most of you aren't paying, you'll let these banks take your money for .7% interest, but you won't pay a few dollars for a hardcore educational analysis???) can access the first of these banks right now - File Icon EU Bank Capital Confusion, Potential Failure. You may click here to subscribe...

This story actually goes deeper and gets more interesting. I can't say much more in public now, but my paying subscribers have the scoop, and have had access to it since 2010. Reference Beware of the Potential Irish Ponzi Scheme! Yes, we were definitely on to something back then, as well...

Published in BoomBustBlog