Monday, 15 April 2013 10:00

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... Featured

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... 

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

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.

As you can see, Ireland is unique among ALL countries in the EMU in that it, and only it, uses charges to secure access funding. But of course it's just a coincidence, right?!
Okay, let's suppose I'm full of sh1t and have made all of this up as some sort of conspiracy theory. After, it's all just circumstantial evidence, right (albeit an awful lot of it). The charges that I presented in my various articles (see the reference list below) did say that they were for the purposes of Target 2 and we all know banks would never, ever, ever lie, right? Ha! That's funny, even when I just type it! 
Below, please find an all-encompassing charge document from the Bank of Scotland (Ireland) in favor to the Irish Central Bank. The annotations are self explanatory, and keep in mind the amount secured (practically everything) and the amount pledged (practically everything). After you finish reading through the document, let me know in the comment section below if you can determine why the charge was issued...


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

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