Anglo's balance sheet at year end-30th Sept 2008

[smitchy2]

I think everyone should have a detailed look at this one before jumping the gun.

Anglo had €20bn on deposit (including IL&P) from other banks at the 30/09/2008.
They had loans out to other banks of €14bn.
http://www.angloirishbank.com/Invest...sults_2008.pdf

This kind of end of year smoothing is common amongst banks and many other companies at there half and year end reporting. They also loan eachother money on a regular basis to square up their accounts at the end of each day.
It is naive to think that it does not happen.

The anomaly is particularly apparent in Ireland as all the banks had different year end dates Sept/Dec/Mar.

It is not illegal but is certainly misleading (and wrong). As I said it is not just banks that do this.
It is a problem about having an accounting system that reports at a set date in time.

I am not justifying Anglos actions here ( in fact I despise their business model) but it is not an isolated event and is fairly common across all companies.

[droghedasouth]

While the banks all have different year ends, they all have to report at the end of every quarter to the regulator so he at least has the overall position.

And that is why it is so shocking that he was allowed to retire with a massive golden handshake.

[euroboy]

It is not illegal but is certainly misleading (and wrong). As I said it is not just banks that do this..

Yeah I wonder how many did the same trick when applying to Oz for a working holiday visa. 5000 E here today gone tomorrow once the visa was granted.

[HarshBuzz]

I am not justifying Anglos actions here ( in fact I despise their business model) but it is not an isolated event and is fairly common across all companies.

auditors should be able to pick this kind of activity up and are in fact trained to do so

can you provide examples of other banks that engage in manipulation of their y/e numbers?

[badboy2]

It is a problem about having an accounting system that reports at a set date in time.

Thats not true - post balance sheet adjusting items have to be taken into account.

Profit smoothing and window dressing are illegal.

The problems is not with the rules but the implementation.

Lets stop blaming anonymous bankers and put the blame where it belongs at the door of the Depts of Finance and Enterprise.

They allowed this to happen.




A myth has grown up that its perfectly ok to manipulate your balance sheet at the end of the year. It is not. The balance sheet is s snap shot at a particular point, but the notes and the P&L refer to the year as a whole. All information in the accounts including P&L, BS CFS and notes should be consistent.

The auditors should also refuse to allow a inconsistent chairman's report appear with a set of audited statements.

[smitchy2]

auditors should be able to pick this kind of activity up and are in fact trained to do so

can you provide examples of other banks that engage in manipulation of their y/e numbers?

It is fairly simply.
Banks arrange for a 1/2 week deposit with another bank at a normal commercial rate.
It is then paid back after the financial year end.
A similar transaction can be called upon by the other bank at their year end.
You scratch by back I will scratch yours.

Considering the large amount of inter bank deposits and lending, it is easy enough to conceal as a normal transaction.

It would point to need for 1 uniform financial year end so at least Irish banks cannot engage in this practice.

[HarshBuzz]

It is fairly simply.
Banks arrange for a 1/2 week deposit with another bank at a normal commercial rate.
It is then paid back after the financial year end.
A similar transaction can be called upon by the other bank at their year end.
You scratch by back I will scratch yours.

Considering the large amount of inter bank deposits and lending, it is easy enough to conceal as a normal transaction.

It would point to need for 1 uniform financial year end so at least Irish banks cannot engage in this practice.

examples please as requested in my previous post

[smitchy2]

examples please as requested in my previous post

Well I cannot give an exact transaction as I do not have access to non-publically released information.

However, take for example AIB.
In their 2007 annual report, they had deposits of €30bn from other banks.
€25bn of these had a term of less than 3 months.
It is not unreasonable to suggest that much of this €25bn was gathered to solid up their balance sheet through obtaining deposits from other banks.

[HarshBuzz]

Well I cannot give an exact transaction as I do not have access to non-publically released information.

However, take for example AIB.
In their 2007 annual report, they had deposits of €30bn from other banks.
€25bn of these had a term of less than 3 months.
It is not unreasonable to suggest that much of this €25bn was gathered to solid up their balance sheet through obtaining deposits from other banks.

or else they were normal money market deposits which typically have a very short-term maturity?

[YellowRedGreen]

Change in importance of deposits from other banks between 07 and 08 surely of some note. What would be the implication for the balance sheet if they don't take in these short term deposits? Balance sheet would have shown no growth since previous year and a reduction in overall deposits.