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Thread: Did an EU directive contribute to the banking collapse?

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    Politics.ie Member Shqiptar's Avatar
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    Default Did an EU directive contribute to the banking collapse?

    We've been fed the line for some time that the principle reason Irish banks collapsed in 2008 was due to lax financial regulation by the Irish authorities. This has been the main justification for the foisting on the Irish tax payer of the massive losses incurred by the financial sector here.

    Cormac Butler, writing in yesterday's IT begs to differ. In 2005, the EU implemented a directive based on the IFRS (International Financial Reporting Standards) which compels banks to hide losses on distressed loans until they are realised. You read that right; it doesn't just allow them to do this - it forces them. And it seems that the only central bank that sees a problem with this is the Bank of England which has issued proposals to resolve the issue.

    A group of British-based pension funds is pushing to have this directive reversed and has contacted the relevant commissioner, Michel Barnier. It has warned him that the process by which the EU allows the concealment of these losses is contrary to EU company law and hopes for some progress on this issue under the Irish presidency. Those who framed the rules 7-8 years ago now admit that they were "overly complicated, rushed together in an inelegant manner and are not fully understood by anyone".

    In 2008, our then finance minister Brian Lenihan was told that Irish banks were solvent. Lenihan was almost certainly not aware that the report reassuring him on this point concealed huge losses, owing to loopholes that the EU had created.

    If the Bank of England’s proposals are taken on board, the EU may be forced to acknowledge that its contribution to the banking collapse here is rather more than it has hitherto admitted.

    Source:
    Bank regulation a worry for Ireland's legacy debt negotiations - The Irish Times - Fri, Jan 04, 2013
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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    I'm not sure I understand this. If the directive compels banks to conceal losses, then it's hardly a loophole they were exploiting. They were conforming to the spirit and letter of the law.

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    Quote Originally Posted by Shqiptar View Post
    We've been fed the line for some time that the principle reason Irish banks collapsed in 2008 was due to lax financial regulation by the Irish authorities. This has been the main justification for the foisting on the Irish tax payer of the massive losses incurred by the financial sector here.

    Cormac Butler, writing in yesterday's IT begs to differ. In 2005, the EU implemented a directive based on the IFRS (International Financial Reporting Standards) which compels banks to hide losses on distressed loans until they are realised. You read that right; it doesn't just allow them to do this - it forces them. And it seems that the only central bank that sees a problem with this is the Bank of England which has issued proposals to resolve the issue.

    A group of British-based pension funds is pushing to have this directive reversed and has contacted the relevant commissioner, Michel Barnier. It has warned him that the process by which the EU allows the concealment of these losses is contrary to EU company law and hopes for some progress on this issue under the Irish presidency. Those who framed the rules 7-8 years ago now admit that they were "overly complicated, rushed together in an inelegant manner and are not fully understood by anyone".

    In 2008, our then finance minister Brian Lenihan was told that Irish banks were solvent. Lenihan was almost certainly not aware that the report reassuring him on this point concealed huge losses, owing to loopholes that the EU had created.

    If the Bank of England’s proposals are taken on board, the EU may be forced to acknowledge that its contribution to the banking collapse here is rather more than it has hitherto admitted.

    Source:
    Bank regulation a worry for Ireland's legacy debt negotiations - The Irish Times - Fri, Jan 04, 2013
    We see this a lot.

    So, who is resigning?
    Fianna Fail - The Anti Democratic Party & The Anti Constitutional Party. Traitors of Irishmen and Irishwomen.

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    Politics.ie Member Boy M5's Avatar
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    I have posted recently over to me the dire state of Irish financial journalism and after the SBP has in recent months seemingly been run by Ryanair's PR agency, I've stopped buying it.
    This however, seems an excellent piece of journalism (like R Carswell)

    However, I don't understand how this comes about in terms of EU rules. So I need have a think.

    My understanding is:


    International Accounting Rule IAS 39 requires banks to hold a bank book and a trading book.
    The bank book is assets held to they mature and they don't have to mark them to market (that is show them in their balance sheet at current value).
    The trading book is assets intended to be sold and therefore has to be marked to current market prices.

    Entirely differently all banks must prudently mark down impaired loans. Furthermore the regulators must be told over significant impairments (solus or in aggregate).
    This last point was part of the dialogue between the excellent Stephen Donnelly and Richie "Ballsbridge funder" Banker.
    "Keep firing & don't stop until I tell you" General Tom Barry

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    Quote Originally Posted by EUrJokingMeRight View Post
    We see this a lot.

    So, who is resigning?
    The people of Ireland? To their fate?

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    Politics.ie Member jpc's Avatar
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    I think that a huge negotiation card just fell on the table.
    Given this revelation is correct or the context/interpretation is correct.
    The bottom line appears to be that alarm bells were prevented from ringing in some overheated European property market
    Has Noonan the balls to play that card?
    Or will craven expediency be order of the day.
    Bet the Spanish will!
    Its only a chat, we ain't the world council.

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    Politics.ie Member Boy M5's Avatar
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    Quote Originally Posted by jpc View Post
    I think that a huge negotiation card just fell on the table.
    Given this revelation is correct or the context is correct.
    The bottom line appears to be that alarm bells were prevented from ringing in some overheated European property market
    Has Noonan the balls to play that card?
    Or will craven expediency be order of the day.
    Bet the Spanish will!
    My money is on the Spanish playing the card, Baldy, Enda and Gimmeemore tailgating then claiming it a gamechanger.
    "Keep firing & don't stop until I tell you" General Tom Barry

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    Politics.ie Member cabledude's Avatar
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    If this is true will it be a game changer. An actual game changer, unlike previous game changers.

    Is this the silver bullet we needed to de-couple banking debt from our sovereign?
    Stand there in silence, look up to the sky and remember how brave they were.

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    Politics.ie Member Shqiptar's Avatar
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    Quote Originally Posted by Iphonista View Post
    I'm not sure I understand this. If the directive compels banks to conceal losses, then it's hardly a loophole they were exploiting. They were conforming to the spirit and letter of the law.
    Well, my understanding is that it was a loophole that had the unintended effect of compelling institutions to conceal bad loans. Of course given the fevered culture of those years before the crash, the bankers needed little compulsion to conceal losses and I doubt any of them wrote to the European Commission expressing concern about this. Why speak out when speaking out would hit one's own obscenely large bonus?
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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    Politics.ie Member Shqiptar's Avatar
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    Quote Originally Posted by jpc View Post
    I think that a huge negotiation card just fell on the table.
    Given this revelation is correct or the context/interpretation is correct.
    The bottom line appears to be that alarm bells were prevented from ringing in some overheated European property market
    Has Noonan the balls to play that card?
    Or will craven expediency be order of the day.
    Bet the Spanish will!
    As I read this, I was wondering: why the hell is this not being splashed across the front page of the IT in banner headlines - rather than being hidden away in the second half of an article in the inner pages of the business supplement? Even the title contains no clue or suggestion as to what has been written.
    Eagla agus eaglais: an bhfuil an fhréamh teangeolaíochta céanna acu?

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