To help provide the economic situation in the UK with some much needed funding, there are contemplations of splitting the troublesome Royal Bank of Scotland into two banks, one “good” and the other “bad” to help alleviate the problem.

However, ratings firm Fitch has said that the price of making this split could actually be more damaging than the money raised.

The company stated that the “bad bank” split might cause obstacles and uncertainty, which could end up being worse than the bank remaining as it is.

Their findings have emerged as Rothschild’s investment executives analyse whether the bank, a recipient of significant bailout funding, should be divided. One aspect of the Royal Bank of Scotland, Ulster Bank, is likely to be moved to the “bad bank” section, as are commercial property loans.

The government is commissioned Rothschild’s analysis to see if credit can be provided to the UK’s economy, and whether the sale of the taxpayers’ hefty 81% share of the company would help.

The review was ordered in June of this year, which heralded George Osborne’s statement that he was thinking of divesting the stake of the taxpayers.

In other Royal Bank of Scotland news, the Financial Times has reported that the bank is in latter stage discussions with Bank of England regulators to place Ross McEwan in the role of Chief Executive Officer.

The new appointment would be as a replacement for Stephen Hester, who left the bank in July 2013. According to the newspaper, McEwan is a lead favourite with the board.

However, no confirmation from the Prudential Regulation Authority of England has been made and Bruce van Saun, the bank’s current director of finance, is one candidate for the replacement.

McEwan is from New Zealand, and was chosen to oversee the Royal Bank of Scotlands retail banking sector last year in August. Prior t this, he was in charge of retail banking at the Commonwealth Bank of Australia, giving him ample experience for the role.

For more information on the Royal Bank of Scotland situation, please read my Slide Share.


Ireland will have to continue to be monitored by the International Monetary Fund even if it leaves the European Central Bank’s bailout programme, it has emerged.

Ireland was part of the beleaguered trio of countries (Ireland, Greece and Portugal) which were bailed out by the EU throughout 2010 and 2011. The bailout programme, which cost €67.5 billion, has helped the country to recover and economical progress over the past few years has made Ireland become more stable.

However, once Ireland exits the bailout programme – which is looking ever more likely, given that Greece and Portugal are still struggling – Ireland will still have to submit to monitoring by the International Monetary Fund. It can only depart from the bailout programme if it subscribes to a safety measure programme from the Euro zone, designed to provide credit should things go awry. Additionally, Ireland needs to protect itself against those who renege on bonds, and the European Central Bank’s promise to guard unlimited purchases of debt in secondary markets can do this. This has led to the introduction of the International Monetary Fund’s watchful eye.

The jump from bailout programme to monitored programme could appear to some as though Ireland still has little control over its own financial destiny. However, whichever the method, Ireland would still have to rely on others for funding; private markets would have to provide the necessary funding for Irish institutions to survive regardless.

The deficit in Ireland’s budget has not decreased for its high level of 7.5% GDP, and the debt of the government has hit the high note of 125% GDP. The real cost, however, is even more than this amount, because the debt that makes up part of the GNP (which Irish residents draw from) is more than 150%.

The revelations come as Angela Merkel begins her fight for her third term in the September elections. The Eurozone economy may well be moving out from the recession, but the bailout programmes will not be unfolding entirely as planned, and this may negatively affect the EU and the upcoming elections.

For further information on the Irish bailout situation and how it will affect other EU countries such as Portugal and Greece, please read my Slide Share.

Moody’s, the credit ratings firm, has released its findings on the position UK financial sector for the future.

Fortunately, things seem to have taken a turn for the better, as Moody’s has judged the situation as “stable”, rather than the “negative” rating it gave previously.

The change, the firm said, was due to the balancing of the economic situation in the UK, even though growth has been slow.

In a statement, the company said: “Unemployment has not increased as much as in previous recessions, thereby contributing to a stabilisation in banks’ asset quality.”

Profits are currently still low, and given the world economic climate growth seems unlikely. However, Moody’s seems to have faith that the UK banking industry will recover.

New rulings over the financial industry also seem to have had a positive impact, with the stricter regulations improving the banking system.

The statement from the company elaborated, commenting with the following: “Overall, we believe that UK banks are sufficiently well capitalised to absorb expected losses from both our central and adverse stress scenarios.”

Moody’s is of the opinion that once the new stipulations of the Prudential Regulation Authority are followed, the more extensive UK banks will have created the reserve capital to be used as a failsafe for capital deficits. This will put the industry in a secure position to face any risky situations in future, and will put the UK financial institutions ahead of the European counterparts.

The new regulations put in place by the Prudential Regulation Authority forces lending agencies to create a buffer sum of approximately £27.1 billion to safeguard against losses through risk. The Royal Bank of Scotland was the worst culprit, and therefore has been asked to produce £13.6 billion of this buffer sum.

Though Moody’s outlook for the future is positive, low interest rates could negatively affect the profits of the banks. Overall, however, the company does foresee an improvement in profits.

Another factor to consider is the price of introducing new regulations, which could lead to one time charges. The implementation of the regulations could have a variety of effects, but for long-term prospects the Prudential Regulation Authority’s ruling should reduce risk.

Additionally, the debt and deposit ratings of the UK banking system was seen as negative by Moody’s, due to the decision by the government to try not to use taxpayer money to bail out struggling banks.

The European Union will also be suggesting new regulations that will force creditors to pay rather than the general public, should a bank encounter difficulties.

To read more on this subject, please see my Slide Share.

Three major Irish banks will have to follow regulations set out by the European Central Bank in Frankfurt, Irish Minister for Finance Michael Noonan has said, speaking at the Oireachtas Committee on Finance, Public Expenditure and Reform.

He elaborated, saying that the European Central bank will have direct control of the regulations over the banks once the new supervisory system is implemented.

Noonan has not confirmed all three banks that will be participating as yet, but he has stated that AIB and the Bank of Ireland will be two of them. “We could have a number of bids on the table for the third,” he explained. Ulster bank is a likely contender, he said, but it all depends on which institutions are seen as “systematically important”.

The supervisory system will place the European Central Bank as the responsibly party for all major banks, taking over from national regulatory bodies. The change will take place during the middle of 2014.

The role of the central regulator will be to guide national regulators, but it will be the central regulator’s decision that is final. Those not included in the scheme will continue to be overseen by the Central Bank in Ireland.

The pressing issue of whether Irish banks require more funding input was also addressed by Noonan. He said: “There is no evidence whatsoever that any of the Irish banks will need extra capital next year. They are very well capitalised. I have no evidence [to the contrary] at this point in time either.”

His statement was met with some animosity, with Sinn Féin’s financial representative countering his words. Pearse Doherty asked how the banks would be financed, should Doonan be wrong and the banks would need capital after the stress tests. Noonan replied that he was “trying to construct a theory on a fake premise.”

The new budget will be brought forward to fall in line with the new ruling from Europe. It will be presented on the 15th of October, a full two months before its usual schedule. Noonan has said the finance bill will be released before mid-December.

For more information on this topic, please read my Slide Share.

The rise and fall of Anglo Irish bank has made some names famous, and others infamous. To help identify the aiders and the culprits of the complex situation unfolding in Ireland’s financial industry, below is a list of the main players in the events and where they stand now.

On the side of famous, we have Mike Aynsley, a strong financial figure with a seemingly clear idea of the situation. On the side of infamous, we have John Bowe and David Drumm, brought into the public awareness because of the leaked tapes of their conversations to the press.

Mike Aynsley

The Australian financier was brought into the fray as CEO to try and alleviate some of the bank’s issues and bring it back under control. He was successful in his bid to reduce the bank’s assets that lay in loans, bringing it from an uncontrollable €115 billion to a more manageable €14 billion. He also brought in €10 billion through the sale of the US assets of the bank.

Aynsley was able to bring the bank into solvency, but the decision of the government to make the bank liquidate may have undermined his hard work. The solution remains to be seen, but Aynsley has returned to his native Australia.

John Bowe

The banking executive was brought from virtual nonexistence in the public eye to the forefront of the Irish press’s interest in the Anglo Irish debacle. The internal telephone conversations between himself and his colleagues at the bank were published earlier this year, and they were less than flattering.

His most pertinent statement was perhaps on the €7 billion loan from the government to salvage the bank. “I picked it out of my arse,” he can be heard saying of the figure that costs the taxpayer more than a pretty penny.

Currently, Bowe is away in Istanbul, attempting to rein in some of the loans that the bank made to balance the books a little better.

David Drumm

Formerly the Chief Executive Officer of Anglo Irish before Aynsley, Drumm was replaced because of the spectacularly unwise comments he made on the leaked tapes. Within the space of a few short months, Drumm realised that the bank’s loans from the Central Bank were not enough to save it due to his misjudgement, and he turned to threats to resolve the situation.

His planned words to the Finance Minister Lenihan were: “What’s this about having to go through due diligence? You made that decision on the 29th of September. You’ve told world we’re all solvent. Now can you protect your hundred billion guarantee of us by writing a two or three billion cheque and get on with it.”

His unwieldy attitude towards the bank and towards the finance regulators led to this dismissal from the bank, and his condemnation by the public and the financial industry.

To keep up to speed on the situation at Anglo Irish Bank, please read my other posts and take a look at my Slide Share.

Michael Noonan, the force behind the liquidation of IBRC/Anglo Irish bank, evaluated the promissory note needed for the bank’s liquidation at €25 billion.

Mike Aynsley, former Chief Executive Officer and expert brought in to resolve the situation, estimated a higher amount of €28 billion.

So what will happen to the €3 billion excess not accounted for?

Unfortunately, it looks like the public will have to make up for the shortfall. Aynsley’s recent interviews with Irish press have illustrated that the bank was in fact solvent at the time of its liquidation, a fact that could lead to some very upset creditors dismissed in the act.

The potentially millions it might cost for the government to pay off the litigation from the creditors will have to come out of the public’s money, something that will almost certainly contribute to the introduction of a harsher budget.

The bank’s former Chief Financial Officer, Maarten Van Eden, has confirmed that this may be the case. “The liquidators may decide not to pay the creditors of Anglo [Irish Bank], but then they will be taken to court and the government will lose, because you cannot walk away from the liabilities of a solvent bank. Insolvency is the only reason for not paying your bills – even if you expropriate by law you will have to pay compensation,” he stated.

This is in direct contrast to the words of the man in charge of the liquidation, KPMG’s Kieran Wallace: “The bank was only solvent at the grace of the Central Bank of Ireland. It was not a solvent bank.”

However, the Department of Finance has seemingly countered this by saying that any difference found in the evaluation of the bank’s assets will have to be paid by the taxpaying public. A source stated the following: “The money will have to be found, yes.”

Creditors liable to bring suits against the government are firms such as Xaia Investments. The German-based company’s representative, Dr. Wolfgang Klopfer, responded to the situation by stating: “I expect a European government to act within the laws and once they act within the laws, there is no need to sue. I’m very confident that they will do it – and if they don’t do it, yes.”

The whole saga seems mired in confusion and the outlook for the public quite bleak, despite Aynsley’s efforts to save the bank from the very situation it finds itself in. To read more on the situation, please take a look at my Slide Share.

The Anglo Irish Bank tapes are fairly shocking. Leading executives at the bank were caught on taped conversations discussing their rather underhand tactics for disguising their actions, leading to a public outcry.

Mike Aynsley, the expert financier brought in to help put the bank back on its feet, has said that he had no idea of the extent of the tapes.

“I was shocked by them frankly. We hadn’t heard all the tapes,” he said, speaking on a talk show on Ireland’s TV3 channel. “We hadn’t heard these particular tapes. It was a bit of a surprise.”

A bit of a surprise is somewhat of an understatement for the public. The tapes reveal the general undercurrent in the bank’s culture, demonstrating the issues that Aynsley has pointed out in his recent interview.

There was a “continuing flow of difficult internal problems,” Aynsley stated. His input into the beleaguered company was to change “the vast majority” of the executives in a bid to streamline the bank and to resolve these very issues.

How did this environment even come to fruition? Aynsley says that the bank was a problem, but that the political situation was also a major contributor. There is a “weak regulatory environment,” according to Aynsley, which was akin to “hosting a 21-year-old’s birthday party… Nobody wants to come and say, ‘Go home.”

The cost of the bank’s folding will still cost the nation a fair amount. Aynsley, being the cautiously realistic type, still expects the bank to cost somewhere between €25 billion and €28 billion to resolve. A hefty number, but one that he has mitigated through his smart thinking during his time as Chief Executive Officer. He managed to significantly reduce the bank’s American deficits, helping to put the balance a little bit back into the region of manageable.

He also spoke about the relationship between the bank and the Department of Finance, which has been subjected to a lot of scrutiny in the past months. It was “testy” at times, Aynsley conceded, and it sometimes made the enforcement of borrowing agreements difficult at times.

Despite this, Aynsley had hopes for the bank just before its liquidation by the government.

For Mike Aynsley’s full comments on the tapes, please visit