Ronan Emmet writes:

Not only did the Irish citizen pay more per head then any other euro citizen or country to fix the European Banking Crisis, we also have the luxury of paying the highest mortgage interest rates of any EURO country.

Is there anything that the Irish Government and bankers touch that doesn’t have a whiff of a scam to it?

Irish people are being ripped off and it will continue until Irish people learn to stand up for themselves against those in power. Time to drain the swamp in Dail Eireann.

Source: Central Bank of Ireland

64 thoughts on “Rate My Rate

  1. Peter

    This isnt the government.
    The EU insists our banks build, up capital reserves because they went bust in the crash,. So they charge more for loans..They have no competition anyway.

    Reply
    1. MaryLou's ArmaLite

      They also have a lot of can’t pay/ won’t pay mortgages that Banks are not allowed to repossess.

      Reply
  2. Kirkbadaz

    Seems like something the middle classes should be up in arms about rather than whether someone deserves a council house or not?

    Reply
  3. Rob_G

    Interest rates in Ireland are so high because it takes something like 5 years to evict someone who isn’t paying their mortgage. When the banks are losing money on all of these delinquent mortgages, where do you think they recoup these losses? That’s right, from the hardworking people who pay their own mortgages and tow the line.

    All of this ‘No evictions!!!’ business has real world consequences – remember, the house always wins, the banks will get their money somehow, it just means that the ordinary mortgagee ends up paying the mortgages of those who don’t pay along with their own.

    Reply
    1. Col

      And those of us who can’t find a place to buy are still saddled with extortionate rents in small apartments while these people pay nothing and stay in their family homes.

      Reply
    2. Johnny

      So like the banks are “averaging” their loan book rates with increased rates on new lending…..
      Is that kinda like reserves against losses via interest rate hedging by ….
      That’s a complete total load of rubbish,you simply made all that up.No financial institution makes new customers pay for the mistakes their bankers made in a prior era-it’s something only a financially illiterate person would make up.
      Ok lads we have some bad loans,I’ve a brilliant idea,we simply overcharge new customers with sky high interest rates (this above mkt interest would not even dent those bad loan books) so duh !

      Reply
      1. Clampers Outside!

        Every business on the planet will raise prices on one or more products to compensate for profit underperformance or losses on another product in their range.
        Banks and their products are no different, in fairness.

        Reply
        1. johnny

          The vast majority off bad loans the banks made were originated in 05-07,its now 2018 can you explain how long this practice continues, for ever or like say another 10 years ?
          Do relatives or friends or people who live close by these bad loans pay higher rates?
          Is it true that good looking people get lower rates……

          If an argument was made that the market were charging more for irish banks to borrow due to the reckless nature hardwired into Irish banking,yeah maybe but they not.

          The banks have more than adequate reserves against these legacy loan books and have moved on, its time you did.

          Reply
          1. Rob_G

            Both you and Anne are conflating how you think the world should work, with how the world actually works. There are still stories in the newspapers every week about court cases arising from loans made in this period (see the Gilson story on another thread) – the fallout from the banking crisis is very much still with us.

          2. anne

            The world actually works by bailing out private entities with taxpayers money when they’re “too big to fail ” – meaning they’ll be bailed out with taxpayers money, but according to the laws of capitalism that shouldn’t happen.

            It’s one set of rules for the wealthy & everyone else live &

          3. anne

            It’s socialism for the rich & capitalism for everyone else basically… so feck off telling us about how the world works. thanks

          4. anne

            That was the fail out from a Vulture…

            As that Bald Eagle accounts teacher sociopath from Limerick said, Paddy is great pickings for the Vultures.

          5. johnny

            what ‘world’ Rob the banking world-KBC and BofI both adjusted upwards their reserves against bad loans in their recent 2nd quarter results-we can discuss that ?
            is that real enough for you-or should we stick to made up stories about banks gouging new customers in some mickey mouse scheme to offset reckless lending from the past ?

          6. Rob_G

            “…stories about banks gouging new customers in some mickey mouse scheme to offset reckless lending from the past ?

            Why do you think they would not do this? You either have an extremely benign view of the banks’ willingness accept losses, or are very unworldly.

            https://www.independent.ie/business/personal-finance/property-mortgages/variable-rates-so-high-because-thousands-are-choosing-not-to-pay-their-mortgages-36919488.html

            “That was the fail out from a Vulture…

            As that Bald Eagle accounts teacher sociopath from Limerick said, Paddy is great pickings for the Vultures.”

            This makes so little sense I can’t even begin to fathom what you are talking about.

            I have had enough of teaching johnny and anne about economics for today; suggest you find a podcast or something.

          7. Owen C

            Irish banks have to set aside 4-5x as much capital as Nordic banks for NEW mortgages, not just old ones. This is directly caused by the high level of arrears and losses on mortgages that have occurred over the last 10 years (and interrelated economic/property market volatility). It will continue for another 5-10 years regardless of how ‘safe’ new lending is, as the underlying risk models look at risks ‘through the cycle’, so past incidences linger for years afterwards. That’s why they have to charge higher rates than other European banks to generate the same implied level of return (return on equity) as other European banks.

            Page 43/Slide 41, bar chart on the top right

            https://investorrelations.bankofireland.com/app/uploads/Bank-of-Ireland-Investor-Presentation-June-2018-1.pdf

          8. anne

            That might be the excuse but they are very profitable… so their loses are our problem, their profits are theirs.

          9. johnny

            ROI is simply a target you intermix Nordic (diff regulators) and European why,who’s they ?
            the ref/pg no makes no sense-do you have a link to ‘these” capital requirements on new lending ?

          10. Owen C

            “they are very profitable”

            I’d love to know what metric you’re using for that subjective analysis. Please fire ahead with how you measure profitability and how it compares with other European banks. Thanks.

            If i used the reference analysis which the likes of the ECB uses, Return on Equity, then the Irish banks on an underlying basis (stripping out exceptional items and write backs), then they are generating an ROE of c.7-9% for AIB and BOI, and 3-4% for PTSB. This is less than the 10% minimum ROE which the investors typically require and less than half the 15-20% ROE which Nordic banks are capable of generating. Again, this is a key part of understanding that Irish banks require more nominal € capital to set aside against lending than comparison banks in the EU.

          11. johnny

            so no link and a load off noise about exactly what ?
            You mention the ECB-are they setting these buffers your referencing without any link?

            “This is less than the 10% minimum ROE which the investors typically require and less than half the 15-20% ROE which Nordic banks are capable of generating.”

            so its the shareholders that are demanding this ROE ?

            you ok Owen ?

            (the post a bit-i never mentioned profits)

          12. Owen C

            @ Johnny

            All large European banks are effectively governed by the same regulatory regime under umbrella regulatory bodies such as the EBA, which ensures that EZ/UK/Nordic banks all adhere to the same rules after applying any locally necessary derogation.

            Risk weighted assets (RWA) in simple terms:
            Loan € x risk weight applying to the loan type = RWA

            The total capital required by the bank is equal to the RWA calculation x the minimum capital level (it varies from bank to bank, but is effectively transitioning to 12-13% over the next couple of years).

            So in really simple terms, per that bar chart, you take 100m of mortgages, multiply by 42.5% RWA %, and then multiply by 13% = 100m x 42.5% x 13% = 5.53m of capital set aside for that mortgage book. For the Nordic banks, they would only need 700k of capital. Thats the denominator in the ROE calculation.

            A mortgage should have a very low risk weight (as can be seen in Nordics and as applied to Ireland previously), with a personal loan or an SME loan having a higher risk weight, but due to the exceptional nature of the Irish housing/mortgage crisis, it now requires much higher risk weightings and so much larger amounts of capital set aside.

          13. johnny

            so no link but now its the EBA-Owen as grateful as I am for this ‘lecture’ which doesn’t really apply-are you saying its ‘market’ specific or institution (legacy issues) ?

          14. Owen C

            @ Johnny

            you ask for links, then links you shall get. I’ll assume you’ll read them thoroughly before responding.

            Here’s the EBA Single Rulebook. It’s a few hundred pages, so take your time. But given that you didn’t seem to know there was pan EU regulation of banks, yet still saw fit to question the credibility of what I was suggesting, maybe give it a double reading.

            https://www.eba.europa.eu/regulation-and-policy/single-rulebook

            “The Single Rulebook aims to provide a single set of harmonised prudential rules which institutions throughout the EU must respect.”

          15. Owen C

            @ Johnny

            The CBI is a member of the European System of Central Banks (to give the ECB its full title). The ECB now regulated EZ banks above a certain size via the Single Supervisory Mechanism (SSM). In conjunction with the EBA, the ECB, the Bank of England, the Swedish FCA and all the other EU regulators team together to ensure harmonised implementation of banking regulations.

            “The ECB directly supervises the 119 significant banks of the participating countries. These banks hold almost 82% of banking assets in the euro area.”

            https://www.bankingsupervision.europa.eu/about/thessm/html/index.en.html

            The CBI retains ownership of local implementation issues such as the counter cyclical capital buffer you note above. In practical terms, this means the ECB SSM sets the first 10-11% of regulatory required capital, the CBI the next 1% (the CCyB you note) and then bank management/shareholders decide the individual buffers on top (around 1-2%). That ends up being the amount of capital a bank holds against its loans.

          16. johnny

            Owen-simple question are these ‘buffers’ market specific or institution, how many banks are on this list, besides clearly the Irish ones you stated, and you mention the ‘cycle’ how long is it ?

            (i do smell blood indeed yep:)-bit its a bit too early off garb coffee Owen-i get your point kinda but this was about the lack of evictions)

          17. Owen C

            @ Johnny

            as regards market or institution specific, its a complex mesh of local and pan-EU rules, which actually now link in with a move to globally harmonised rules (aimed at so-called Globally Systemic Financial Institutions), on top of any additional market ‘requirements’ for perceived risks/issues.

            On that BOI presentation, on page 42/slide 40, they give a good outline of the different regulatory requirements they now face

            https://investorrelations.bankofireland.com/app/uploads/Bank-of-Ireland-Investor-Presentation-June-2018-1.pdf

            There are 8 different current, future or potential capital requirements they need to adhere too, set by the CRR and CRD (EU law/ECB requirements), P2R (ECB), countercyclical capital buffer (set individually by CBI, BOE FPC, Fed), O-SII buffer (CBI), Systemic Risk Buffer (Minister for Finance). There is then a Pillar 2 Guidance (P2G) which they don’t even disclose which is set by the ECB. On top of that, management/shareholders will look to retain buffers over and above the legally/regulatory capital requirements

            Additional to this, no two banks operate with the same RWA model (there is a more penal standardised model, but they all try to implement some elements of Internal Risk-Based (IRB) RWA models), so they will need different € amounts of capital regardless of what the 12-13% headline regulatory requirement says

          18. Rob_G

            Watching Owen and Johnny debating is really like watching Garry Kasparov and a pigeon playing chess.

          19. Owen C

            @ Johnny

            no one is able to say how long “the cycle” is, but academic research suggests property market cycles last at least seven years and up to twenty years. The issue is that property market values are still very volatile, and arrears on legacy loans are still very high. So until they’re dealt with (no more arrears for a few years, more stable property prices), you couldn’t with any statistical honesty come up with a risk model which suggests losses on future irish residential mortgages won’t be a problem and don’t deserve onerous treatment.

          20. Cian

            For any of yizzers that are wondering about Rob_G’s chess comment

            “it’s like trying to play chess with a pigeon — it knocks the pieces over, craps on the board, and flies back to its flock to claim victory.”
            – Scott D. Weitzenhoffer

        2. anne

          It’s like cold capitalism when it suits.. the banks were bailed out with taxpayers money dear.. your point is mute.

          Reply
        3. johnny

          Owen-how about utilizing your term and we say irish interest rates are a result of a complex mesh situation!
          So no link or list of these banks/areas-ok ok :)

          Reply
          1. Owen C

            @ Johnny

            I gave a fairly central link above that you clearly didn’t even bother to have a go at. Two clicks later you can have the full list, but if this is the level of curiosity or effort you’re willing to put in to it, I don’t really see why I should have to keep being polite enough to answer your endless set of questions.

            The first part of the list are directly supervised by the ECB. The second part are “indirectly” supervised, which means supervised by the local regulator/national authority but in adherence with basic ECB/EU rules.

            https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.list_of_supervised_entities_201807.en.pdf

          2. Johnny

            Owen you haven’t bothered to answer one question,you’ve bombarded me with noise and useless links-all of which I already knew.
            I can keep asking or like most people move on and get on with my day.
            Your clearly referencing some “list” of Irish banks with legacy bad loans that have according to you some “sin” capital buffet requirement,like a time out.
            I’m curious how long your on this “list” for,how do you get off it,and do you get on it based on geography or simply legacy bad loans ?
            As for the rest it’s irrelevant and not applicable and mostly noise around capital requirements.

          3. johnny

            Owen-you went off on a rant about capital requirements for European banks with links to a long list of supervised institutions.
            None of which explains why interest rates are so high in Ireland-Ed Sibley in a recent speech addressed this,without resorting to bombarding his audience with noise and nonsense about Supervised ECB institutions,

            https://www.centralbank.ie/news/article/irish-mortgage-market-2018-and-beyond-ed-sibley

            Rob-your link to Brendan Burgess in the Indo is pitiful.

          4. Owen C

            @ Johnny

            “I knew all this already”

            All the LOLs.

            The data included in the very first link i provided is from the EBA transperency exercise last year. Every bank within the EBA/ECB supervisory coverage (the last link i provided you with) has to submit a standardised set of returns which detail risk weighted assets by loan type (ie mortgage, corporate, government). But you knew this already I’m sure. The average for the Irish banks returning data under this process (ie all of them ones included in the latter link) had an average 42.5% RW on residential mortgages. Its not a “sin” capital buffer requirement, as I’m sure you knew already, its literally the model they need to use to gauge how they calculate their required capital against loans (they don’t just take the model from the regulator – they have to do a collaborative exercise with the regulator using their own data and the regulator verifying the statistical appropriateness of it etc). Its not a time out, its just what the statistical models suggest they will need to reserve for in the future based on the experience of the past. But you knew this already.

            “I’m curious how long your on this “list” for,how do you get off it,and do you get on it based on geography or simply legacy bad loans ?”

            Anyone who could ask this question “how long are you on the list” clearly doesn’t know ANY of this already. Its not a bad bank list. You don’t go on or off it. Its just the current reality of what the model, formulated by the banks and the regulator (see the recent ECB TRIM process – I’m sure you know of it already), spits out and which they have to adhere to.

            It’s like teaching a cave man about fire. Which I’m sure you knew already.

          5. johnny

            FFS Owen,its broadsheet I’m not one your small time clients thats need a lecture from a x bond trader,who’s now peddling dodgy advice on crap Irish banks,the majority off which are govt owned/controlled.
            Glad you have so much time on your hands to bombard me with nonsense on Irish banks capital requirements.
            Go build your fire there Owen-I can recommend lots second rate reports on Irish banks to build it with-that no one ever bothers reading!

          6. Rob_G

            johnny: “do you have a link for that?”

            Owen: “Sure, here you go”

            johnny: “Those documents are too long and I cannot understand them – ergo, I have won the argument”

          7. johnny

            Gosh Rob are you living vicariously through Owen,ah of course its Man Crush Monday-when you grow up to you want be just like Owen-pity your stupid point was lost in all this,oh right you had a s**t link to a quote from Brendan Burges in the Indo that was ridiculed by pretty much everyone, except of course you!

  4. anne

    Here, Richard Boyd Barrett puts it better than me –

    https://www.irishtimes.com/opinion/letters/sale-of-ptsb-mortgages-1.3585865?mode=amp

    Sale of PTSB mortgages

    , – It is disgraceful that Minister for Finance Paschal Donohoe would sign off on this sale of over 10,000 mortgages to Start Mortgages, a subsidiary of Lone Star, which has a horrendous record in taking aggressive action to evict people.

    After the financial crash, the people of this country bailed out these banks to the tune of tens of billions. For this, the public get the Minister for Finance not only failing to use his 75 per cent share in the bank to protect these vulnerable mortgage holders, but he is effectively gifting the wolf the keys to the front door. The Minister should block this sale as he has a duty to protect these vulnerable mortgage holders, many of whom are families.

    It is also utterly scandalous that the very entities that the Minister will be gifting these mortgages to pay little or no tax in this country due to tax arrangements put in place in 2013 by his predecessor, Michael Noonan, who effectively invited these vulture funds in the first place. At every turn, Fine Gael has facilitated and championed the interests of greedy and profit-driven vulture funds at the expense of mortgage holders and those affected by the housing crisis. – Yours, etc,

    RICHARD BOYD

    BARRETT TD,

    Reply
  5. stephen c

    Ireland has better safety nets for tenants and mortgage defaulters than most of the world. Take Finland there for an example

    http://www.probonodicta.org/2015/housing-justice-project/housing-law-in-finland/

    “In Finland a landlord is able to terminate a tenancy immediately without notice, if tenant has not paid his rent in two months. ”
    ” After the landlord gets the judgment the sheriff usually gives 2-3 weeks to tenant to move out before actual physical eviction”

    No fixed terms.
    https://yle.fi/uutiset/osasto/news/economist_finland_has_lowest_mortgage_interest_rates_in_eurozone_but_there_are_risks/10176839

    We have high security, its very hard to evict tenants and seizing principal private residences is almost never done. You pay for this security.

    Reply
    1. anne

      Wonderful..lets all move to finland & build igloos. Rents are probably reasonably affordable there.. so you’re not comparing like for like

      Reply
      1. Rob_G

        This is precisely the level of intelligence and insight your public have come to expect from your comments, Anne – kudos.

        Reply
  6. Anne

    I’ll just leave this here… welcome to our new overlords, coz like profit is all relative and that. There’s more to be made.

    http://www.davidmcwilliams.ie/namas-actions-have-enslaved-us/

    These whites are not the affluent, chino-wearing, golf-playing whites of upscale Barbados. These are poor, very poor whites. As I watch them line up solemnly at St John’s, where a church has stood since 1630, they all display the universal tell-tale sign of poverty: rotten and missing teeth.

    These people are the last of the ‘red legs’, the distant demographic echo of Irish slaves sent to Barbados by Cromwell. It is thought that between 1645 and 1660, 40,000 Irish captives were sold into Caribbean slavery from Ireland, via Liverpool and Bristol to Barbados and beyond. As with all slave trades, the people were sold via middlemen. They didn’t walk willingly to Waterford port. They were traded.

    It’s amazing to think that slavery was legal, isn’t it?

    As I considered the future of this tiny Irish tribe, the ‘assets’ Cromwell’s middlemen traded for pennies, the words Colm O’Rourke declared last year came to mind: “The reality is that Nama is, with official blessing, overseeing the greatest plundering of Irish assets since the Cromwellian plantations.”

    In the past eight years, huge tracts of Ireland have been sold by Nama at deep discounts to vulture funds. This went on under the radar, in effect transferring enormous wealth out of Ireland to foreigners. Maybe it wasn’t the Cromwellian plantations, but it is hard to think of another country whose own government sanctioned such a fire sale of national assets.

    For the past few years, having bought up the assets, the vultures have been hovering over their prey, but now they are ready to swoop. As this paper reports today, the vulture funds are now moving against the former owners, squeezing the last few quid out of their Irish assets.

    Thousands of small businesses are now under the control of vulture funds.

    The strategy of the funds is to buy as cheaply as possible and sweat the asset until the yield on the property rises. Once the yield or the income of the property rises, they can re-rate the price of the property upwards. In finance, this is almost formulaic. But in reality it is far from a formula.

    Re-rating the property value upwards at a time of low inflation will involve putting up rents, squeezing the owners – who are pretty much bust and may have one business (a pub, say) which is throwing off just enough cash to pay the interest on the property. Now the vultures are using the Irish courts to come after the other assets of the unfortunate owners. So if the ‘loan’ for a house was secured against a pub, for example, both the pub and the house are now being claimed by the vultures.

    In the next few months, the courts will decide how many of Ireland’s small businesses will be handed over to these funds. This transfer of assets is taking place right under our nose. It is a disaster for the country, for the society and for the capital base of the economy, and yet it is legal.

    But then again, so too was slavery – once.

    Reply
    1. Cian

      He also says in that article (from just over two years ago):
      Most vulture funds have a rule called the three-thirty rule.This means they buy and hold for a maximum of three years and once they make 30 per cent, they are out.

      We’ve had these vulture funds for nearly 10 years….

      Reply

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