Last month I wrote a piece about the Irish Nationwide Building Society and its special purpose vehicle, Armoin Securities.
Clare Daly, TD, asked a question in the Dáil on Wednesday (6 June) regarding the purchase of Armoin Securities by the Irish State via the Irish Bank Resolution Corporation (IBRC). This is the reply she received:
DÁIL QUESTIONNO 65
To ask the Minister for Finance the reason the Irish State, via the Irish Bank Resolution Corporation paid full value €2.5 billion to a company (details suppplied) even though the prospectus clearly stated that if Irish Nationwide was not in a position to pay, then the investors would lose..
- Clare Daly.
* For WRITTEN answer on Wednesday, 6th June, 2012.
Ref No: 26273/12Armoin Residential Securities
REPLY
Minister for Finance ( Mr Noonan) : As the Deputy is aware the Board of the bank is responsible for the day to day operation of the bank. Nonetheless, the Deputy may wish to note that the company referred to in the question was an independently rated funding vehicle set up by INBS that enabled INBS to access low cost funding from the ECB. It was fully consolidated into INBS and all securities issued by that company were held by INBS. Therefore at no time were any securities sold to external investors. The structure was unwound at no gain or loss to IBRC in April 2012 as the particular securities no longer met ECB criteria and therefore the bank was no longer able to access low cost ECB funding.
I find this fascinating. There’s a lot of information in that statement - the ECB’s exposure to Irish Nationwide via cheap loans based on a non-traded SPV, the increased reliance on the shadow banking system for funding post-2008, the role of the shadow banking system in the Irish mortgage market - and that’s just at first reading.
It’s fair to day that untangling the business practices of the Irish banking sector both pre-and post-2008 will be a long and difficult process, but the beauty of questions like the one asked by Clare Daly is that they get to the heart of the mechanism itself rather than the flashy lights of the personalities involved.
I just know that there’s more going on in that answer than I’m aware of at the moment, as I don’t know enough to truly contextualise it. But hopefully over the next year or so the gems that are hidden within it will become more clear.
It’s true the world of Irish Banking both pre and post 2008 is a a very murky, twisted and moralless place, but thanks to to sites like this and the likes of Clare Daly and others we need to continue to ask questions, the Banks are unwinding their positions slowly, they are making headway into recovering their positions quietly and as soon as they can, it will be business as usual!.
I would dearly like to know some critical information relating to Ulster Bank, 1. What entities bought their MBS through Celtic Residential Irish Mortgages tranches 1-17 and most importantly lists of the Mortgages contained in each tranche, my fear is this information will never be known unless we stumble across it or a “whistleblower” steps up to the plate. What I am certain of, in my mind, is that Ulster has foreclosed on many individuals without having any Legal standing and absolutely no rights over these properties and the legal system has been complicit in aiding and abetting this fraud. Any information is welcome and will be acted upon in strictest confidence.
The below is taken from INBS’s Annual Report and Accounts for 2010.
“In 2009 the Society entered into a securitisation transaction during the year that resulted in the legal transfer of residential loans and advances to a subsidiary special purpose entity, Armoin Residential Securities Ltd (Armoin).
While the Society has transferred these loans and advances to Armoin, it has retained substantially all of the credit risk associated with these transferred assets. Therefore, the Society continues to recognise these assets within loans and advances to customers”
So a “legal transfer” of the residential loans took place yet “the Society continues to recognise these assets within loans and advances to customers”. So then was the transaction at arms length or not as is required in securitisation?
Also even if INBS/IBRC bought these loans back then the loans should be no longer attached to peoples debt mortgages. Does Mr. Noonan even know what he is reading?
Jack
(PARAPHRASED) REPLY
Minister for Finance ( Mr Noonan) : As the Deputy is aware they only did the securitization thingamejig to access low cost funding from the ECB. The particular securities no longer met ECB criteria and therefore the bank was no longer able to access low cost ECB funding, so we got together and thought it best to forget about the whole thing.
The structure was unwound at no gain or loss to IBRC in April 2012 because we thought it would be fairer to let the Irish People pay for the mess even if the bank guarantee didn’t really cover this sort of thing.
Is it possible for Claire Daly to request that Noonan elaborate on his answer. How does securitisation help anyone to get low cost funding from the ECB wihtout investors being involved?