Daily Archives: March 31, 2011

Robin Harding

We’re working our way through the Fed’s data dump but our crack coding team have extracted enough that we have a sense of the big users of the discount window. CAUTION: We can’t vouch for the complete accuracy of this scrape.

The biggest day for the discount window was the 29th October 2008 when lending stood at $110bn. Here’s who had the money:

 Read more

Irish stress tests reveal a capital shortfall of €24bn, comprising:

  • Allied Irish – €13.3bn
  • Bank of Ireland – €5.2bn
  • Irish Life – €4bn
  • EBS – €1.5bn

Note: Anglo Irish Bank and Irish Nationwide Building Society were not included in the exercise because their loan books are being wound down. Anglo was fully nationalised in January 2009 and Nationwide is “effectively state-owned”. Both have required substantial state aid.

The headline figure of €24bn is better than many expected, particularly since about a fifth of it is for an additional capital “buffer” that goes beyond the 10.5 per cent tier one requirement in the base scenario, and 6 per cent requirement in the adverse scenario. Without this additional requirement, the recapitalisation requirement would be €18.7bn. The Irish central bank seems to have gone for the warts-and-all approach, which bodes well for the reliability of the numbers.

As well as raising new capital, banks will need to sell many of their non-core assets, following a deleveraging plan agreed with the central bank “in order to transition to smaller balance sheets and a more stable funding base”. They will separate assets into core and non-core, gradually selling off the latter. But shareholders, take heart: first, this will not be done in a hurry; second, the losses this will inevitably incur are already factored into the analysis: Read more

Taiwan has raised rates 12.5 basis points, or an eighth of one per cent, sticking to its plan to normalise rates. The move was widely expected.

Consumer prices rose sharply between January and February – the first substantial increase since October last year. Since then prices have mostly fallen or been static. The less volatile annual rate is more modest, showing a 1.33 per cent gain on the year. The CBC forecasts inflation of 2 per cent for the year. Read more

Chances of an April rate rise have risen further as the latest estimate of eurozone inflation exceeds expectations. Consumer prices rose 2.6 per cent in the year to March, according to a flash estimate by eurostat; they had risen 2.4 per cent in the year to February and 2.3 per cent in the year to January, against a target of “below but close to 2 per cent”.

Many worry that raising rates will disproportionately hurt vulnerable economies struggling to pay their debt. As Ralph points out, an ECB interest rate rise could hit countries such as Ireland – but also Spain – harder than elsewhere because of its impact on mortgage markets. But executive board member Jürgen Stark argues in today’s FT, persistent high inflation would penalise those economies more in the long run, as investors seek compensation for inflation risk. Read more