Defaulting banks - where will it stop?

[Jan Klimkowski]

Yet more proof that there's one rule for us, and another rule for the bankers.

Britain paid an extra £10BILLION to bail out Irish banks in back-door deal through RBS

Ulster Bank has received more than £10bn from parent Royal Bank of Scotland to cover losses since 2008
Bank operates predominately in Republic of Ireland
Figures come as MPs discuss breaking up RBS into 'good' and 'bad' banks

By Matt West Daily Mail

PUBLISHED: 10:25, 10 June 2013 | UPDATED: 11:00, 10 June 2013


British taxpayers have paid more than £10bilion by the back door to bail out the Irish economy in an agreement that was never approved by Parliament, it emerged today.

The figure is more than three times the £3.25billion pumped into Ireland by the British government and approved by Parliament as part of a wider European Union/International Monetary Fund backed bailout of the Irish economy in November 2010.

The additional funds were given to Ulster Bank, a subsidiary of the Royal Bank of Scotland which is 81 per cent owned by the taxpayer, after the Government rescued the over-stretched bank to the tune of £45billion five years ago.

New figures filed by the Dublin-based lender at the Companies Registration Office show it has received an injection of £14.3billion from RBS to cover loans which have gone bad since the collapse of the Irish housing market in 2008 as well as future losses.

Analysis by investment bank, Investec, has showed bad loans at Ulster Bank, which despite its name operates predominately in the Republic of Ireland, so far account for £12.7billion out of a total of £44.3billion in bad debts at RBS since the start of the financial crisis.

Had the taxpayer not bailed out RBS, the bank would not have been able to support its Irish subsidiary. The consequences for the Irish economy would have been severe and it is unlikely Ireland would have been able to absorb the losses at the nation's third largest bank.

Investec's banking analyst Ian Gordon told The Times that losses at Ulster Bank represent roughly a quarter of RBS' losses to date.

When RBS failed Ulster Bank accounted for only around 10 per cent of group loans yet cumulative Irish impairments since then have been around £12.7billion and over just the past three years Ireland has contributed around half of all RBS bad debts,' Mr Gordon told the newspaper.

The figures come as MPs on the independent Banking Commission prepare to discuss the future of RBS and whether to split the bank into a good bank and a bad bank similar to the break-up of Northern Rock in order to allow RBS to be returned to private hands.

Despite the Chancellor George Osborne making it clear he will resist attempts to break up RBS, the Treasury is keen to sell its stake in the bank and Lloyds Banking Group, which is 39 per cent taxpayer owned, or at least to have started the process, by the time of the 2015 general election.

The Treasury is far closer to achieving this aim with Lloyds, which last month announced pre-tax profits had leapt to £2billion in the first three months of this year, compared to £497million a year earlier.

Lloyds' share price surged on the news and recently passed the Government's break-even point of 61p per share, which would allow the Government to recoup the £37billion it gave the bank to save it from collapse. Lloyds' shares were today trading at 62.2p.

Lloyds pumped €8billion (£6.81billion) of capital into its own Irish subsidiary between late 2008 and 2010, when it let its local banking licence lapse and took the loans into its own books.

The severe losses suffered by certain UK lenders in Ireland partly reflects the aggressive lending practices they employed here," said Philip O'Sullivan, chief economist at Dublin-based NCB Stockbroker
Ulster Bank's net loss narrowed to £2.2billion from £2.8billionn in 2011, as loan impairment losses fell 37 per cent to £2.34billion. The capital injection from RBS last year was the smallest since 2009, the bank said.

Ulster Bank has received a £2.93billion capital injection from RBS last year alone. The lender, which was bought by RBS in 2000, under Sir Fred Goodwins' strategy of acquiring businesses to gain market share doubled its assets to £55billion in the four years before Ireland's property bubble burst, according to a report published in 2011 by the Financial Services Authority.