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Eamonn Farrell/Photocall Ireland

Ulster Bank lost €925m in deposits when Bank Guarantee kicked in

The Irish arm of RBS lost £732 million in deposits in the four days after the government guaranteed its native competitors.

A STATE-SPONSORED BRITISH report has revealed that Ulster Bank lost around €925 million in customer deposits in the four days after the Irish government introduced its bank guarantee for Irish-owned institutions.

A report into the circumstances that led to the British government’s bailout of Royal Bank of Scotland, Ulster Bank’s British parent, declared that the bank lost £723 million in the days after the Irish government offered a guarantee for its native banking competitors.

Ulster Bank was not among the institutions guaranteed by Ireland, because it is a wholly-owned subsidiary of RBS, which is regulated by the UK’s Financial Services Authority.

The report discusses how the backing of a sovereign state caused a major influx of capital to the covered Irish institutions and out of non-guaranteed alternatives – with Ulster Bank one of the major losers as savers moved deposits into institutions which were, notionally, more secure.

The FSA report also discusses how Ulster Bank began to concentrate on property-based corporate and residential lending in the latter part of the last decade – forcing it to ultimately write off close to £6 billion in loans over three years.

Ulster Bank incurred £4.4 billion in impairment losses between 2008 and 2010, the report said, “reflecting the scale of poor corporate property lending in Ireland, in which RBS participated.”

The bank also wrote off £475 million of residential mortgages in the same period, and £962 million of other loans in that time.

The report is elsewhere critical of RBS for allowing itself to build a loan portfolio that was so heavily exposed to the Irish property sector through Ulster Bank’s own portfolio, as well as RBS’s other exposures to the sub-prime mortgage market.

It quotes managers from one hedge fund who said RBS’s decision to retain those loans on its balance sheet as “mind-boggling”.

More broadly, the FSA’s report is critical of itself for how it allowed its own criticisms of RBS’s management to be watered down in the years approaching the British government’s bailout.

The report documents how the authority prepared a letter to be sent to RBS chief executive Sir Fred Goodwin, outlining a series of major concerns about how the bank was operating – but how Goodwin was permitted to edit the letter before it was sent to him.

The report seeks legal changes to ensure that individual bankers can be prosecuted for the failure of their institutions.

The British government injected tens of billions of pounds into RBS in 2008 and 2009 after the the potential scale of the bank’s lending losses became known. The government now owns 84 per cent of the RBS Group.

Europe gives green light to extending Ireland’s bank guarantee

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6 Comments
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    Mute Biff Finn
    Favourite Biff Finn
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    Dec 12th 2011, 3:39 PM

    Maybe thats why they didn’t reduce my mortgage with last 2 rate decreases…

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    Mute occulusdexter
    Favourite occulusdexter
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    Dec 12th 2011, 4:25 PM

    Ul ster Bank should do the right thing and pass on the interest rate cut to me and others !! or it’s jingle mail for them !!!!!

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    Mute Debbie Ringwood
    Favourite Debbie Ringwood
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    Dec 12th 2011, 11:42 PM

    There might be issues in other areas but as a startup biz in 2011, they’re the only ones interested in opening new accounts – the Irish banks don’t give a damn

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    Mute Darren B Waters
    Favourite Darren B Waters
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    Dec 12th 2011, 8:05 PM

    I worked for them in the UK. The management did not know what was going on one day to the next. They would only promoted people that would suck up to them and tell them wanted to hear. And that’s why it all went belly up.

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    Mute Cathy Dalton
    Favourite Cathy Dalton
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    Dec 12th 2011, 5:56 PM

    Ulster Bank loaned myself and my ex two loans for properties as pension, in 2003 and 2005. The loan is in place since 2005 is on an interest-only basis. The loan was obtained on the basis of misrepresentation: UB were given as security a lien on a property which was to be removed when planning permission for the adjoining site came through. This happened in 2008. They are still taking interest-only payments, have held on to the interets in the property, and have obstructed transfer of title in this and another property on foot of a Family Law agreement (hard-won after 5 years). In effect they are preventing me from obtaining a legal separation/divorce. That is after several years of increasing lending to my ex against my wishes, with all payments being taken out of a company account, of which I was co-Director, even when in desperation I terminated the company mandate, after they would not facilitate a change to a joint mandate. In the end I resigned my directorship as I had no financial control because of their actions. Despite this, they are still trying to hold me liable for the debts incurred. None of the loans have been defaulted on to date. Usury.

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    Mute John Connolly
    Favourite John Connolly
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    Dec 13th 2011, 1:00 PM

    Jaysus.

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