What is max% government can hold without banks being "nationalised"?

cyberianpan

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As part of the Nama transfer deal the government will have to inject capital into the banks in the form of equity.

Lenihan has indicated that he may not have to "nationalise" AIB & BOI See

So my question is:
What percentage of equity can the government hold and still say the banks "aren't nationalised" ?

ISE rules usually require 25% + of shares to be publicly available for trading, though they'll make exceptions.

I've fuzzy recollections of company law for publicly listed companies but I think it said that once a single shareholder goes above 80% they take on additional obligations and they can force the buyout of the remaining 20% or the remaining 20% can demand to be bought out. So I think the threshold looks like 75-80%.

Can anyone aid in answering this question, as I'll freely admit my knowledge of equity listing is rusty !

cYp
 


kerrynorth

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100% is the answer. Full ownership does not itself mean full nationalisation. Nationalisation also involves the State taking on the burden of the assets and liabilities and the day to day running of the bank. The State can through an investment vehicle own 100% of a bank without taking on the full responsibilities of outright nationalisation.
 

Middleaged

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100% is the answer. Full ownership does not itself mean full nationalisation. Nationalisation also involves the State taking on the burden of the assets and liabilities and the day to day running of the bank. The State can through an investment vehicle own 100% of a bank without taking on the full responsibilities of outright nationalisation.
Is that how the UK Govt, did the RBS deal?

Because they still trade
 

cyberianpan

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100% is the answer. Full ownership does not itself mean full nationalisation. Nationalisation also involves the State taking on the burden of the assets and liabilities and the day to day running of the bank. The State can through an investment vehicle own 100% of a bank without taking on the full responsibilities of outright nationalisation.
Indeed - but politically 100% would seem ... like well 100%, especially if the ISE delisted the banks (though on a side point the banks should delist from the NYSE as SOX is far too onerous)

Also doesn't EU law apply here ? As in I don't think the State can suddenly acquire a controlling interest in a particular sector (banking) as that violates competition law ? Even if they tried an arm's length trust I think that would fail (legally)

I think a lot of people could prove to be surprised by what "not nationalised" means

cYp
 

cyberianpan

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So can we say that for political purposes nationalisation would be a 100% stake ... and that to avoid charges of nationalisation it would be preferable to maintain a stockmarket listing ?

Thus up 75% government owned is certainly fine and higher if the ISE approves ?

cYp
 

cyberianpan

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Also does % holding potentially affect:

1) Limited liability status of the bank
2) EU competition law being forcibly triggered
3) EU national debt measurement rules

I ask this as I think AIB is heading for over 80% state ownership (though of course the Sep 16 "haircut", being only ~1/3 of the haircuts/acquisitions, won't push it that far)

cYp
 

cyberianpan

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Is that how the UK Govt, did the RBS deal?

Because they still trade
It is

There are legal niceties around just how much the government can own ... if it should go for an "arms length SPV" ...

On the common sense side if it does nationalize ... they need to only have oversight of the banks... not try to run them

The phrase "Nationalize the banks" is getting bandied around a lot and I don't think there's clarity on what it means

For example Nama & Nationalization go well together:

Karl Whelan
First, Sarah frames the debate as nationalisation versus NAMA. However, both than 20 guys piece and my earlier four-point plan proposed that a NAMA-like vehicle be used in conjunction with nationalisation, so it is not accurate to say that “The academics want to nationalise the banks and the bureaucrats want Nama.” (Does anybody actually like the IT’s house style on acronyms?)
Though depending how it would be done there would be problems regards funding the deal... and EC competition issues

cYp
 

lifeisagame

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It is

There are legal niceties around just how much the government can own ... if it should go for an "arms length SPV" ...

On the common sense side if it does nationalize ... they need to only have oversight of the banks... not try to run them

The phrase "Nationalize the banks" is getting bandied around a lot and I don't think there's clarity on what it means

For example Nama & Nationalization go well together:



Though depending how it would be done there would be problems regards funding the deal... and EC competition issues

cYp
Having met you once, my opinion is your a nice guy.
However, your Posts are utter nonsense in the Current Climate.
If there are steps on your Egotistigal Pedestal, then I suggest you ring some moron that does not read your waffle to see if you can get down.
When you want to apply for a Job Please do not show any of this to Future Employer.
As a gesture I will do reference if you come back to Planet Earth.
 

cyberianpan

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Having met you once, my opinion is your a nice guy.
However, your Posts are utter nonsense in the Current Climate.
If there are steps on your Egotistigal Pedestal, then I suggest you ring some moron that does not read your waffle to see if you can get down.
When you want to apply for a Job Please do not show any of this to Future Employer.
As a gesture I will do reference if you come back to Planet Earth.
Your comment is very general - and I don't see how it relates to any of the points I made

If you could try to address the points I could perhaps answer it

I'm raising this question now, as it is highly topical, given the likely conversion of the Government's preference shares into ordinary shares will take AIB close to the brink of 50% state ownership (and perhaps go over depending on deal) ... and also given the Nama haircuts are growing in size... the capital injection to restore capital adequacy is less likely to be found on the markets.

cYp
 

Malbekh

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The UK will end up having a share in RBS of around 84% - at least that's what I've read. Assuming that the UK has to adhere to the usual EU guidelines then I see no reason why the same can't/won't happen here. I think the key here cYp is the perspective of the government, Lenny has made it abundantly clear that nationalisation is no resort let alone a last one.

I'm not so sure, unlike the general trend in P.ie that Anglo will be liquidated or even absorbed into another bank. I think it's more likely that it will go ahead with its business plan to the EU and remain in operation for the foreseeable future. I could be wrong, but I think Lenny's main concern is to ensure that at least one bank will be in a position of lending to ISME's, and the only one that can is Anglo, because the government can make it.

I agree with the general synopsis that for a variety of reasons, mostly corporate and personal debt, the government will take on a majority shareholding in AIB in 2010. I also think that Lenny is fully aware of this, and because of these circumstances, he hasn't been too outraged by the appointment of Doherty because he'll be forced to fall on his sword next year.

@lifeisagame

I approach cYp with all the enthusiasm of engaging with a provoked Rattlesnake, but with experience you can read the subtle and non-too subtle signs and negotiate the encounter favourably. This thread is perfectly legitimate and no different from any of the financial threads that have been around so far this year.

Your own recent posts Exhibit 'A' are rather pot, kettle, black when accusing people of being on an ego statistical pedestal.
 

Cassandra Syndrome

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Nationalisation requires the entire 100% of the privately owned firms assets to be taken over by the government. It is mainly done by socialist governments as a national policy to protect jobs. It can also de done if it is a natural monopoly.
It can be a market externality for subsidising public transport and providing services in rural areas. And is argued for long term investment situations such as education and health.

But never ever was it designed to bail out and save grossly insolvent institutes steeped in corruption.
 

lifeisagame

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The UK will end up having a share in RBS of around 84% - at least that's what I've read. Assuming that the UK has to adhere to the usual EU guidelines then I see no reason why the same can't/won't happen here. I think the key here cYp is the perspective of the government, Lenny has made it abundantly clear that nationalisation is no resort let alone a last one.

I'm not so sure, unlike the general trend in P.ie that Anglo will be liquidated or even absorbed into another bank. I think it's more likely that it will go ahead with its business plan to the EU and remain in operation for the foreseeable future. I could be wrong, but I think Lenny's main concern is to ensure that at least one bank will be in a position of lending to ISME's, and the only one that can is Anglo, because the government can make it.

I agree with the general synopsis that for a variety of reasons, mostly corporate and personal debt, the government will take on a majority shareholding in AIB in 2010. I also think that Lenny is fully aware of this, and because of these circumstances, he hasn't been too outraged by the appointment of Doherty because he'll be forced to fall on his sword next year.

@lifeisagame

I approach cYp with all the enthusiasm of engaging with a provoked Rattlesnake, but with experience you can read the subtle and non-too subtle signs and negotiate the encounter favourably. This thread is perfectly legitimate and no different from any of the financial threads that have been around so far this year.

Your own recent posts Exhibit 'A' are rather pot, kettle, black when accusing people of being on an ego statistical pedestal.
I take your points, including Exhibit A. My points are very simple, I want the average Irish Person to understand what we are doing.
What you and Cyp have done is a Doran, " you are too stupid and uneducated to understand, Shut your Mouths"
Is that wrong or has both your egos taken you beyond there?
 

lifeisagame

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Your comment is very general - and I don't see how it relates to any of the points I made

If you could try to address the points I could perhaps answer it

I'm raising this question now, as it is highly topical, given the likely conversion of the Government's preference shares into ordinary shares will take AIB close to the brink of 50% state ownership (and perhaps go over depending on deal) ... and also given the Nama haircuts are growing in size... the capital injection to restore capital adequacy is less likely to be found on the markets.

cYp
I quite understand, now bring it properly to "the man in the street" That is the hardest part of gaining credence and support of your argument.
 

cyberianpan

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I quite understand, now bring it properly to "the man in the street" That is the hardest part of gaining credence and support of your argument.
This thread is exploratory ... and asking questions ... what does nationalization mean ... what is nationalization ?

I agree with the general synopsis that for a variety of reasons, mostly corporate and personal debt, the government will take on a majority shareholding in AIB in 2010
  1. Will that be nationalization ?
  2. What if an SPV with an 80% State and 20% ISE listed was in charge of AIB ?
  3. What is a meaningful proportion of a bank to leave traded on a Stock Exchange ?
  4. What of the bond risk capital providers ... do they have an out clause in event of takeover ?
  5. Do we want to liquidate/vaporize them if we do "nationalise"

I think it's worthwhile exploring this ... as just what form this takes could have large impact on our debt ... also how the banking "market" would operate with more banks "nationalized" is not yet clear

cYp
 

Malbekh

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I take your points, including Exhibit A. My points are very simple, I want the average Irish Person to understand what we are doing.
What you and Cyp have done is a Doran, " you are too stupid and uneducated to understand, Shut your Mouths"
Is that wrong or has both your egos taken you beyond there
Eh? cYp and I are debating the potential nationalisation of the Irish banking system, or what's left of it. In case you haven't noticed, and I'm sure you have, an awful lot of our borrowings is going into supporting said banks as well as hocking our future livelihoods on NAMA.

Now I could be wrong, but I fail to see how this isn't a relevant topic for debate. At what point am I being ego statistical? I'm making observations and contributing to a debate. People are more than welcome to challenge any assertions I make and prove me wrong, it's happened before and it'll happen again.

If you have something to contribute to this topic, on topic, be my guest.
 

Malbekh

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This thread is exploratory ... and asking questions ... what does nationalization mean ... what is nationalization ?



  1. Will that be nationalization ?
  2. What if an SPV with an 80% State and 20% ISE listed was in charge of AIB ?
  3. What is a meaningful proportion of a bank to leave traded on a Stock Exchange ?
  4. What of the bond risk capital providers ... do they have an out clause in event of takeover ?
  5. Do we want to liquidate/vaporize them if we do "nationalise"

I think it's worthwhile exploring this ... as just what form this takes could have large impact on our debt ... also how the banking "market" would operate with more banks "nationalized" is not yet clear

cYp
I can only answer this in generalised terms, because if you haven't noticed before I do only do generalisations, not in depth analysis.

Only Labour are in favour of nationalising the banks, therefore as KN has pointed out, regardless of what % the state takes in AIB or BOI neither will be nationalised as neither FF or FG will tolerate it.

I guess for me the central issue is in the context of Anglo, the government had a choice to let it collapse without having to inject any capital in it whatsoever, saving the taxpayer billions, but with poisonous consequences for the other Irish banks. With the bank guarantee scheme in place the option was removed. Similarly with AIB and BOI and in particular with the €7b injected of tax payers money injected into their capital, the options available to the government are limited.

I have always advocated paying LTEV through NAMA in purchasing the toxic assets from the banks, regardless of the implications of nationalisation. However, the realist in me can only see the state taking a majority share but refusing point blank to call it nationalisation.

The important thing for me is in that context, the state maximises the potential benefits for the taxpayer, notwithstanding that a temporary nationalisation is the only true recourse that benefits the state.

Yours wishy-washily
 

Malbekh

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Actually, and I know multiple posting is bad form, but there are no provisions for recapitalising the banks in next year's budget which I find disingenuous to say the least.
 
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100% is the answer. Full ownership does not itself mean full nationalisation. Nationalisation also involves the State taking on the burden of the assets and liabilities and the day to day running of the bank. The State can through an investment vehicle own 100% of a bank without taking on the full responsibilities of outright nationalisation.
The Irish taxpayer already has already pumped in excess of the 'value' of the banks, that is the actual billions received by AIB and BOI exceeded their share capitalisation at the time.

The liabilities of the banks for which the Irish taxpayer is standing under exceeds any medium to even long term potential share capital valuation.

the banks shares are worthless, any other business would have been wrapped by now, this state under poor leadership has failed to differentiate between needing a banking system and 'needing' particular banks

As of Dubai's incident with Dubai World we are effectively being rated and therefore punished with higher % bond rates.

The markets are milking Ireland Inc because of perceived risk and 'belief' that Ireland will default.

meanwhile cowen borrows €500 million per week for current expenditure - party on pikers
 

cyberianpan

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I think this question is very relevant right now... what is our precise definition of nationalization ?

As part of the Nama transfer deal the government will have to inject capital into the banks in the form of equity.

Lenihan has indicated that he may not have to "nationalise" AIB & BOI See

So my question is:
What percentage of equity can the government hold and still say the banks "aren't nationalised" ?

ISE rules usually require 25% + of shares to be publicly available for trading, though they'll make exceptions.

I've fuzzy recollections of company law for publicly listed companies but I think it said that once a single shareholder goes above 80% they take on additional obligations and they can force the buyout of the remaining 20% or the remaining 20% can demand to be bought out. So I think the threshold looks like 75-80%.

Can anyone aid in answering this question, as I'll freely admit my knowledge of equity listing is rusty !

cYp


cYp
 

ManfredJudge

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(though on a side point the banks should delist from the NYSE as SOX is far too onerous)
SOX can be bypassed by doing the deals in London and getting a legal firm and an accountancy firm to ok them. That is what "worked" for Lehman Brothers.
 


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