Ratings agencies should invest in technical writers to decipher financial morse for the masses.
A contingent liability is polite recognition that a bad decision made will be worse than the financial reserve created, or, beware the balance sheet that goes boom in the night.
In Ireland's case the bad decisions made will be borne by the government at a cost of 15% of one years GDP which may go as high as 25%.
The crystallization of contingent liabilities from the banking system, as represented by a series of recapitalization measures and the need to create the National Asset Management Agency (NAMA), a government-created special purpose vehicle that is acquiring impaired loans from banks.
Moody’s expects Nama’s recapitalisation outlay to amount to almost €25bn, or 15.3 per cent of Ireland’s 2009 GDP. And while the agency is pretty convinced that the Irish government won’t swallow hefty permanent losses (for some reason it specifies 25 per cent of 2009 GDP)
No comments:
Post a Comment