Guarantee cost Ulster Bank €858m

ULSTER Bank lost €858 million of deposits in the four days after the Government’s bank guarantee in September 2008, according to a Financial Services Authority report.

“The Irish Government’s announcement that it would guarantee the deposits of Irish banks but not banks such as [Royal Bank of Scotland] subsidiary Ulster Bank further intensified pressure on RBS’s liquidity position in the period that followed the failure of Lehman Brothers,” according to the report on the near collapse of RBS.

Ulster Bank’s assets grew at an average 26% rate in the four years through 2007 to £55 billion (€65bn). Its cumulative impairment charge for the three years through 2010 equates to 7.5% of its gross loans at the end of 2008, more than double the average 3.1% charge for RBS’s total loans over the period.

Yesterday, British regu-lators pushed for new powers to automatically sanction senior bank executives as well as increased oversight of financial mer-gers as part of the report.

Automatic sanctions for poor decisions that lead to a bank failure “have the advantage of not requiring expensive and contentious legal processes”, the Financial Services Authority said on its website.

Takeovers should be more forcefully regulated, according to the study.

RBS reported a £24.1bn loss for 2008, the largest in British corporate history.

The FSA came under pressure from lawmakers to publish the probe into RBS finances after it cleared former RBS chief executive Fred Goodwin and others of wrongdoing.