I know that what is happening at IBRC right now sounds pretty complicated to some of you, but practically all of you will know that most deals can be improved. This blogpost examines how the IBRC scheme as presently described can be improved.
The number one fear at the ECB is that Ireland will renege on the promissory notes, and as the Irish saying goes “you might as well be hanged for a sheep as a lamb” so if we reneged on €26 of the promissory note, it would be the same as reneging on €26bn. The ECB is highly concerned that the promissory notes can be reneged on and that the ECB will be legally exposed to a massive loss. The ECB recognizes that the promissory notes were IOUs from a democratically elected minister of Ireland and that they are backed up by so-called “letters of comfort” but the ECB is concerned that there might be some reneging, and that “some reneging” might quickly lead to an utter rejection of the promissory note debt.
The main way by which the IBRC scheme can be improved, is to renege or threaten to renege on the €27bn of extant promissory notes. This course of action will carry risk, and there will be dire threats in retaliation. The ECB is lending €70bn to our banks directly, including Bank of Ireland, AIB and Permanent TSB apparently. The ECB might seek higher interest on its lending. The ECB ultimately has the power to collapse our banking system. Solidarity with our European partners might deter extreme action. We can argue about the legal niceties but without banks, we might be too busy hiding in cellars with tinned food to deal with the niceties of court action. So there are risks but there are huge potential rewards also.
As recommended on here a year ago, because the status of the promissory notes is the ECB’s Achilles Heel, and we should be pounding on it relentlessly.
These are the days in which Ireland can save billions and maybe €10bn+.
NAMA Wine Lake 
Am I right in saying that the coupon on the instruments is irrelevant? The ‘new’ instruments will be a mixture of NAMA bonds (well, FRNs, paying 6M Euribor), and presumably some straight govt bonds.
For the time being, these are held by the Irish Central Bank. The margin between what the CBI is paying at the MRO rate and what it receives from instruments is paid back to the State anyway.
The key determinant of the deal is in fact still what the schedule for the destruction of the ELA is – which determines how long the Irish Central Bank can hold onto the Irish paper.
When the Central Bank has to sell the new instruments to get cash to destroy the ELA, it will make (almost certainly) a loss – so in effect at that point the Irish State is issuing the bonds, and will have an effective interest rate (yield) based on the sale price?
For as long as the Bank can hold the instruments, Ireland is paying at the MRO rate (currently 0.75%). When it has to sell them, it will depend on market?