It is reported that deposits placed by ILP with Anglo during September amounted to between €6-€7 billion. The €4 billion that was lodged with Anglo Irish on September 30th, hours after the State’s bank guarantee was announced, was withdrawn by ILP a week to 10 days later.

The deposit improved Anglo's position, as it had suffered withdrawals of €4 billion before the State’s bank guarantee was announced, a move that helped to attract other deposits to the bank.

Some companies try to massage their year end accounts  - - for example Anglo chairman Sean FitzPatrick had hidden directors loans to him of €87 million by arranging a transfer from Irish Nationwide Building Society - - and all creditor payments can be put on hold in the last month of the financial year.

Irish Life & Permanent PLC 'A-/A-1' Ratings Affirmed; Removed From CreditWatch Negative; Outlook Negative

On Feb. 10, 2009, Standard & Poor's Ratings Services affirmed its 'A-/A-1' counterparty credit ratings on Irish Life & Permanent PLC (ILP). At the same time, the long- and short-term counterparty credit ratings were removed from CreditWatch, where they had been placed with negative implications on Nov. 5,  2008.

Furthermore, the 'A-' counterparty credit and insurer financial strength ratings on its wholly owned subsidiary Irish Life Assurance PLC (ILA) were also affirmed. Additionally, the ratings on ILA were removed from CreditWatch, where they had also been placed with negative implications on Nov. 5, 2008.

The outlooks on both entities are negative.

The rating action reflects our view that ILP will receive the government support necessary to allow it the time to re-work its business model, in particular its funding profile. ILP continues to have a significant amount of work to do to improve the shape and tenor of its liability base, but we consider that ILP has been afforded the opportunity to implement these changes in a measured and prudent manner.

The ratings on ILP reflect its leading positions in the life, pensions, and residential mortgage markets in Ireland. This is offset by its high reliance on wholesale funding, a tight core capital position by our measures, and significant exposure to high loan-to-value residential mortgage loans. In addition to one notch of support from ILA, the ratings on ILP also incorporate two notches of uplift as a result of the extraordinary support the government of Ireland has provided to the banking sector. We consider that the funding guarantee has been of particular benefit to ILP in supporting the bank's funding position. We view ILP as being of high systemic importance. We consider that ILP has been particularly affected by the continuing difficult funding markets as a result of its high reliance on wholesale funding; ILP's loan-to-deposit ratio was 243% at Oct. 30, 2008. The Irish government has guaranteed most liabilities of much of the domestic banking sector. The guarantee currently extends until Sept. 30, 2010. Management is now paying significant attention to increasing deposits and reducing asset growth, but we consider that it will take some time for the bank's funding profile to be significantly improved by these means.

While ILP's regulatory Tier 1 ratio appears high--10.1% at June 30, 2008--we consider capitalization to be weak after adjusting for capital we consider attributable to ILP's large life assurance subsidiary ILA. Our preferred measure of capital, adjusted total equity, was 3.8% of Basel 1 risk assets at the end of the first-half 2008. Although improved on prior years, this measure continues to compare poorly to peers. Various management actions are being taken to improve capitalization, including increased capital efficiency at ILA and suspension of the group dividend. ILP has the option to request capital from the Irish government if it considers it appropriate, but it has not yet done so.

We expect ILA to maintain its leading position in the Irish life and pensions sector. ILA's earnings will likely ease due to a reduction in new business in 2008, but capital in excess of its current solvency coverage--approximately 1.6x the regulatory minimum margin--is expected to be upstreamed to ILP.

ILP remains in discussions with Ireland's EBS Building Society (not rated) about a possible merger. We consider that a merger may provide some competitive and financial benefits, but the likelihood of such a deal is not yet clear. While a merger with EBS would improve ILP's loan-to-deposit ratio, the quantum of funding needed for the group would increase. We would expect that any deal would be done with appropriate support from the Irish government.

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