# Why are the Irish banks like Anglo in a mess



## LouisCribben (22 Jan 2009)

Naive question.

Why are Anglo in such a mess ? What did they do wrong to get in such a mess ?
Is it because they gave out loans which have been defaulted on ?
Do they have massive bad debts ? Or is it the future anticipation of bad debts that is the problem ?

Within Ireland, I don't see a lot of evidence about individuals defaulting on their mortgages, I'm confused why all of a sudden the banks are worth only a small fraction of what they used to be.

Are Bank of Ireland and AIB in as bad a mess as Anglo ? If not, what did they do differently to Anglo ?

Did Irish banks expose themselves to American Sub Prime loans, is this part of the reason ?


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## z109 (22 Jan 2009)

No relationship with US subprime loans, although there is an argument that giving 100% mortgages on eight times salary with self-certified bonuses and overtime and a top-up loan for fees constitutes our own version of subprime.

Anglo, though, has no residential mortgages. It is solely concerned with C&D (Construction and Development) and Commercial lending. The other banks also have some exposure to this. The belief in the markets is that the assets that underpin these loans are worth a fraction of the value they are being held on the banks books at. So, for example, all those sites in Dublin that sold for tens of millions an acre of borrowed money are not worth the money, nor is it likely that should they be built on  the housing, office and retail units on them will be worth that amount either. Add to this the large amount of unsold/unlet housing, retail, office and undustrial units around the country and there is a bit of a pickle. The markets don't like pickles.

BoI and AIB also have an exposure to BTL (Buy to Let) investors both here and in the UK (never mind the apartments in Bulgaria, French leasebacks etc). Aside from the slide in sterling reducing the income from these properties, BTL investors are having to contend with falling rents on properties that didn't ever cover their mortgages.

Finally, with rising unemployment, even sensible-seeming lending has increased in risk.

Made in Ireland. Don't let anyone tell you its a foreign import.


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## extopia (22 Jan 2009)

yoganmahew said:


> Made in Ireland. Don't let anyone tell you its a foreign import.



Agree completely. I'm sick of hearing politicians and bank officials claiming it's just part of a global problem. The global credit crunch accelerated our banks' decline because they couldn't cover it up any more. But the problems are of our own making.


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## VOR (22 Jan 2009)

extopia said:


> Agree completely. I'm sick of hearing politicians and bank officials claiming it's just part of a global problem. The global credit crunch accelerated our banks' decline because they couldn't cover it up any more. But the problems are of our own making.


 
I'd go even further and say the global credit crunch stopped us from a worse fate. Imagine if the crazy housing bubble had gone on until 2010 or 2011. We'd be screwed.


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## z103 (22 Jan 2009)

> Imagine if the crazy housing bubble had gone on until 2010 or 2011. We'd be screwed.


We're already screwed.


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## PaddyW (22 Jan 2009)

Yes, but even further screwed than we are now.


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## VOR (22 Jan 2009)

PaddyW said:


> Yes, but even further screwed than we are now.


 
Thanks PaddyW. My point exactly.


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## Brendan Burgess (22 Jan 2009)

There is no need to open another thread on this.

Please keep the discussion to the existing threads.


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