# Banks will be our Partners in Recovery?



## onq (15 Feb 2010)

New institutions in business development centres are to help drive matters forward in the Irish economy.

Banks are to Partner businesses in the forthcoming upturn.

Not if they don't, won't or can't lend money.

And they know this.

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It looks like things are levelling out now for some and what we heed to seriously address is the utter lack of liquidity in the lending instutitons which is preventing the money we need circulating in the economy.

This is caused by an arbitrary "good practice" capital lending ratio - something actuaries mull over when times are good and which we're now suffering due to now that times are FUBAR.

Achieving this rate means banks must seek deposits and jealously gouard those they already have.

But becoming a deposit-driven business is usesless when trying to help an economy recover.

Its also useless when banks are trading incompetently, as they have done, because the people who have invested millions in them tend to lose their money - as they have done, wiping out shareholer value.

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Economies don't just recover on a certain date - its a dynamic thing - with the rate of breakdown being overtaken by the rate of new jobs generation.

We have no way of knowing what the banks inability to lend has done to damage the recovery, which is under way even as we debate this. 

Recoveries are always under way, just as recessions are always waiting to happen when the balance shifts and becomes unfavourable.

But with the banks not lending, we cannot even keep people in jobs, never mind launch a recovery, and they know this.

Even now they are setting up Business divisions, but what use can they be if they are tied back to the parent institution and become governed by their currently non-compliant capital lending ratio?

Of limited use, I suspect, but I will be overjoyed to be proved wrong.

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Could we improve the rate of recovery with a new commercial lending bank set up by the government with even 1Bn of funding? 

I believe we could.

So do several of my clients, whose desire to make money in Ireland Incorporated remains unabated, but the current lack fo demand means they cannot continue to trade.

This isn't just new houses, but right across the board.

I spoke to two people at a networking evening a while ago who wanted to extend their house but "didn't have the money" - two busines people who would normally have access to a bank loan.

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I am not trying to scupper the chances of the Irish banks coming back into compliance.

I am not talking about a deposit-taking bank - I am talking about a lending bank for businesses.

If this isn't done soon I am of the belief that we won't have sufficient funds in the economy to allow the multiplier effect to work in our favour to help us recover.

If we're in no condition to recover, this government and our banks will be responsible for destroying our economy, not because of NAMA, but because there was no additional funding to adequately recapitalize the banks

ONQ.


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