criticism of Irish Banks

It has been suggested that banking, like the electricity supply, is too important to be trusted to the private sector and the short term profit motive. Imagine that our banking system had always been an arm of the public service. I very much doubt that we would have had 100% mortgages, massive inter bank borrowing from abroad to fund foreign property investment, lending to developers to pay massive land prices, unemployed and low income people with multiple credit cards etc. etc.

What would we have lost? The Celtic Tiger would have been more tame. Some people who now own their own homes would have been restricted to rental accomodation. Some people would have been denied a good time which they couldn't afford. Though come to think of it, I don't think we would really have lost that much and we would be sitting in clover now.
 
Duke of Marmalade said:
It has been suggested that banking, like the electricity supply, is too important to be trusted to the private sector and the short term profit motive. Imagine that our banking system had always been an arm of the public service. I very much doubt that we would have had 100% mortgages, massive inter bank borrowing from abroad to fund foreign property investment, lending to developers to pay massive land prices, unemployed and low income people with multiple credit cards etc. etc.

What would we have lost? The Celtic Tiger would have been more tame. Some people who now own their own homes would have been restricted to rental accomodation. Some people would have been denied a good time which they couldn't afford. Though come to think of it, I don't think we would really have lost that much and we would be sitting in clover now.
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It is difficult to argue against your post given that the private sector management of the banking system has proven to be a great way to destabilise the economy. However, neither the government, the central bank nor the regulator appear to have been up to their jobs either so I doubt that any of these people could run a bank either.
 
Brendan said:
Why? Is the liquidity crisis not primarily due to banks just not lending to each other because they don't trust each other's balance sheets?

Irish shares were marked down, but not to the extent that they are today. The mark-down did not anticipate that the international money markets would freeze.

Brendan
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The international banks would have been too afraid to lend to Irish Banks once they realised the true values of the impending asset write down which is surely coming. Would that not have created a liquidity crisis.
 
Regarding 100% mortgages - surely individuals were getting 100% mortgages long before they were offered as a product. You simply got a personal loan from one or two lenders and a 90% mortgage from another lender.
None of the lenders seems to be down on that despite having access to centralised client borrowing history data revealing the total of clients borrowings.
 
Well done Brendan, you're making some very valid points.

I must say upfront that I'm a banker though very much on the lower levels.

I doubt if Irish banks would ever have gotten into 100% mortgages if it hadn't been to keep up with some of the foreign competition. In fact, we were constantly being lambasted for being too strict on the guidelines. People do not like being told that they cannot afford repayments !

The normal high street banks were quite responsible and to date there isn't much evidence of repossessions or even people falling behind with repayments. It's the bigger boys who did the bigger lending that have gotten us into trouble as well as the top nobs with their wonderful bonuses.

Subprime should never have been let into this country. Common sense would tell you if you have a bad credit history and are finding it difficult to get loans, then perhaps you shouldn't be looking for one till your finances improve.

As for keeping quiet on the extent of bad debts. It honestly isn't clear yet. Some staff have been selected to visit customers in trouble to try to work out something. If people aren't given the chance to try to bail themselves out, the situation will be much worse. Something may be salvaged this way whereas if you just foreclose there will be nothing to gain by the bank owning property/land that in the present climate is not worth much. That would just exacerbate the problem.

We'll all just have to have a little patience. People tend to forget that the banks do have a great deal of assets. The main crisis here is one of confidence.
 
The problems of the Irish banks stem from more than just subprime lending to a small section of the population. Repeating the mantra that all the Irish banks are facing is a crisis of confidence ignores the real problem. The Irish banks have advanced far too much money (200% of GDP) and are far too exposed to a single asset class (albeit with some geographic spread). What continues to amaze me is that even as property prices fall and the economy heads rapidly south a lot of people believe that there is nothing fundamentally wrong with the assets sitting on the books of the Irish banks. If the Irish banks were to face the same level of loan losses as the UK banks took in the early 1990s recession then they need to stop paying dividends and think about how to go about raising capital.
 
I anticipate that following whats happening in England we will shortly hear criticism that Irish Banks are not lending enough here. Will not this be ironic in view of the growing recession and lending in such a climate can only lead to more bad debts
 
I heard the Germans are making their bankers take a pay cut to 500K salary. What would be the equivelent salary for Irish top bankers?
 
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