There are a couple of additional points that I would like to raise having re-read this thread.
Debates on loan losses aside, the events of the past 18 months have dramatically altered the perception of risk within the banking industry. The minimum 'acceptable' levels of equity capital are now higher than they were before the credit cruch began. Currently, the level of core Tier 1 equity capital for every Irish bank (bar IL&P) falls short of the new acceptable norms. Were economic conditions more supportive, the banks might be able to gradually increase their capital bases without resorting to their shareholders but I don't think that this is an option in the current environment. So, in the post credit crunch world, the financial markets are demanding lower risk profiles from the banks that they are being asked to fund and i do not believe that any bank that is accused of having too little capital can simply ignore calls to remedy this.
Separately, I am not convinced that AIB and BOI are that only banks deserving of government support should additional capital be required. I appreciate that the two largest banks in the country need to survive but I wonder is it right to simply discard the rest? Would we really be better off if AIB and BOI where to only two banks to emerge from this recession? What about future competition within the industry?
To date, I really cannot see that ANY of the banks have demonstrated that they are deserving of state cash should it be required. I am really concerned that we would have to create a national champion because no one bank has emerged from this debacle with its reputation or balance sheet intact. No single institution was possessed of enough sense to limit their exposure to an overheating property market.
Debates on loan losses aside, the events of the past 18 months have dramatically altered the perception of risk within the banking industry. The minimum 'acceptable' levels of equity capital are now higher than they were before the credit cruch began. Currently, the level of core Tier 1 equity capital for every Irish bank (bar IL&P) falls short of the new acceptable norms. Were economic conditions more supportive, the banks might be able to gradually increase their capital bases without resorting to their shareholders but I don't think that this is an option in the current environment. So, in the post credit crunch world, the financial markets are demanding lower risk profiles from the banks that they are being asked to fund and i do not believe that any bank that is accused of having too little capital can simply ignore calls to remedy this.
Separately, I am not convinced that AIB and BOI are that only banks deserving of government support should additional capital be required. I appreciate that the two largest banks in the country need to survive but I wonder is it right to simply discard the rest? Would we really be better off if AIB and BOI where to only two banks to emerge from this recession? What about future competition within the industry?
To date, I really cannot see that ANY of the banks have demonstrated that they are deserving of state cash should it be required. I am really concerned that we would have to create a national champion because no one bank has emerged from this debacle with its reputation or balance sheet intact. No single institution was possessed of enough sense to limit their exposure to an overheating property market.