Irish Bank Run - History and Future

[Peter_R_Math]

Hi all,

Great forum guys. I have just spent the last few hours reading through a lot of the posts here over that were made over the last few months. I am writing a paper for a foreign university on "banking collapses and subsequent bank runs" and have decided to focus on what is happening in Ireland.

I have a fair idea myself but I would appreciate if a few knowledgeable posters could tell me ...
A) The history of the Irish bank run?
B) Where people think the bank run will go from here?

Many thanks,
Peter.

 

[Lightning]

History:

I: Mid 2008 onwards: Anglo and INBS deposit flight.
Some key events included, Permanent TSB helping window-dress the Anglo deposit figures in their accounts for the year ended September 30th 2008. Sean Fitzpatrick campaigned Cowen to try and get the NTMA to prop up Anglo deposits to hide deposit losses.

II: Pre June 30th 2010: Period of deposit stability at 4 Irish banks.
AIB, BOI and EBS deposits remained stable up to June 30th 2010. PTSB deposits grew. Anglo and INBS continued to loose deposits.

III: July 2010 onwards: Corporate deposit withdrawals.
Massive Corporate deposit withdrawals at all 6 Irish banks. This reached a peak in September 2010 as the deposit guarantee was not renewed until the very last possible day.

IV: September 2010 onwards: Foreign deposit withdrawals.
Over 40% of all foreign based deposits in Irish banks was withdrawn.

IV: October/November 2010: Retail deposit withdrawals.
A wholesale loss of confidence in Irish banks. Deposit withdrawals spread to retail deposit holders. Massive ECB and CBI support backed up the deposit exits. IMF arrives.

V: December 2010 onwards: Post IMF: Deposit flight continues but slows.
Early indicators point to ongoing but slowed deposit exits.

Future: Best Case:
Irish banks move from state ownership to foreign ownership, invest in good online only future focused deposit offerings, a steady flow of deposits fly back into the banks.

Future: Worst Case:
Greek or other periphery country defaults causing more depositors to move deposits abroad or a loss of confidence in the EUR itself causes a renewed exit. Deposit controls put in place.

 

[horusd]

You might also consider :

1. Perception of inappropriate relationships between banking and the political system . (evidenced again in recent Newspaper reports).

2. Failure so far to prosecute or hold to account anyone in relation to possible banking irregularities.

3. Collapse in public support for Gov.t almost in tandem with collapse in bank confidence.

4. Continued deep and extremely damaging public scepticism (domestic & international) in the ABSENCE of remedial actions on 1,2 & 3 above.

5. Deep & endemic worries about L.T. future of euro given abject failure of EU political and monetary system to address the matter. (Again, evidenced here on AAM in the number of Irish people looking to switch out of euro and into non-euro denominated currencies and countries).

Personally I cannot see confidence returning to the banking system and the euro until all the above are addressed. And I believe that the two are indelibly linked in people's perceptions. You will note from AAM site a considerable debate/enquiries about switching money to countries like Germany anticipating a problem with the Euro itself. Including perhaps the return of local currencies, ie Punt, or alternatively a switch to a two-tier strong and weak Euro. This weighs as much in my opinion as debt problems and a general lack of confidence in Irish banks.


Another issue worthy of consideration is extent of debt held by foreign banks/insitutions in Irelandmaking us very susceptible to external negative perceptions. Japan has a very high level of debt, but most of it is held by the domestic population. Thus despite it's debt levels it has not experienced the systemic problems we have, and that precepitated our need for EU/IMF help.

There is a need for a complete overhaul of the political/banking/regulatory system and a resolution to the EU-wide political/fiscal issues before stability can be restored and confidence returns. Regulatory failure in IRL and the ECB, polticical inertia, weakness and incompetence have all massively contributed to banking crisis. As CiaranT says and Patrick Honohan has intimated, foreign ownership is the likely and best outcome for Irish banks. But the crisis is far from over yet.