List the consequences of allowing banks to fail.

If I knew that the banks would be cut loose after the sep 2010 expiry, I would start my own bank now.

“First Bungaloid Bank of Commerce” or some such.

But who can compete when billions of taxpayer euros are simply handed over to losers that ran the current
institutions into the ground?

Neither foreign nor new banks can compete with a failure subsidy of this magnitude.

+1. Life would go on. The remainder of the population (those possessing complete brains :confused: ) would work towards creating a better and fairer society. We haven’t suffered a civil war. We haven’t been invaded or struck by a massive earthquake or an asteroid. Sure, we have a financial crisis but it’s also an opportunity to get our house in order so that future generations will enjoy better lives. If a few bankrupt private companies fail, what of it?

Frank Fahy told the Nation today that the Credit Unions are the bondholders :unamused: . Anyone got any idea to what extent the CU are holders of bonds? FF will be using this line a lot over the next few weeks.

BT

I would rather not be playing any high stakes games right now. The unfortunate reality is that the circumstances are such that the State is playing.

NAMA is huge risk. It may work, it may not. Even if it does, it may not result in credit flowing through the banks (if the international experience of bank bail outs is anything to go by, then in the short term, even if it is hugely successful, it won’t and the economy is not improved but the State is indebted).

A recession hit Irish economy survived the complete shut down of the banking system twice in the 1970s as a result of strikes. No banking was available to businesses or individuals through any branch of any bank. So long as there are other banks available, the economy CAN survive the loss of individual banks. Allowing ailing institutions fail would appear to be a lesser risk.

Blue Horseshoe

Tell me why we would hit 25% straight away.

So what about bankruptcies, reform the laws. Its time we positioned this country so we can deal with this sort of thing and move on. NAMA will timewarp us

This is the only reason I can see against letting them collapse. We need figures on this.
We could always reduce the deposit guarantee and recapitalise them until the guarantee runs out.

We could change the deposit guarantee from 100% of all deposits to 102% if you leave you money for 1 year.

That would prevent any run.

€180bn consumer deposits for only BoI and AIB alone (check the annual reports) . For a 100% guarantee on deposits it doesn’t bear thinking about, not to mention the other banks. The moment it becomes clear the depositors will not get 100%, it’s Argentina time.

The banks are too big to fail, they must be dealt with in other ways.

Nate

nothing is too big to fail, guarantee deposits up to a certain limit and thats it

Ireland is the argentina of europe corrupt politicians, massive private and pretty soon public debt

default and move on

Most of what you have set out there will happen whether the banks default or not.

It would not be the end of the world… Yes we would suffer as a country financially but have we not suffered far worse as a country throughout our history, Look to our past and our generations now gone, where they not a resilient bunch & seen as the “fighting Irish” who could not be put down for long. These qualities are set in us surely? I think we would really need to look back to move forward.
I also believe we’ve punched above our weight as a nation across this world in the past because the Irish had a different approach to life which was respected / admired by other nations. It is these values, the things that make us Irish that everyone of us let go during the Celtic tiger “spit” greed ridden years. We now need to find a new balance….

Simply, We need to have good look at ourselves as a nation and put Ireland back into context. FFS, Bradford city in the U.K. has a larger populations then this entire republic land.

I would just hope that somewhere during this financial suffering we will once again find our distinctive qualities & remember what makes the Irish who they are……. A nation who had a great sense of pride in our country even when we had nothing & that family & community bonding that got us through those times when we had nothing.

Surely as a well educated nation we could mobilise a city sized country for the better of the next Irish generation. I would also give anything to see us stop going with the hand out across the world…… Foreign bondholders / foreign investors / ECB bail outs etc, & being so fking worried about the global financially communities opinion of us. Fk um all I say, it’s those greed ridden communities landed us here in the first place. Can we not structure this country whereby we stand on our own two feet…. We can do water, We can do food, we can do energy. What more do we really need…. I say invest the 90Bn into creating a continuous source of water, food, & energy for our children. We don’t need anybody else after that as we have always mastered the entertaining ourselves bit. 8DD BD

Yes, I know we would need some sort of external financial input for us to sustain the lifestyles we have now grow accustomed too, But this should be approached from a social point of view & not a greed ridden approach again, I remember reading somewhere a national development type proposal on developing the Shannon estuary to the same level as the likes of Rotterdam & turn Ireland into Europes material clearing house, get materials / cargo onto the books with some sort of value added services & let companies avail of our corporation tax benefits. Christ, then run train lines straight across the country, tunnel to U.K. Plenty jobs involved & which are all working for the common benefit of our people.

Just read this with my Arthur goggles on, I think I lost the plot a little but you know where I’m coming from, I just keep thinking back to my childhood days in the late 70’s / 80’s and the majority of people I knew had jackshit financially to what we have now but I still feel they where better times from a society point of view. Money is not everything at end of the day, we need to learn that again…

A come on - less of the hypebole comments - Ireland is no worse off than most other European countries. It is only that you live here and read stories on a day to day basis that you think it could not be any worse.
Look at Italy, Greece, Half of Eastern Europe. Look at the UK. Why would you think we are worse than them?

I can only find 36 billion on a central bank report which I know is too little.
What about Commercial deposits -
Do you have a linky for the 180 billion. We cant cover 100% we probably couldnt even cover the first €100,000.

If it becomes a choice of NAMA or the state going broke then the sooner we default as a nation the better.
NAMA isnt a choice it will ruin us financially and preserve the status quo. Japanese experience and the experience of the great depression has shown that you need to root out those at the top and make reforms.

The balance sheets list €374bn in assets in BoI and AIB. Is this not enough to easily cover consumer deposit and senior debt liabilities 100% even after a massive mark-down of poor quality loans?

This is what we were told at the time of the guarantee :slight_smile:
(I believe 25% excess of assets over liabilities was mentioned a number of times?

Link?

Please stick to the topic everyone:

List the consequences of allowing the banks to fail.

For AIB the 2008 figures are here:
aib.ie/servlet/ContentServer … annel=IRHP
182 bn in assets
135 bn in loans
155 bn in deposits and debt securities (note, I assume this includes subordinate debt?)

BoI here:
online.hemscottir.com/ir/bir/ar_2009/ar.jsp
194 bn in assets
134 bn in loans
156 bn in deposits and debt securities

Thanks YM. That’s very helpful.

It doesn’t seem right to me that “deposits” and “debt securities” should be lumped together on a financial statement. It seems to me that that gives the banks too much room to hide important info and may be even designed to deliberately confuse. Not that I understand accountancy, but my annual household budget plan would be more precise and rigorous than that… :unamused: Like, to put it in basic terms, I would separately list “fuel” costs from “mortgage” costs.

There’s a world of difference between “deposits” and “debt securities”. Would I be right in thinking that debt securities can sometimes be very insecure indeed? (i.e. can’t a debt security be an increasingly worthless property off-set against a loan?)

Basically, it is very difficult to glean any real info from the figures above. Even the value of the “assets” is questionable.

I’ll have a compiled list ready to put up within the next hour or two.

To be fair, I only gave the summary information. There is a note in the full report that breaks down the information into type of deposit, type of debt security, time limitation etc. When people talk of the flight of bonds or the flight of deposits, they clearly don’t look at the time limits on them. A bank is under no obligation to return deposits or pay off bonds before they are due.

OK, thanks for that!