State would intervene in the unlikely event of bank collapse
Friday, September 19, 2008
irishtimes.com/newspaper/fin … 03139.html
Irish situation The Financial Regulator, while remaining vigilant, has set out to assure us that Irish banks can weather this storm, writes Simon Carswell
THE SPECTACULAR rescues of insurance giant AIG, investment bank Merrill Lynch and the UK’s biggest mortgage lender, HBOS, earlier this week raise the question of whether any Irish bank is also too big to be allowed to fail and too crucial to the economy.
The question, of course, presupposes that any Irish financial institution is facing potential collapse.
While Irish banks face rising bad debts amid a declining property market and higher funding costs like all global banks, they are solid and well-capitalised.
“Irish banks have only very limited exposures to US subprime losses and related structured credit products,” he said. “Irish banks are resilient and have good shock-absorption capacity to cope with the current situation.”
The regulator, however, was more vigilant of the Irish banks and continued “to remain on high alert” to any emerging risks.
It has sought updates every evening this week from the banks on flows of customer deposits to monitor any dramatic changes in response to the developments in the US and British financial sectors. Irish banks have also been queried by the regulator about any exposure to AIG and Lehman.
The government would very likely have to step in, because there is not enough money in the deposit protection scheme in event of even a small building society folding the alternative is a situation like