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Ireland Strives To Rebuild Trust In Its Banks

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As the Irish government introduced the toughest budget in the nation’s history this week, Stephen Henry, a worker at a credit scoring service, paused to glower at the Anglo Irish Bank building facing St. Stephen’s Green in the heart of Dublin.

“The budget is going to increase my taxes, reduce my income and cut my standards of living, and these guys are the culprits,” Mr. Henry said. “The sooner they’re gone, the better.”

He will not have long to wait: Regulators have ordered the bank closed and the nameplate on Ireland’s most notorious financial institution — the bank many blame for precipitating the country’s current crisis — to be taken down within weeks.

The closure is part of a broader effort by Ireland to persuade global investors, just two weeks after Dublin applied for an 85 billion euro ($112 billion) international bailout, that no more banking problems lurk in the shadows. If all goes well, investors will regain confidence in the country and foreign banks and private equity players like Wilbur L. Ross Jr. and J. C. Flowers could be tempted to pluck bargains from the wreckage.

Regulators must be “more convincing than we have been” that the worst will soon be behind Ireland’s banks, said Patrick Honohan, the governor of the country’s central bank.

That could prove a stiff challenge. Time and again, as Ireland’s banking crisis deepened, estimates rose for the cleanup. The bill to taxpayers for the bailout has swelled to 84 billion euros, 56 percent of gross domestic product, the result of a government decision to backstop the banks’ losses.

The Fitch ratings agency dropped Ireland’s credit rating three notches Thursday, warning that the aggressive program of purging bad loans from banks, coming amid a new wave of austerity in the economy, could “stall a recovery.”

Moreover, as the country tightens its belt to help pay the banking bill, the default rate on residential mortgages, now 5 to 10 percent, is expected to rise as homeowners struggle to meet monthly payments.

So far, the sharpest losses have been on commercial real estate loans, which banks made lavishly during the real estate boom. Regulators have forced two big institutions, Allied Irish Banks and Bank of Ireland, to raise more cash in the event losses worsen.

But when Ireland received its recent bailout, the International Monetary Fund ordered another 10 billion euros pumped into banks immediately, in part to hedge against a possible rise in mortgage defaults. An additional 25 billion euros is on standby if banks’ losses are bigger than expected.

The bailout is supposed to tide Ireland over for years as it recovers, and give it room to mend its finances until it can borrow in financial markets again.

Yet it is still unclear if the money will be enough. Irish regulators and I.M.F. officials found no new surprises when they pored over the banks’ books recently, and they said they doubted that the banks would need more capital or that mortgage defaults would surge. But if Irish homeowners, who feel particularly duty-bound to make their payments, change their behavior, that could increase defaults and push banks to tap the reserve of 25 billion euros. Regulators will test the banks again in March for any new threats from residential or other mortgages.

Even if the banks pass the latest stress tests, banking experts worry that problems may surface later.

“I reckon 35 billion euros is not going to be enough,” said Alan Dukes, a former finance minister whom the government tapped to unwind Anglo Irish before it was nationalized in January.

“The number that’s there at the moment is based on what we can expect of the commercial property market,” Mr. Dukes said. “I don’t think any assessment has been made of the possible impact of mortgage defaults.”

Pure comedy genius. We have the IMF declaring they found no new surprises, we have the default rate on mortgages going up, wages due to austerity going down and the clowns think their is little risk to the banks and all the bad debts have been fessed up.

It's hard to see how this bailout is going to succeed Ireland it would appear still hasn't hit rock bottom and the next wave will surely be mortgage defaults, unless of course austerity doesn't have a huge negative impact on aggregate demand.

I'm just relieved it's all contained. The financial experts are ahead of the game it would appear.

Edited by interestrateripoff

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Ireland Strives To Rebuild Trust In Its Banks We must be more convincing in telling people the worst is over

...tall order ...in Euroland as they are ...it hasn't even started yet..... :rolleyes:

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Sterling devaluing will have a worse effect for defaults on their Sterling denominated capital.


That explains something I had been wondering about, but it makes sense now.

Thank you for your useful post.

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no. he was hanged around 5 months ago....


Although questioned by American authorities, al-Sahhaf was released, and there has been no suggestion of charging or detaining him for his role in the Saddam Hussein government. He is now living in the United Arab Emirates with his family.

Do you have a source? Wikipedia seem to be suggesting he's very much alive and well.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
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      • Even
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      • up 5%

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