Financial stability can trace back a long way, according to an article today in the Irish Times. Indeed, the September 2008 unilateral bank guarantee from Ireland was, according to EU commissioner Joaquin Alumnia, what “trigger[ed] subsequent EU-level actions to preserve Continent-wide financial stability.”
Alumnia’s Criticisms
Alumnia was addressing a group of bankers yesterday in Dublin in which he reiterated the criticisms he’d made earlier in the week about the guarantee, claiming it had reduced “the margin for maneuver to seek burden-sharing from senior bondholders.” He also said that for the most part, the EU countries have been engaging in some great team work vis-à-vis the crisis. However Alumnia wasn’t so impressed with the behavior of the country’s banks and made no bones about this fact saying that it was their “careless lending to the commercial real estate factor” that had created the country’s “financial woes.” Further, he believes that the country’s economy requires “smaller, more robust and more prudent institutions” and that banking sectors must be prevented from becoming “disproportionate” vis-à-vis the economies in which they work. As well, the state regulator needs to be better at identifying risk in “traditional lending,” as that has significantly contributed to the crisis. Getting Out of Crisis Thus the advice for the future is to establish two pillar banks to set up a “de facto duopoly.” Along with EU authorities, the Irish need to try and ensure consumers benefit from competition. Further, in the last three years governments from the 27-member bloc have given financial institutions €2,000bn which Alumnia thought was “staggering.” The EU’s largest bank bailout has gone to Ireland, at a crazy high figure of 33 percent of GDP. The Netherlands at number 2, is significantly behind at 6.6 percent of GDP.
Sorry, comments are closed for this post.