ISEQ suffers record one-day fall
Monday, 29 September 2008 17:57



The ISEQ index has suffered a record one-day fall ending down 13%, to close at 3,292.

Shares in Irish banks plummeted today as a series of US and European bank failures sparked fears that the massive bailout plan in the US may not be enough to deal with the problems in the sector.

Shares in Anglo Irish Bank were down more than 45% at one stage, while Irish Life & Permanent fell by more than 30%.


AdvertisementOther European shares dropped to a three-and-a-half year closing low. London's FTSE ended down 5.3% at 4,819, where it was announced that the British government had decided to partly nationalise the bank, Bradford & Bingley.

Falls in Belgium and the Netherlands were especially steep following the announcement that the governments there, and in Luxembourg, had agreed to nationalise one of Europe's biggest banks Fortis in a €11.2bn bailout.


Meanwhile, the Labour Party has proposed a range of measures to deal with the economic downturn.

They include a major school building programme and substantially increased investment in the retraining of Ireland's workforce.

Labour says the construction industry should be stimulated by a programme to provide proper accommodation for 40,000 children currently in prefabs.

The party also wants a fresh medium term budgetary strategy to return the public services to order within three or four years.

Labour is also calling for a re-prioritisation of the National Development Plan with a focus on projects with a high economic and social content, and a review of the regulatory performance of the Central Bank and other institutions.

The proposals are contained in a Labour Party document being launched this afternoon.

€11.2bn bailout for Fortis

Senior officials from the three countries, and President of the European Central Bank Jean-Claude Trichet, hammered out plans to partially nationalise Fortis over the weekend after the group failed to dispel liquidity concerns in recent days.

The financial stability of Fortis has raised concerns about Postbank - the joint venture between the bank and An Post - which provides banking services through post offices in Ireland.

Postbank said it is an independently managed institution, and that its operations are not affected by the current speculation regarding Fortis.

As it only takes deposits, savings at Postbank are guaranteed.

EU Commissioner for Internal Markets Charlie McCreevy said that in the absence of a single supervisory authority in the EU, decisions on any interventions in the banking sector will have to be made by states themselves, rather than at the EU level.

Commissioner McCreevy would not comment on what measures the Irish Government should be considering, other than to say he is sure that the appropriate measures will be taken given the new economic and budgetary situation.


British bank nationalised

The British Treasury formally announced this morning that the mortgages and loans of lender Bradford & Bingley are to be nationalised to prevent the bank collapsing.

Spanish bank Santander is taking over the £20bn savings business and branch network, but Bradford & Bingley's £40-£50bn mortgage and loan book will be nationalised.

Officials from the British Treasury, the Bank of England and the Financial Services Authority spent the weekend finalising the deal with bankers.

Santander already owns the British mortgage lender, Abbey, and is in the process of buying Alliance & Leicester.

Bradford & Bingley will follow Northern Rock into public ownership and the British taxpayer will take the risk of defaults.

It has been a leader in buy-to-let mortgages and its exposure to this sector of the market led to a fall in confidence in the bank.

The British government says the priority has been to protect Bradford & Bingley's 2.5m savers while maintaining the stability of Britain's banking system.

Troubled German bank

Separately, German bank Hypo Real Estate has been granted a last-minute multi-billion euro credit line from a consortium of German banks that allowed it to avoid declaring bankruptcy.

A consortium has provided the troubled property lender 'a major new credit facility which is designed to shield the company from the impact of the current malfunctioning of the international money markets,' a statement said.

The daily Financial Times Deutschland reported that private German banks had been trying 'feverishly' to find a way to rescue the institution, hit hard by the US subprime loan crisis that began in August 2007.

The report said the bank fell victim to speculation by its German-Irish unit DEPFA.

The paper said DEPFA had pursued long-term projects with heavy loans and generally ensured refinancing only at the last minute, which due to the current global credit crunch was no longer possible.




www.rte.ie



So with the credit crunch, the housing bubble burst and the huge uncertainty in global markets it looks as if these turbulent times will last another year at least. That is a spectacular fall though and I really do wonder what has actually driven it? Could a major Irish bank be at risk?

Lasting another year is wildly optimistic. The complete breakdown in trust between banks, with consumers is what is really driving us all to the wall. How long will trust take to be re-established? Its going to take hundreds of billions of dollars and years (stress plural) for anyone to trust to lend out their dough. There is so much mess that needs sorted out from overblown corporate bonuses to liar loans, not to mention what to do with all the toxic debt, that there is not going to be a quick fix to this. Its plainly obvious no one has a clue what to do. Congress has just rejected Paulson's $700 billion plan, with sound concerns, but what now? As I watch the ticker tape, the Dow is now lower than when I visted the NYSE just over 9 years ago. Unless someone can up with a seriously bold intervention we could be heading to a Japanese style, decade long period of financial doldrums. The only people that talk any sense in all this, I have to say are Vince Cable (treasurey spokesman, Lib Dems) and Will Hutton (CEO, Work Foundation). Everyone else is a muppet.

Is it true that Irish people are the most in debt nation in the world?

Is it true that Irish people are the most in debt nation in the world?

Per person yes possibly - but nationally it has one of the lowest national debts in the world which gives us some wriggle room for stunts like this


Irish government guarantees banks

The Irish government has acted to shore up its financial system.

It is guaranteeing all deposits in Irish banks and all money borrowed by the banks from other financial institutions.

On Tuesday, the Department of Finance said the state would safeguard all deposits, bonds and debts in six banks and building societies for two years.

The decision follows Monday's enormous slide in the value of the shares of Irish banks.

The banks covered are Allied Irish, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.
WHAT THE MOVE MEANS



It's very difficult to find any guarantees in the current climate, but at least there's some relief for people who have money in Irish banks.



Martin Cassidy
Consumer Correspondent
Read Martin's analysis here




The Irish Department of Finance said all deposits, bonds and debts in the six banks and building societies would be covered by the state for the next two years.

But there will be terms and conditions.


See Robert Peston's blog

That means that the Irish government has decided that the Irish taxpayer will now provide a guarantee for up to 400bn euro of liabilities.

The department said that the scheme would cover all UK branches of the financial institutions, but that negotiations were under way with the British authorities on safeguards that might be provided to any of the six banks' subsidiary companies in the UK.

The Irish stock exchange reacted favourably to the move with banks shares rising dramatically after big falls on Monday.

On Tuesday, Finance minister Brian Lenihan said: "If funds are not secured by the Irish banks, it will be a very, very serious matter for the economic life of this community.

"Every bank, every worker, everyone knows how short those funds have been in the last year.

"If they dry up entirely, then that is very serious for Ireland. We must take action to secure the stability of our banking system and that is what the government decided to do."

The Irish government hopes the move will remove any uncertainty that surrounds Irish banks

This amounts to gaurentees on over 400 billion euros worth of deposits. Not supprisingly the stock market in Dublin saw possibly the biggest recovery globally today. A good move.

Is it true that Irish people are the most in debt nation in the world?

No...what nonsense.

The Irish collective consumer debt is roughly 297 billion Euro. It is about the 9th most indebted Euro economy.

In the United Kingdom its about £1.4 trillion which is roughly £1.1 trillion secured against property and £224 billion on credit cars. Approx £4700 owed per person excluding mortgages. The United States is worse still.

So no, that statement is false.

We have just put 500 billion euro (more then the US congress was prepared to accept) on our own banks.........fook that is a risk:o - Hope it works - it did today, shares in Irish banks rocketed.


My concern is our initiative being spread to Irish subsidiaries in the UK - I, as an Irish taxpayer, am not prepared to prop them up - oh the irony is unreal:cheers:

In the United Kingdom its about £1.4 trillion which is roughly £1.1 trillion secured against property and £224 billion on credit cars. Approx £4700 owed per person excluding mortgages.

actually the UK figure is *shrinking*. bet you didn't know that.



The Irish collective consumer debt is roughly 297 billion Euro.

average per capita uk non mortage debt is £3702, combined with mortgages it's £21,883 per capita and falling in absolute terms by £7 per month per capita when inflation is 4.7%.

counting debt a similar way in the republic, irish debt per capita is £53,231.

uk gpd per capita is 25,658.1466 British pounds, ireland's is 28,234.4331 British pounds (and that's partly higher due to the strength of the euro). you can see the difference compared to national income... it's massive.

it would take britain 311 days to pay it off and that's being conservative as the british debt is eroding anyway in absolute and real terms. it would take ireland 686 days and that debt is growing in real and absolute terms so would take longer.

ouch!

No...what nonsense.

The Irish collective consumer debt is roughly 297 billion Euro. It is about the 9th most indebted Euro economy.

In the United Kingdom its about £1.4 trillion which is roughly £1.1 trillion secured against property and £224 billion on credit cars. Approx £4700 owed per person excluding mortgages. The United States is worse still.

So no, that statement is false.
I was saying about per capita debt. And your post proved I'm right.

The South has shown itself to be the only government willing to put its neck on the line here. That was a bold move, its rattled Downing Street and the EU competition people are looking into it. The response by most other democracies has been hopeless dithering. This could put Irish Banks in a very strong position to mop up the spoils once the fog of war lifts.

i agree. the alternative is that it could go terribly wrong... interesting days. i think the UK govt should guarantee funds too but only for those who are resident in the uk, we don't want to encourage a run on the pound.

actually the UK figure is *shrinking*. bet you didn't know that.

I did. :)

Yes per capita Ireland is more indebted, I took the original statement to mean the nation had the most consumer debt in the world, which is clearly false :)

Ireland's national debt is amongst the lowest in the EU - its borrowing power is very strong BUT this can change dramatically in a short space of time. The problem for the British Government is that they just cannot take the risk of gauranteeing all British Banks because of recent history with Northern Rock etc. What the Irish Government has unintentionally done is put potentially very damaging pressure on UK institutions only gauranteed to 35,000 per saver. That is fine for the small fry average savers - it is a different story for major companies and investors which, if the news today is to be believed, are shifting funds into Irish banks. The problem there is that when this happens it means effectively a flow of capital from the UK to Ireland....this will be the case unless the British match the Irish move or they wait out the 2 year gaurantee. Irish banks with subsidiaries in the UK now have a big advantage over internal UK banks.

Make no mistake though - this is incredibly risky business by the Irish Government - it will win us no freinds in the European Union - who tbh are furious. None more so then the British Bankers Association and the British Government. Alistair Darling rang Brian Lenihan a few times yesterday 'pleading' for him to rethink this arrangement. I suspect BritishBanks have been given a headache they would rather not have. The extent of the shift in Capital will be known in the coming weeks. Id imagine it will be pretty big - and an enormous risk to the Irish taxpayer.


A risky, brave peace of initiative which is having very posisitive results on the Stock Market.......for now. It will either be seen as very foolish or very ingenius.

it will win us no freinds in the European Union - who tbh are furious. .

Indeed...what goes around, comes around.

It may well end up costing you far more in the long run than any short term benefit.

Distribution of EU funds?.....plenty of people will now put you back of the queue.

Objections to any new EU laws....plenty of people will now ignore you..

Etc,etc.

Indeed...what goes around, comes around.

It may well end up costing you far more in the long run than any short term benefit.

Distribution of EU funds?.....plenty of people will now put you back of the queue.

Objections to any new EU laws....plenty of people will now ignore you..

Etc,etc.


We are entitled to protect our financial system just as you are. Maybe other countries need to grow a set of balls and do the same thing. New EU laws we dont like dont get passed or at least wont apply to us. Unanimity is required across all EU states.

Its a globalised world - decisions made under certain circumstances in certain countries will effect other countries. We are hardly going to put the interests of British or French financial institutions ahead of our own. There is a context to this deal that seems to have been missed.

We are entitled to protect our financial system just as you are. Maybe other countries need to grow a set of balls and do the same thing. New EU laws we dont like dont get passed or at least wont apply to us. Unanimity is required across all EU states.

Its a globalised world - decisions made under certain circumstances in certain countries will effect other countries. We are hardly going to put the interests of British or French financial institutions ahead of our own. There is a context to this deal that seems to have been missed.

Of course your entitled to do it......just dont expect others in the EU to take it lying down, thats all.

At the end of the day, Ireland is just a small country on the outskirts of Europe and it is easy to ignore if others choose to do so.

easy to ignore

Then ignore it...lol! Why comment on it if you want to ignore it?


Or if you dont - get some perspective and read

European bank rescue plan in tatters amid savings stampede


From The Times
October 3, 2008
European bank rescue plan in tatters amid savings stampede

Patrick Hosking

[link to business.timesonline.co.uk]

Plans for a pan-European response to the global financial crisis lay in tatters last night as Greece followed Ireland in unilaterally guaranteeing all bank deposits.

Amid reports that Greek depositors were rushing to withdraw their savings, Greece's Cabinet agreed to protect all deposits whatever their size. Previously the maximum guaranteed was €20,000 (£15,600).

A proposal by President Sarkozy of France to create a European €300 billion bailout fund also collapsed, leaving attempts on this side of the Atlantic to calm investor panic and lubricate the money markets in chaos.

America's rejigged $700billion bank bailout still hangs in the balance, awaiting the approval of Congress today. But after days in which the surprises sprung by European governments had succeeded only in angering each other, the chances of a parallel joint plan from EU nations are, for now, slim to non-existent.

The latest chapter in the story of this piecemeal approach to stabilising the banking system began on Monday evening, when a group of Ireland's most senior bankers trooped into Government Buildings in Dublin.

It had been a terrible day in markets worldwide and a catastrophic one locally. One bank, Anglo Irish, had seen its shares plummet by 46 per cent. There were rumours of large depositors demanding their money, including one German customer wanting an immediate €1.5billion. Then came the horrendous news that Congress had rejected the US bailout plan.

The shaken Irish bankers were grave as they poured out their story to the Taoiseach, Brian Cowen, and the Finance Minister, Brian Lenihan. Liquidity was drying up, they said, other banks were refusing to lend to them except for the shortest periods. According to one source: “They basically said, ‘Look, tomorrow two of our banks won't survive'.”

Thus began the hatching of the explosive plan for a guarantee of all Irish bank deposits. Irish officials worked through the night to cobble together a credible plan.

There was no time to consult other governments, the European Commission or even the European Central Bank. A guarantee had to be in place before ordinary bank branches opened on Tuesday. At 4.15am the plan was completed. The promise would apply to six home-grown banks, and to no one else.

A couple of hours later Alistair Darling rose from his slumbers to be told the bad news. The Chancellor had for once had a full night's sleep, having spent most of the weekend stitching together the Bradford & Bingley deal.

Mr Darling immediately spoke by phone to Mr Lenihan. Why hadn't he been told? Why was there no consultation with other EU states? Mr Lehinan explained that there had been no time.

In Paris, President Sarkozy was already awake and grappling with his own crisis. Dexia, the Franco-Belgian bank, was in desperate trouble and short of liquidity after a 28 per cent plunge in its shares on Monday.

A limousine whisked him to the Élysée Palace, where François Fillon, the Prime Minister, was on the telephone to Yves Leterme, his Belgian counterpart.

The previous day, Mr Leterme had given his backing to the partial nationalisation of Fortis, the Benelux bank, for €11.2 billion. He had no trouble convincing French leaders that they should now help him to salvage Dexia. Mr Sarkozy and Mr Leterme both agreed to chip in €3 billion, and Jean-Claude Juncker, the Luxembourg Prime Minister, contributed €376 million. The deal was cemented while the croissants were still warm.

The rescue helped to reinforce Mr Sarkozy's belief that Europe-wide action was needed. A banking watchdog, curbs on executives' and traders' pay and a change to accountancy rules for financial institutions were among his ideas. He was warming too to the idea of a European bank rescue fund - an idea first floated by JanPeter Balkenende, the Dutch Prime Minister, who suggested that each EU state should contribute 3 per cent of its national wealth.

Back in London, share markets were stabilising after the horrors of Monday, but not for HBOS and its prospective rescuer Lloyds TSB, whose shares were plunging on growing fears that Lloyds shareholders would not support the deal on its current terms. Any failure to complete it could be disastrous for HBOS, whose shares had collapsed just before the Lloyds rescue on fears that, alone, it would suffer funding problems and a possible run.

A run of that magnitude would be unthinkable for Britain and deeply damaging personally for Gordon Brown, who two weeks earlier took the axe to normal anti-monopoly rules to wave through the deal.

Meanwhile Dublin's move was having awkward consequences. Depositors on both sides of the Irish Sea were beginning to vote with their feet. Allied Irish Bank reported a surge in new deposits, as did Bank of Ireland, as anxious savers rushed to pull their money from British-owned banks and put it in the six favoured institutions with a rock-solid guarantee.

British bank leaders were furious. Dublin's move might be good for Irish banks but it was bad for British ones, for whom deposits were lifeblood in such difficult conditions. By Tuesday evening, several banking leaders were putting their concerns directly to Mr Brown, Mr Darling and Mervyn King, Governor of the Bank of England, in a conference call.

The freezing of the money markets was still worsening in spite of hopes that a revamped US bailout plan could be passed. They asked for more liquidity. Specifically they wanted the Bank of England to relax the rules of its Special Liquidity Scheme (SLS), a mechanism that is already thought to have injected more than £100 billion into the banking system.

Mr Brown refused to follow Dublin's lead in guaranteeing all deposits.

By Wednesday, the fury over Ireland's unilateral guarantee was hardening in the City and across Europe. British banks were incandescent with their Irish counterparts, whom they accused of having deliberately exploited the situation to ring up corporate depositors and urge them to defect to “safer” Irish banks.

The case for an ambitious, co-ordinated response across Europe seemed stronger than ever to some on the Continent. That evening one European government source disclosed that France wanted Britain, Germany and Italy to back a €300 billion bank rescue fund at Mr Sarkozy's planned summit this weekend.

Within minutes, however, a German government spokesman bluntly rejected the idea in comments echoed by Angela Merkel. Confusion set in as French officials accused Germany of leaking the scheme to kill it off.

By late Wednesday evening French officials were changing tack to describe the €300billion fund as a Dutch idea, which they had always rejected. The Hague said it had no idea what France was talking about

The Élysée announced that a meeting between Mr Sarkozy and Mr Balkenende, due that evening, had been postponed for a day because the Dutch Prime Minister “has a problem with his airplane”.

By yesterday lunchtime, Hendrieneke Bolhaar, a Dutch finance ministry spokesman, said that the idea for a bank rescue fund had come from The Hague after all.

But farce then took over as Mr Balkenende emerged from his meeting with Mr Sarkozy - held after his aircraft started working again - to slap down the spokesman. There has “never been any question of a European fund”. It is all a “misunderstanding”, he said.

Instead, taking up a concept first mooted by Mr Balkenende, Mr Sarkozy is expected to float the idea that each EU country demonstrate that it has at least 3 per cent of its GDP at its disposal to help out in a financial crisis.

One EU diplomat told The Times that early French thinking on co-ordinated national funds had probably been mistakenly conflated into the idea of an EU fund, given that 3 per cent of EU GDP amounts to around €300 billion.

With the fund off the agenda, Mr Sarkozy finally persuaded Mr Brown and Mrs Merkel to meet him, Silvio Berlusconi, Mr Juncker, José Manuel Barroso, the European Commission chairman, and Jean-Louis Trichet, the chairman of the European Central Bank, in Paris on Saturday afternoon.

The official aim is merely to agree on a European plan for tighter investment bank regulation to put to the next G8 summit. Unoffically, Mr Sarkozy would also like a decision on a EU response to the crisis and at the very least an agreement not to follow Ireland's - and now Greece's - go-it-alone example.

But there has been little this week by the way of co-ordination to suggest that the plan has a chance.

Then ignore it...lol! Why comment on it if you want to ignore it?


Or if you dont - get some perspective and read

you obviously dont understand what im saying....those celtic heckles are well and truly raised and doing your talking...:ohno:

you obviously dont understand what im saying....those celtic heckles are well and truly raised and doing your talking...:ohno:


meh - im made of stronger stuff:cheers: - sorry if I came across in anyway ignorant or that. Not my intention:)

All i was trying to say is that the actions you took had a negative effect on other countries banking systems. And sooner or later those affected will find an opportunity to get their own back.

Its petty, but thats politics.

Of course your entitled to do it......just dont expect others in the EU to take it lying down, thats all.

At the end of the day, Ireland is just a small country on the outskirts of Europe and it is easy to ignore if others choose to do so.

Don't be too sure of that.

Ireland may be a small country but it does have a rather influential voice and position within Europe and the European Union as well as support from other nations and businesses around the world.

I seriously doubt that Europe will try and turn it back on them. ALL new EU laws and treaties have to be approved by the Irish people under the constitution. Purposely annoying the Irish may well end in the Irish blocking new laws. Not as powerless as you seem to think.
The EU's reaction to such moves would not be that strong either as getting rid of Ireland would most likely collapse the union.

Don't be too sure of that.
Purposely annoying the Irish may well end in the Irish blocking new laws. Not as powerless as you seem to think.
.

History has shown that when one country trys to hold up the others, the rest go around it.

History has shown that when one country trys to hold up the others, the rest go around it.

Unlikely.

You underestimate the annoyance of some governments and Europeans toward the EU. Should the EU ignore and 'go around' Ireland I'm pretty sure the United Kingdom would have something to say on the matter, especially if we had a anti-EU conservative government in place. While Ireland may be small, the power the UK holds is something altogether different.

http://www.cnbc.com/id/26986243


^^

I think talk of the end of the euro may be premature. But Ireland may well emerge from this with Dublin becoming Europe's premier financial capital. The combination of low corporation tax and the guaranteeing of deposits surely puts it at the top for any company considering its HQ. Ireland may well feel it is beneficial to leave the EU/eurozone and go it alone. Certainly the population's general attitude to the EU is starting to align with Britain's. Finger wagging and tut-tutting from the big boys isn't going to help this, and if Ireland does emerge in a position of strength what does it owe anyone?

I have to say it is hiliarious how wrong footed London is from Dublin's move. It is a credit to the people of the South to have politicians working all through the night to decisively sort out this mess. I hope such enthusiasm for problem solving persists into other awkward areas such as healthcare.

. But Ireland may well emerge from this with Dublin becoming Europe's premier financial capital. .

:rofl:

Now i see the level and extent of your delusional thinking, i dont think there is any point in discussing anything with you in future.

Im curious, when Ireland has a GDP of about $230Bn, just how would Ireland honour its committment to repay Loans,deposits that currently stand at $600bn if it were ever called on to do so?.

Its crazy.

And it was blind panic that got your politicians to give a blankett guarantee, not careful, thoughtful policy making. When your finance minister was told 2 of Irelands largest banks were on the verge of bankruptcy, it seemed to cause your politicians to blink first.

"Now i see the level and extent of your delusional thinking.."

My point may seem incredulous. But it is fair to say that a complete lack of expecting the unexpected has got us into this mess. To state 6 months ago that Walls Street's investment banks, those bastions of western capitalism, would in effect cease to exist would be considered delusional. Unintended consequences from this will last for years to come, and I was merely proposing one possible outcome. How many 'black swans' must you see?

"I dont think there is any point in discussing anything with you in future."

Really? On what grounds? That you disagree with a point I made. Do you not think that is quite pathetic?

All i was trying to say is that the actions you took had a negative effect on other countries banking systems. And sooner or later those affected will find an opportunity to get their own back.

Its petty, but thats politics.

it would most likely only really effect British deposit accout levels and I don't think the UK gov will look for reprisals.

Hopefully this crunch will make both UK and Ireland come to their senses about the EU and leave!

http://en.wikipedia.org/wiki/Federal_Europe

ahem, um...

*leaves*

well this DUBLIN stock exchange is known to be the good so far as I knew. This is in the Ireland and known as the Irish stock exchange to. This is proven to be best for many of the stock traders . But, as of now all the stock exchanges were not doing well due to impact of the US market.

i read this quite interesting comment on the situation there -


The problem for Ireland comes if other countries now adopt the same guarantee policy. Just as some money may well have switched into Irish banks on the back of the guarantee, it can quite easily switch out again if the UK/French/German etc governments provide equivalent guarantees. In that case, Ireland will again face the fact that its banks are in the weakest position in the EU, and will quickly lose external interbank funding (which was the reason the guarantee was required in the first place).

basically... if the uk, france and germany introduce a 100% guarantee, ireland suddenly loses the advantage it had in introducing one. now they HAVE to introduce one because ireland set the ball rolling and to not have one would look weak leaving ireland back in the same mess it was in before.

i read this quite interesting comment on the situation there -



basically... if the uk, france and germany introduce a 100% guarantee, ireland suddenly loses the advantage it had in introducing one. now they HAVE to introduce one because ireland set the ball rolling and to not have one would look weak leaving ireland back in the same mess it was in before.

Looks like that has just started....Germany has just put in place a guarantee like Irelands....hmmm, things are about to get interesting..:ohno:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/full_deposit_protection_is_nig.html

Full deposit protection is nigh

* Robert Peston
* 5 Oct 08, 05:04 PM

The decision by the German federal government to guarantee all private savings in German banks is momentous.

In a globalised banking market, in which money can leak across borders like a sieve, it will be almost impossible for the UK not to follow Germany's lead.

I would be immensely surprised if Alistair Darling, the Chancellor of the Exchequer, didn't announce a similar commitment within the next 24 hours.

The formalisation of full protection for depositors throughout the European Union became almost inevitable after similar decisions were taken over the past few days by the Irish and Greek governments.

But Germany is the biggest economy in Europe, a global powerhouse, with a banking sector that for years prided itself on its conservativism.

That Germany is the first of the major European economies to provide 100 per cent insurance to private savers shows just how fragile its banks have become.

The trigger for the announcement seems to have been the desperate straits of Hypo Real Estate, the commercial property lender whose rescue in jeopardy.

But that's only the trigger.

The underlying cause is a near-total collapse of confidence by creditors to banks and by bankers themselves.



Oh dear Ireland, what did you set in motion.....the law of unintended consequences has now come into play.

If this goes the wrong way, you are in DEEP shit, because you have no cards left to play.

This was an immediate solution to an immediate problem, we would have been in deep shit (aka bailout mode, supposedly) if this action wasnt taken.

I would have preferred a common european position on the situation, whether it was paris's or otherwise.

you're gonna be in deep shit now. you gave yourselves a competitive advantage over every other country in europe, forcing their governments to expensively act and have done nothing to sort your own problems out in the process.

I didnt do it:D

Like I said, I would have preferred a european solution... and I voted for Fine Gael

yes. i don't mean *you* personally. more the stupid irish finance ministers who thought they could get out of giving direct help to irish banks by simply having that competitive advantage.

I have to disagree with the above sentiments. Ireland's decision re its bank guarantee was to prevent a run, not to gain competitive advantage. That was an 'unintended consequence' which led to my somewhat tongue-in-cheek comment dated Oct 4. Germany's decision to do something similar (which at the time of writing is not definite), will just remove a reason to shift capital from Frankfurt to Dublin, which as I've said was not the intention of the Irish government.

As a native of Belfast, I hate to use this particular analogy, but we're all in some ways just re-arranging the deck chairs on the Titanic. If this does prove to be a doomsday situation then the West as a whole is in deep shit, and we're all going down. I still think (hope) we'll get through this.

yes. i don't mean *you* personally. more the stupid irish finance ministers who thought they could get out of giving direct help to irish banks by simply having that competitive advantage.


The Irish move was a good move IMO. It is all about confidence and tbh it worked - why do you think the Danes have done the same thing along with the Greeks and the Germans? Ireland did start the ball rolling by acting unilaterally. Being small helps.

Other countries then had the excuse to ignore the rediculous ramblings of the European Union about 'working together'. The Irish Finance minister took a necessary but brave step and it's worked.

It was never ever done for 'competitive advantage'. The Irish Government has told the banks this and has prevented them advertising the fact and such. Though it hardly needed advertising in the UK anyway!

It was never ever done for 'competitive advantage'. The Irish Government has told the banks this and has prevented them advertising the fact and such.

european commission is expected to take action against the republic over this and fine them a very large amount of money for... breaking competition rules! the danes, germans, greeks et al did the same because they had to! if one person does it everyone does.

european commission is expected to take action against the republic over this and fine them a very large amount of money for... breaking competition rules! the danes, germans, greeks et al did the same because they had to! if one person does it everyone does.

We wont be fined. They are copying us for goodness sake - how could a German Chancellor possibly condemn another country when her country does the exact same thing!? Maybe they are just peeved they were not the ones to think of it first! I do think Ireland stole a march on this one and made the right decision to suit it's circumstances. Ireland never intended competitive advantage - that is simply a fact. It may get it by proxy but it was to save the financial system in the country.

Agreed odlum. The South's move was smart, and as they say "imitation is the sincerest form of flattery". I think the above contributions from the British Mainland possibly stem from a frustration at Westminster's impotence and dithering. Given that they are my economic overlords I am certainly incandescent with rage at the lack of leadership and sense of purpose. I regard London as the greatest city on Earth and my political masters (whom I have no say in whether they get into office or not - but NI's democratic deficit is for another day) are doing it an immense disservice.

We wont be fined. They are copying us for goodness sake - how could a German Chancellor possibly condemn another country when her country does the exact same thing!? Maybe they are just peeved they were not the ones to think of it first! I do think Ireland stole a march on this one and made the right decision to suit it's circumstances. Ireland never intended competitive advantage - that is simply a fact. It may get it by proxy but it was to save the financial system in the country.

Agreed odlum. The South's move was smart, and as they say "imitation is the sincerest form of flattery". I think the above contributions from the British Mainland possibly stem from a frustration at Westminster's impotence and dithering. Given that they are my economic overlords I am certainly incandescent with rage at the lack of leadership and sense of purpose. I regard London as the greatest city on Earth and my political masters (whom I have no say in whether they get into office or not - but NI's democratic deficit is for another day) are doing it an immense disservice.

You two are delusional....:nuts:

"imitation is the sincerest form of flattery"

Seriously wtf are you drinking......your making out that the Republic's actions were part of some grand, cunning masterplan.

It was blind panic...nothing more, nothing less.

Start thinking with your brains instead of your balls....jesus..



And you still havent answered my previous question...

Just how will the Republic honour its commitment to repay $600 billion worth of deposits, with a GDP of only $200 billion, if things go tits up...???

look. irelands banking system was in such a peril that had the irish government NOT done this it would have had to nationalise the entire sector over night. every last little bit... rumour has it AIB is insolvent and will go tits up otherwise just for starters and has liabilities greater than irelands entire GDP. it will probably have to do so in six months at the most anyway.

in introducing this however it DOES give ireland a competitive advantage because it means irish banks are privately owned but backed in entirety by the irish government thus people move their funds from other european banks to ireland undermining those banking systems which do not have this security - because they didn't need it. of course people then ask "why haven't the british/french/germans guaranteed it? ireland offers that security, let's bank there!"

as it happens germany hasn't done what ireland has done but smaller european countries have HAD to. greece or denmark for example because for them its the only way they are capable of propping up their banking systems following the moves of ireland. ireland's banking system will still likely go tits up after iceland's does which will leave ireland completely dependent on the charity of strangers who were only a few weeks ago pissed off by the irish actions.

as for britain, yes the shower of shits that run britain have not a clue. the morons even broke the link between house prices and inflation so they wouldn't have to put up interest rates and reign the problem in in 2003.

You two are delusional....:nuts:

"imitation is the sincerest form of flattery"

Seriously wtf are you drinking......your making out that the Republic's actions were part of some grand, cunning masterplan.




Erm when did anyone ever say that? - Have you got a chip on your shoulder?


It was an excellent idea - it worked - now sort out your own banking system, stop dithering, then you are in a better posistion to offer wise words and, yes, the imitation says it all quite frankly - and you guys will be doing the same aswell.

As for the 600 billion gaurantee - the idea is that it will never have to be paid. Seriously man use your nut will yeh?

Gothicform 2 investment banks here are seen as vulnerable - the 2 big banks - AIB and Bank of Ireland are retail banks primarily and therefore not seen as particularly vulnerable any more then any of the bigger UK or French banks. It is the investment banks that are the concern. Though they have the opportunity now to get their house in order and to re-capitalise. It will be scrutinised by the Government to ensure that's what they do. The Government will have representatives on the boards to protect the taxpayer's interests.

As for the 600 billion gaurantee - the idea is that it will never have to be paid. Seriously man use your nut will yeh?




So in effect its a worthless guarantee, as the Irish government has made a committment it cant honour.

So in effect its a worthless guarantee, as the Irish government has made a committment it cant honour.


No, the Irish Government has made a committment it will honour - but if something did happen the banks - not all would go bust anyway. So a final figure would be nowhere near that much. The banks are safe - that is the point. So the gaurantee wont ever have to be honoured. Things like this are done to promote confidence - that is the idea.

If the British Government tomorrow wanted to gaurantee all it's banks - that would be around 2 trillion dollars - could you afford to bail that out? - no. But that is not the point. The point is promoting confidence - that is all any government can do. It is a concept that is tricky to explain tbh.

Exactly.

The deposit guarantee will not need to be used, it has been used solely to help with banking, saver and investor confidence.

Once confidence has been re-established then inter-bank lending should start to increase and rates decrease and some of these problems will no longer be an issue.

If it goes shits up, then it will be for everyone bar the multi millionaires.

The guarantees are if it goes ape but more to safeguard banks.

And to be honest very few of us have more than £60,000/E60,000 in cash savings. We are more likely to have put it into property. Business might though have that kind of cash, but thats protected in a different way.

In the end the neocon Reaganite Thatcherite legacy will have brought us two recessions within a generation.

"Ireland's banking system will still likely go tits up after iceland's does which will leave ireland completely dependent on the charity of strangers who were only a few weeks ago pissed off by the irish actions."

Thankfully, Ireland is in no way in the same sort of shit as Iceland is. Other than banking, all that Iceland has is cod and old Bjork CDs. At least Ireland gave up its dependance on U2 years ago.

As stated, the move was to restore confidence. Unfortunately economics is a dark art and not a mathematical science, and its the evaporation of confidence with hysteria filling the vacuum that is really driving this mayhem.

The projected "reasonable worst case scenario" is having to pay out €40bn, this would be extremely painful, and would require serious borrowing, but it could be done.

Think of it like an insurance company, as this is exactly what this deal is, an insurance policy which is paid for to the tune of €2bn. Its highly unlikely that all the insured cars will crash at the same time, even on shitty roads.

The banks should have to pay more though imho, and again, european cohension could only be a good thing in such dire straits.

This does raise serious issues about where the eurozone goes from here. The current hybrid of monetary union among still fiercely independent nation states is probably unsustainable in the long term. If the Euro is to continue to succeed, and if Ireland still wants to remain a part of it, then treaties such as Lisbon will need to be ratified.

Merkel slams Ireland over bank guarantees
7 Oct, 2008, 2202 hrs IST






BERLIN: German Chancellor Angela Merkel criticised Ireland's unilateral move to protect its banks as "unacceptable" Tuesday, saying Dublin had not gone about the decision in the right way.

"The Irish way is not the right way," Merkel said in a keenly awaited address to parliament on the financial crisis.

"Protecting without coordination one's own banks, without including other international institutions that paid taxes in Ireland for years, and thereby of course hurting competition, is in my opinion unacceptable."

Ireland pledged a blanket guarantee on personal and corporate bank deposits at its six major banks last week despite protests by neighbours that it would distort competition.

In Dublin, Irish Prime Minister Brian Cowen's office declined to comment on Merkel's remarks.

Germany and other countries have said they would guarantee only personal savings and current accounts to prevent a rush of people withdrawing money because of fears that a bank could fold.

The comments came as European finance ministers agreed in Luxembourg on Tuesday to increase such minimum bank deposit guarantees in Europe to 50,000 euros (67,500 dollars) from 20,000 euros currently.

Guaranteeing private deposits is aimed at preventing a rush of people seeking to withdraw all their money from banks because of fears that the bank could fold.

A government spokesman said Tuesday that Merkel's weekend announcement for a guarantee for all savings in Germany had achieved its aim of soothing people's worries about their money not being safe.

"We think that with this guarantee ... the objective is being fulfilled, namely a calming of the situation," government spokesman Thomas Steg told a regular news conference.

^^hmmm

How patronising. No one is suggesting what Ireland should have done, other than not show up larger nation's politicians to be reactive as opposed to pro-active. I appreciate a quick phone call at 4am when the decision was made might have addressed sensitivites, but this public telling off by the 'big four' will achieve nothing other than further aggravate Ireland's already deteriorating relationship with the EU. Cooler heads are needed.

do you think britain, france and germany give a fuck about ireland? we have companies bigger than the irish economy. small countries cannot afford to act without the consensus of bigger ones, or act like big ones which is what the irish did. they should have as the previous poster has mentioned first of all let other countries know what they were doing instead of just going ahead on their own.
we're all still expecting a certain irish bank to collapse in the next few days. i won't say which one but everyone is a bit confused why it is insolvent and hasn't collapsed. i expect that will bring the irish financial system down like a house of cards.

^^ It matters to us and that is all that matters. Would you mind telling us what Irish bank is insolvent? Also considering we have yet to see a bank go under your hardly ones to be giving advice! The fact is Ireland acted and did the right thing....do you think we give a fcuk what the British think? - obviously not.


Ulster Bank gets Irish guarantee

The 400bn euro guarantee initially covered six Irish banks.
The Irish government's finance minister has said a guarantee scheme will be extended to some non-Irish banks with a presence in the Republic of Ireland.

Brian Lenihan said the Ulster Bank, First Active, Halifax Bank of Scotland, IIB Bank and Postbank were eligible.

However, the Department of Finance said this only referred to their operations in the Republic.

"The subsidiaries in the north fall under the remit of the Financial Services Authority in the UK," it said.

The Ulster Bank - a subsidiary of the Royal Bank of Scotland - had applied to join the scheme.

The 400bn euro guarantee initially covered six Irish banks.

Mr Lenihan said on Thursday he was extending the guarantee to banks with a broad footprint in the Republic's domestic economy.

He said there would be additional limitations to ensure the support covered liabilities in the national economy, as opposed to the Irish subsidiaries and their parent groups.

The minister said it was another sign of the determination of EU member states to ensure the stability of the banking system.

Meanwhile, most European and Asian shares have rallied after investors absorbed news of a co-ordinated interest rate cut.

The UK bank rescue package boosted financial shares, with HBOS up 30% and Royal Bank of Scotland adding 15%.


without the consensus of bigger ones

We dont need consensus from you, or permission, to do anything. Those days ended in 1948...all this is is begrudgery - anyone but Ireland may come up with a plan seems to be concensus around Europe atm - why should you be any different. We did our own thing - we are happy and comfortable with it and, quite frankly, other then that it is no more of your business what we do anymore then it is any of our business what way your country chooses to get out of it's mess.

Also for your information we had no time to consult the European Union or any other country anyway. Of course it is right and friendly to consult and this would have been done and should have been done. No point crying over spilt milk.

The banks should have to pay more though imho.

The figure to the taxpayer is somewhere between 2 and 12 billion euro per year from the banks for this protection. If all goes well the taxpayer will make a mint in the end and it wont cost us anything.

Downing's Street attitude is becoming a bit schizophrenic. It slates Ireland for guaranteeing deposits, for the reasons all quoted above, but this evening it has effectively declared financial war on Iceland, for not guaranteeing deposits of British customers, and in retaliation is seizing Icelandic assets in Britain.

Are you privvy to information not in the public domain gothic? I'd be interested to know which bank is on the verge of imminent collapse.

do you think we give a fcuk what the British think? -

well you should. britain basically owns iceland now.

Downing's Street attitude is becoming a bit schizophrenic. It slates Ireland for guaranteeing deposits, for the reasons all quoted above, but this evening it has effectively declared financial war on Iceland, for not guaranteeing deposits of British customers, and in retaliation is seizing Icelandic assets in Britain.

i totally agree. i think the thing is iceland owes britain a LOT of money. what's going to happen when over the coming days various british institutions start withdrawing their money from ireland next because thats the next small over leveraged economy that cannot possibly afford to meet its liabilities.

well you should. britain basically owns iceland now.



i totally agree. i think the thing is iceland owes britain a LOT of money. what's going to happen when over the coming days various british institutions start withdrawing their money from ireland next because thats the next small over leveraged economy that cannot possibly afford to meet its liabilities.

Ireland may be relatively small but it is nowhere near as small as Iceland and I am certain will come out in healthy shape when all this is finished. Look after your own back garden and we will look after ours. Also what do you mean by British institutions starting to withdraw their money? What institutions are these?

This is all a stepping stone towards recapitalisation of the banks, as happened in sweden in the early 90s, the moves give the government and banks time to take stock of the situation in order to tailor a solution. Supposedly anyway.

Look after your own back garden and we will look after ours.

Both your attitudes are very unhelpful to the situation(not that any of us have any influence) but this is an international problem, and especially in europe, an international solution is best. Decisions taken in one country will affect another in a globalised market, as we have seen. Each country taking its own actions unilaterally will result in a messy free for all. A common policy would be far more stabilising. Co-ordinated actions will always result in a neater and more confident solution... and confidence is what is needed right now.

Ireland did start a bit of a mess, but it may have been that necessary. Hopefully the above will happen, as per sweden(it needs to):ohno:, and europe will see the benefit of a non-imploded irish economy.

State mortgage plan for first-time buyers


Independent.ie

Saturday October 11 2008

A RADICAL plan to allow first-time buyers to purchase new houses with a mortgage financed by the State is set to be unveiled in the Budget, the Irish Independent has learned.

The move would allow new buyers who are struggling to meet strict conditions imposed by banks and building societies being able to borrow up to €300,000 from the Government.

Mortgage brokers have been approached and asked if they would be willing to arrange the State-provided home loans. Sources indicated that the brokers would be paid a set fee, thought to be around €1,000, for arranging the mortgages.

The new scheme, to be announced in next Tuesday's Budget, will be restricted to the purchase of new homes only, which is likely to lead to criticism it will end up giving developers a dig-out.

Critics will argue the scheme could have the effect of stopping house prices falling further to their market-adjusted level.

Since the demise of 100pc mortgages, most lenders are now demanding deposits of up to 20pc before approving a mortgage. This means first-time buyers are having to come up with deposits of between €30,000 and €60,000.

Under the new scheme, which has been designed by the Department of the Environment and Local Government, with input from the State's Housing Finance Agency, funding would be provided for those refused a loan and who do not earn more than €60,000.

The Housing Finance Agency raises money for local authorities to use to support housing projects. Affordable housing schemes have run into major difficulties, with developers withdrawing from the programmes claiming they cannot make money.

Up to now, local authority loans had a maximum loan approval of just €185,000. The new scheme will expand the maximum loan approval to €300,000.

Neither the Department of Finance or the Department of Environment, Heritage and Local Government would comment last night.

- Charlie Weston Personal Finance Editor

Interesting...but it would let developers off the hook (again). That said it would be a kick start aid for first time buyers into the housing market.

On the other hand I think we should let the housing market find it's natural level. I think it is too early to start giving these sort of incentives.

Yes, I still maintain Ireland did the right thing at the time it did with the given circumstances it found itself in. No one has been able to suggest what Ireland should have alternatively done. It is now apparent that given our interconnected globalised banking system, separate plans by individual countries is not going to work. Iceland's bankruptcy has been in no one's interests (except maybe Russia, who can now muscle in into a NATO country sandwiched between the US and the Europe). If Ireland, a eurozone state was to go the same way the carnage would be frightening.

The markets are calling for a consensus, multinational approach. I have been very critical of Downing Street to date, but the plan put forward by Brown/Darling does look like a template for other countries to use. Lets hope by tomorrow the G8 have an agreed plan. If they don't, then next week will make the one we just had look like a tea party.

It is too early. If I was a first time buyer again I would definitely be waiting. There is now an increasing probability that rather than a mild recession we are heading for a depression. The last one took the best part of 20 years and a world war before it ended. Even if this is all managed well, the boom years are not going to be repeated for a very very long time.

Yes I agree completely


EU Approves Ireland's EUR485B Draft Bank-Guarantee Plan

DUBLIN (Dow Jones)--The European Commission has approved Ireland's EUR485 billion draft plan to guarantee this country's banking system.

The Irish government's two-year guarantee safeguards deposits, covered bonds, senior debt and dated subordinated debt and gives Finance Minister Brian Lenihan the last word on decisions on potential mergers or acquisitions of the Irish banks.

It covers the four main publicly quoted banks: Allied Irish Banks PLC (AIB), Bank of Ireland PLC (IRE), Irish Life & Permanent PLC (IPM.DB) and Anglo Irish Bank PLC (ANGL.DB), two of Ireland's biggest building societies and five subsidiaries of foreign-owned banks.

Irish Prime Minister Brian Cowen received the news directly from European Union President Jose Manuel Barroso, who confirmed that the proposal is in compliance with the European Commission's requirements, the Department of Finance said.



-By Quentin Fottrell,

So despite all the huff and puff the Irish plan is approved. Don't get me wrong, I support the EU project but there has been a telling lesson in all this for small countries and their dealings with the big four.

I'm starting to feel cautiously optimistic. Brown's plan is being well received internationally and today was the FTSE's second best day ever. All we need now is for the US to vote in Obama, not necessarily for any policy reason, but because I believe there would be an immediate world wide restoration of faith and confidence in the US, and this in itself would have an immensely positive effect.

I wonder what the Finance Minister said to Alistair Darling in the UK when announcing his scheme - 'Hello Darling, how was your day'?:lol:

Quite a pessimistic article in today's New York Times about the outlook for Ireland.

"Erin go Bust" by John Banville. Read it and weep.

http://www.nytimes.com/2008/10/16/opinion/16banville.html

Ah John Banville who longs for 'the good old days' - think he will be dissapointed, thank god!