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Policy issues concerning Banking Crisis

Ireland is heading for bankruptcy, which would be catastrophic for Ireland according to Morgan Kelly in his op-ed article in the Irish Times on May 7, 2011.

The full text of the 172-page Report of the Commission of Investigation into the Banking Sector in Ireland was published on April 20, 2011.

Systemic financial crises, like the recent Irish one, require a great number of institutions, enterprises 

1.   Ireland’s Banks Stress Tested:The Financial Measures Programme Report, which details the outcome of the review of the capital and funding assessments of domestic Irish banks(stress test) published on Thursday 31st March 2011

NCB have published a very interesting analysis of the future for Irish bank senior bondholders.  It shows there are almost €75bn in bonds held currently by the Irish banking system.  A substantial proportion of these (almost €25bn) are either subordinated or unsecured.

An article by financial journalist Michael Lewis in next month’s Vanity Fair argues that Ireland will have no choice but to default on the private debt (i.e. not sovereign debt). Lewis is well known for writing on Greece and Iceland and their financial crises. He argues strongly against the claim that Ireland has no choice but to repay the debts run up by gambling bankers and speculators. 

Documentation Regarding the Bank Guarantee, fowarded to the Oireachtas Committee on Public Accounts by the Department of Finance. 
15 July 2010 can be accessed here


 

As Ireland faces major decisions on whether or not to extend the €450bn bank guarantee there is growing questioning of the danger of moral hazard in this process. Moral hazard is the situation in which an individual, or institution or whatever, is insulated from risk while others pay the negative consequences of the risk.

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