Possibility of banks collapsing in Ireland?

pjbrady1

The risk in any system is related to
1. The current number of parameters at play that are known about
2. The potential number of future events that can be foreseen
3. The potential number of future events that are unforeseen.
In banking I would define that there is four current factors at play.
-There is cash (however acquired) on deposit (invested in whatever form)/held in reserve.
-There is cash invested in whatever form that takes
-There is cash loaned out to third parties (fully loaned out or possibly not fully drawn down but cash is partially drawndown/loan approved).
-There are assets which the banks own or have a legal entitlement to ownership of in the case of a default on loan payment

With my limited knowledge of banking, I know that there are rules whereby a % of a loans value must be held in cash reserve. The highest it extends to is 4% I stand to be corrected on that. On average banks generally only have 2-3% in reserve.

If we look at the next two years there are a number of factors that could hurt the ability of the banks debtors to pay. A rise in interest rates by 1%+ will be enough to stretch people severely, combined with resulting job losses in construction and construction services. If tallied with job losses in manufacturing and IT/Telecoms/Electronics. Suddenly you have loans being defaulted on and the savings level of the country plummeting due to people drawing down savings to pay mortgages and people no longer being able to save.
The banks sell off houses in a depressed housing market (we'll say average house drops of 15% in the previous scenario). As the banks start to flood the market with properties (they have no option as their reserves are low) prices could lose another 3-4% quite quickly. News headlines of banks seizing properties panic housing investors. Foreign investors refuse to go near Irish properties.
Deposit/Cash reserves would start to vanish at an enormous rate week on week in the above scenario.
So how do the banks pay out cash deposits in the above scenario? Foreign assets for most banks are still quite small compared to their loan liabilities and deposit responsibilites in Ireland.

To sum up in the next two years if there is
- interest rate rises of 1%+
- house price drop of 10%+
- job losses in construction of 15%+
- Job losses in Manufacturing and IT/Telecoms/Electronics combined of 5%+
then in my opinion Irish banks would start to struggle to operate loans and deposits on a monthly basis.