HSBC, an opportunity

ei.sdraob wrote: »

Yes there could be issues with the EU, but in all honesty by this stage the EU is probably as sick of hearing about Anglo mess as us, they might be too happy to get the matter resolved somehow, remember that if Ireland does a Greece (were getting there) then the EU might have to fork up mucho mucho money
This is politics our representatives should tell the EU that the other option is Anglo dragging us down into a Greek situation, tell them to choose the least worst option grow some balls and all that
Anyways remember Lisbon Treaty last year? much noise was made about EU not having a say in our direct taxation, there could be competition issues but with the existing banking sector being already distorted by the state...

We're on thin ice already because we have our tax rate almost as low as it can go (and this is taking away taxes from other EU States. If we breached the minimum tax level (and saying the EU has no say in our taxation policy is not strictly true - they have always set minimum and maximum levels for corporation tax and vat etc, although amazingly have never pulled us up on VRT).

ei.sdraob wrote: »

Of course we are not going back to the bubble days, but introducing a major bank into the country could create some bloody competition, and we surely could use some of that as the native banks try to squeeze us for their mistakes

As you say yourself, government sponsored banks are hard to compete against because they can offer unprofitable interest rates to customers. However, the corrollary of this is that the banks try to avoid lending as much as possible. The gap in the market is for medium risk high interest lending, and when this becomes sufficiently profitable I expect other banks to arise.

ei.sdraob wrote: »

I dunno i just seen the article and thought it might be an opportunity, no it will not solve all our problems but it could be a step in right direction, and this surely sounds like a more realistic idea than all of that mycountrymycall ****e we seen

I am probably the last person here would advocate government interference, but if it results in more competition and solves one of our problems somewhat, then it sounds good

The problem is that if they let the banks fail back then now would be a perfect opportunity to encourage new lenders into the market. Even now if they let them fail HSBC might be interested in picking up the retail branch networks and certain parts of the deposit and loan books of some of the NAMA banks.

But so long as there are NAMA banks propped up by the State, I can't see any new entrants to the Irish market. Ok, if you give them sufficient subsidies and tax breaks I'm sure you'd get a few banks interested, but you'd have to pay them more than they spend in coming here and that kinda defeats the purpose of seeking private international investment in the first place.

So while I can see the point you're making, in my view the current system of NAMA banks is an almost absolute bar to competition in the banking sector. The NAMA banks are not run like a business, they are run to appease various groups:
1) they have unsustainably low mortgage interest rates and rarely seek to repossess to appease homeowner voters;
2) they don't sell their commercial and development property loans on the open market so as to prevent scandals coming out;
3) they offer good rates and claim that they are "open for business" or that they have certain funds allocated for mortgages/small businesses to appease those voters and give the whole thing a semblence of restoring credit;
4) they prop the government's ballooning deficit up with loans, without which the state is unlikely to source funding.

None of the above operations are in the best interests of running a profitable bank. Equally though, the above hinders competition from other sources. The only gap I can see is to charge higher interest rates but to actually lend rather than pretend to lend like the NAMA banks do. However, international banks can't see this market because from their point of view, if the NAMA banks won't lend to someone they must be a bad credit risk ergo there is no room for a viable lender in this market.

As an aside (it's late on the saturday night and I'm not at the picnic so forgive me if my permabear is showing), the massive shrinking of private sector credit in Ireland can only be a good thing. So far the total level of debt has been paid down a small bit (although a much larger reduction in private sector credit results from the State taking it over), but there is a long way to go. In the heady days personal private debt in Ireland was over 200% of GDP; 2Pac on TPP estimates that after a burst bubble personal private debt shrinks to on average 80% of GDP and it also must be bourne in mind that our GDP has shrunk quite a bit in the last 2-3 years. So if you look at where we are and where we are going to, the last thing we need is more supply of credit because there is unlikely to be the demand* for that credit.

*demand as adjusted according to how prudent it would be to lend to those people. I'm not sure if there is a proper term for this along the lines of aggregate demand.