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Ireland`s exposure to risky assets

  • 15-07-2018 10:54am
    #1
    realitykeeper
    Registered Users Posts: 4,138 ✭✭✭


    Does anyone know how exposed Irish banks are to the derivatives market and other risky assets?

    History tells us the government will bail out the banks when they fail so bank risk is government risk. Applying Murphy`s law, we know these risks eventually become the reality so taxpayers are then exposed to even more debt. Indeed, exposure to the Irish economy is risky in and of itself. Last time there was a recession, those with mortgages depended on earning a living in Ireland to keep up payments. When the economy failed, mortgages failed, then banks and of course the taxpayer got the bill. In theory, Ireland has already paid the cost of the bank bailouts and payments are presently being made on the interest on the loans taken out to pay the bailout costs.

    When things go wrong in the economy and the government has traditionally borrowed a lot of money and the national debt multiplies. Before 2008 it was "only" about 40 billion and now it is over 200 billion. My point being, next time the government needs to borrow, the national debt could very easily hit the one trillion euro mark, that is assuming the ECB play ball. If the ECB say no, Ireland will suffer (which is good for the soul) or it will leave the Eurozone and start printing trillions upon trillions of worthless punts, (in which case Ireland will suffer in anyway).

    But back to the original question, how exposed is Ireland to derivatives and other risky assets?


Comments

  • #2
    Geuze
    Registered Users Posts: 13,036 ✭✭✭✭Geuze


    Check the bank's balance sheet?


  • #3
    Geuze
    Registered Users Posts: 13,036 ✭✭✭✭Geuze


    realitykeeper wrote: »

    When things go wrong in the economy and the government has traditionally borrowed a lot of money and the national debt multiplies. Before 2008 it was "only" about 40 billion and now it is over 200 billion. My point being, next time the government needs to borrow, the national debt could very easily hit the one trillion euro mark, that is assuming the ECB play ball.

    Given that the EU fiscal compact now applies, and that we are now committed to running balanced budgets / surpluses, then our public debt will not grown to 1 trillion euro.


  • #4
    rivegauche
    Registered Users Posts: 1,035 ✭✭✭rivegauche


    You can be sure that a banker will find someway to get Irish Government to place "skin in the game" just like Drumm did a decade ago.

    You don't need to look for derivatives. the Irish banks have plenty of toxic debt in the form of very large mortgages given on very modest properties.
    The banks could go bust in a very conventional way on the next economic downswing. Bali-in rules mean those with cash in Irish banks will pay leading to an earlier bank run.


  • #5
    euser1984
    Registered Users Posts: 1,977 ✭✭✭euser1984


    everything you need to know is in here

    https://www.businessinsider.com/wall-street-banks-are-issuing-tons-of-risky-loans-2017-10?IR=T

    there is no money to bail the banks out again and the public will never accept another bailout - it's all down to your imagination after that "just for now"

    get yourself prepared


  • #6
    cnocbui
    Registered Users Posts: 19,651 ✭✭✭✭cnocbui


    rivegauche wrote: »
    You can be sure that a banker will find someway to get Irish Government to place "skin in the game" just like Drumm did a decade ago.

    You don't need to look for derivatives. the Irish banks have plenty of toxic debt in the form of very large mortgages given on very modest properties.
    The banks could go bust in a very conventional way on the next economic downswing. Bali-in rules mean those with cash in Irish banks will pay leading to an earlier bank run.

    As I recall, it was our German overlords who forced the government into protecting their interests at significant cost to the Irish people, not the banks.


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  • #7
    euser1984
    Registered Users Posts: 1,977 ✭✭✭euser1984


    cnocbui wrote: »
    As I recall, it was our German overlords who forced the government into protecting their interests at significant cost to the Irish people, not the banks.


    Ireland caused half of the EU crisis and we paid for it, because the public started playing "keeping up with the jones" as majority

    the germans actually gave us their citizens pension funds - how about that


  • #8
    cnocbui
    Registered Users Posts: 19,651 ✭✭✭✭cnocbui


    euser1984 wrote: »
    Ireland caused half of the EU crisis and we paid for it, because the public started playing "keeping up with the jones" as majority

    the germans actually gave us their citizens pension funds - how about that

    The German banks were equal contributors to the problem by not doing any due-diligence in relation to assessing the supply and demand situation here. Any bank in Ireland will do more due-diligence for a single €500 K mortgage than the German banks did for umpteen billion in loans.

    The Germans 'gave' nothing. They lent into the market that provided them with the highest rate of return and were extremely happy to do so. They were in it for all they could get.

    After things went sour, the again profited by foisting on us usurious interest rates for the bailout money that was 6 times the prevailing EU interest rate, so they continued to make money hand over fist with a rate of return unachievable anywhere else.


  • #9
    euser1984
    Registered Users Posts: 1,977 ✭✭✭euser1984


    cnocbui wrote: »
    The German banks were equal contributors to the problem by not doing any due-diligence in relation to assessing the supply and demand situation here. Any bank in Ireland will do more due-diligence for a single €500 K mortgage than the German banks did for umpteen billion in loans.

    The Germans 'gave' nothing. They lent into the market that provided them with the highest rate of return and were extremely happy to do so. They were in it for all they could get.

    After things went sour, the again profited by foisting on us usurious interest rates for the bailout money that was 6 times the prevailing EU interest rate, so they continued to make money hand over fist with a rate of return unachievable anywhere else.

    so where do you draw the line between the greedy consumer and the banks?

    is that interest rate large considering the government will have to bail out an out of control Deutsche Bank when the economy dips

    it was their pension fund too


  • #10
    noodler
    Registered Users Posts: 26,141 ✭✭✭✭noodler


    Geuze wrote: »
    Given that the EU fiscal compact now applies, and that we are now committed to running balanced budgets / surpluses, then our public debt will not grown to 1 trillion euro.

    There was always fiscal rules.

    Although yeah, a trillion is ridic.

    The 64bn gross, much lower net, cost of bailing out the banks was at the tip of our affordability at the time.


  • #11
    rivegauche
    Registered Users Posts: 1,035 ✭✭✭rivegauche


    cnocbui wrote: »
    As I recall, it was our German overlords who forced the government into protecting their interests at significant cost to the Irish people, not the banks.

    No the other Countries just used their influence to ensure that their banks/pensioners/stakeholders didn't end up carrying the can. The Irish banks made sure to ensnare the Irish Government in their debts and if you want to google "skin in the game" with regard to Anglo what happened should become clearer to you.
    The other Countries protected their Interests. Ireland's Government didn't protect its Citizens' interests.
    Some people might want to spin an anti-EU line here but it was Ireland's Government which failed it.


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