The annual report of Anglo Irish Bank has just been published and you can download it here.
Month: February 2009
Today’s Irish Times reports that the government has hired Peter Bacon
to assess the possibility of creating a “bad bank” or risk insurance scheme to take so-called toxic debts off the banks’ balance sheets in a bid to free up new lending.
I know I’m at risk of sounding like a broken record on this topic but, given its importance, I’ll add my latest two cents on this. I’m not in favour of either this form of “bad bank” or a risk insurance scheme.
As cited by Martin Wolf in today’s FT, Andrew Haldane of the Bank of England has a very clear exposition of the problems with stress tests: you can read his speech here.
It is certainly quite difficult to measure properly the liabilities of the Irish banking sector, if this term is defined to mean those banks that are embedded in the Irish economy with significant domestic non-bank business. The main problem is that the aggregate banking data (as published by the BIS and the Irish central bank) are dominated by the activities of international bank groups that run significant volumes through the IFSC. These operations are pure offshore financial intermediaries and should be ignored in terms of assessing the scale of liabilities of the domestic banking system.
Rossa White has a written a useful short note “Irish banking liabilities – True figure is just over 300% of GDP, one-third of bogus ratio being quoted,” which is available via the Davy website.
On an annual basis, the volume of world trade fell by 25-30% between 1929 and 1932. If you use quarterly data, you can push the peak to trough Great Depression trade decline up to around 35%.
The latest data indicate that the volume of world trade fell by 13% between August and December 2008. We are not only on track, we are ahead of schedule. Everything now depends on the policy response.