Economies with Large Banking Systems

The IMF has released a new report on the challenges facing economies that have large banking systems: Ireland is included in the analysis.  The report is here and the abstract is below:

Summary:
This paper examines cross-country perspectives on economies with large banking systems relative to GDP. As such economies tend to have domestic institutions with major foreign currency cross-border activities, strong links are generated between the health of the financial system and sovereign sustainability. These links are of central interest to the paper. It does not cover off-shore centers as their international links tend to be relatively unrelated to domestic activities.

To make the analysis more concrete, the experience of five economies—Hong Kong SAR, Iceland, Ireland, Singapore, and Switzerland—are featured (plus a Box on the Benelux region). These economies had large and relatively diversified international banking sectors compared to their fiscal capacity before the global financial crisis of 2007–09, and divergent experiences over the crisis. The paper analyzes the reasons for these outcomes. (A range of private and public sector individuals were interviewed during missions to Belgium, Hong Kong SAR, Ireland, Singapore, Switzerland, and the United Kingdom.)

7 thoughts on “Economies with Large Banking Systems”

  1. @Philip Lane

    On Tigers: Singapore and Hong Kong kept a firm hold on the tail of their tigers – conversely, our handlers (Ahearn, McGreevy, McDowell, Harney, Cowan) allowed our tiger to run riot wherever it wished – and our tiger was in reasonable shape in 1997 ………

    I’m reminded of what used to happen to the wild game handlers in the Coliseum when the animals failed to perform … the ol thumbs down! Conversely here – look at where the famous five end up? They simply turn the gatling on the serfs in the audience – reverse logic and they are getting away with it.

    The Graphics in this IMF are telling – and damning for the usual suspects … Blind Biddy could have seen these ratios and growth rates going out of control ……. this was known (we have enough evidence of red flags at the mo, INBS yesterday), yet policy continued. The 2002-2007 admin, blinded by a cultish ideology, is unquestionably guilty of economic treason. Further, their response to the crash has an inbuilt dynamic that has a high probability of taking the nation backwards wrt all key socioeconomic indicators – simply to save themselves and their upper-echelon entourage. Doubly charged. Spartacus II anyone?

  2. Summary:

    1. We blew a massive asset bubble.
    2. It burst.
    3. ECB helps us avoid default.
    4. The cost of the bubble bursting is lumped on to future generations.

    As a member of the future generation. Thanks lads, thanks for leaving us with a country in far worse shape than you recieved it in. I can only hope that ‘gombeen’ capitalism will die off with FF in the next election or at the very least through a gradual replacement of the current stock of politicans, civil servants and asset classes.

  3. DOD
    Thailand has had recent and continuing experience with civil action, verging on war. Unpleasant and inappropriate for a more advanced economy.

    Ireland has an opposition that is clearly ineffective, relishing the inevitable backlash against GFF.

    What may happen in the future is a part (maybe even partial!) repudiation of loans, certainly a devaluation with consequent stimulus, but when and how is unclear. Possibly after the deaths of another 6,000,000 souls, the minimum requirement for a jubilee? I rely upon the old testament. So no blasphemy!

    Until then, things will get worse and that is entirely due to an inability to understand Thomas Jeffersons opposition to Banking. That opposition is now based upon recent experience …? Fractional reserve banking is like a most powerful drug that grants immense confidence in the ability to fly, if required. But once the credit has been over extended, the mechanism is broken for decades.

    The larger the FIRE sector, the worse the effects of withdrawal. Having had such a big FIRE sector, so badly run, makes it so evident that the consequences, still so little understood at policy levels, “Housing prices have a floor” etc., that remedial action has not even begun! We still accord credit some purely positive status.

    It is highly toxic in large quantities and incompetently administered it is lethal!

    Competence in the area is now being gained by sorry experience, the most inefficient way of acquiring the knowledge. But Feedback is vital in the learning by bleeding experience and this web site provides this.

    It is entirely frustrating that the Gombeens, our overpaid economic managers, learn so slowly. Emergency replacement is a good idea, but who is qualified to replace them? The acknowledgement that this is a dire emergency is being dampened by those who insist that to say this is to damage confidence. This confidence is misplaced and based upon ignorance.

  4. How about we implement a reverse grandparent rule? For say, 30 years?

    That is to say, any financial manager in this country must not be irish or be irish as far back as two generations. I.e the reverse of the rule which has helped our national soccer team so much through the years. Its already working with elderfield.

    The thirty year limit is to allow for the ageing of the gombeens to a stage in their lives from which they can do no more harm.

  5. How about we implement a reverse grandparent rule? For say, 30 years?

    That is to say, any financial manager in this country must not be irish or be irish as far back as two generations. I.e the reverse of the rule which has helped our national soccer team so much through the years. Its already working with elderfield.

    The thirty year limit is to allow for the ageing of gombeens to a stage in their lives from which they can do no more harm.

  6. I think what all that means is that little countries are interesting at the moment as they’re going where the big countries will follow. Interesting in this context is not the same as good 🙁

    BB

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