Did the ECB Cause a Run on Irish Banks? by Gary O’Callaghan


Failures by the Irish fiscal authorities have been blamed, in recent newspaper and TV interviews, by ECB Executuve Board member Bini-Smaghi for precipitating the October crisis and Ireland’s resort to bail-out.

Gary O’Callaghan of Dubrovnik International University thinks the culprits were ECB Executive Board members.  


18 replies on “Did the ECB Cause a Run on Irish Banks? by Gary O’Callaghan”

On the basis of the title…….

Trigger, precipitate, get fed up with ensuring could not happen – maybe.

“Cause” is a bit rich, though it fits in nicely with the Irish Narrative! 😉

Irish banks, Swedish banks, UK banks etc it´s all the same – a total fraud!

I think this will interest you. It’s a speech that the governor of the Swedish Riksbanken (the Swedish central bank giving out the Nobel prize) held giving an example calculation on how much leverage banks in Sweden use to households in accordance with Basel2 – your banks been practicing the same rules.:

“An example may illustrate what the capital adequacy regulations permitted and still permit. Assume that we a house buyer who borrows SEK 1 million and mortgages his house to 100 per cent. We can estimate the risk weighting for mortgages at 10 per cent.The risk-weighted assets for the loan will then be SEK 100 000. The total capital requirement is 8 per cent, which means that the bank must hold capital amounting to
SEK 8 000. The more relevant Tier 1 capital requirement is 4 per cent, so the Tier 1 capital held must amount to SEK 4 000. Thirty per cent of the Tier 1 capital may be hybrids of different types. This means that a bank can get away with equity – real share capital and accrued profits – of SEK 2 800 to provide cover for a loan of SEK 1 million.
Does SEK 2 800 in loss-absorbing capital provide sufficient resilience for a loan of SEK 1 million?
My answer is no, it does not. ”

So they only need 2 800 kr in real Tier1 capital to “lend” 1 million kr. 1000000/2800=357 – that means that they only have to have 1 pound for every 357 Pound they “lend” – if thy used the same rules in Ireland .


You can´t but agree with he governor of the Bank of England:
“of all the many ways of organising banking, the worst is the one we have today.”

And if HE says it then the situation is really bad! Even the rats are on the edge leaving Titanic.

We will be following you soon. It´s soon 1789 here i Sweden as well.

Having watched America blaming everyone but themselves for their problems it was just a matter of time until we Irish aped them.

Reality is for people who cannot face up to alcohol, we may have been shortchanged on that front.

Without casting dispersions, can someone confirm that this months ECB’s bond issue to cover the Irish ‘bail out’ got an interest rate of 2.6%.

To Lincoln,

That 2,800kr is the minimum size of the gap between the bank’s liabilities and the bank’s assets. This gap is called the capital. Capital is not kronor, it is just a size.

The assets inculde both the debt of the home buyer and any kronor that the bank happens to own.

The liabilities include the one million kronor used to buy the house, unless the seller of the house happens to bank with a different institution and would prefer to be paid in its liabilities instead. In which case, the lending bank will have to arrange this either by paying the seller’s bank or by netting against payments due to it from the seller’s bank.

@Simon Twist

I´m aware the way it’s presented on the balance sheet. The credit/debt are created directly from the tier capital, and, just as the governor of the Swedish Riksbanken, Ingves said: the tier1 capital is the one that you actually you should be concerned with. The clearing function is not a part of the creation of the credit/debt.

The bank does not create credit out of deposits – two Nobel prize winners (actually, it isn’t a Nobel prize) have proven that. They also proved that that the tier1 capital was added about one year after the credit/debt was created.This is somethin Ingves omit telling.


Lets check the so called “housing market”.

When a house is sold probably none of the bidders actually got the money to buy it. So they go to the banks and the banks “offers” them to take a loan, which equals money the banks don’t have either but can invent by credit creation. So here we got three participants
1) the seller (supply side)
2) the buyers (demand side) and
3) the middle man, the bank who is trying to sell as much of it’s product – debt – as possible.

This is how the housing market works.

You could actually argue that this is not really a market but more of a debt slave race, where the buyer gets to rent the house he/she thinks that he/she owns but in reality is owned by the middle man – the bank.

So in the simplest possible terms:
The bank parasites have built a house Ponzi scheme by renaming house price inflation to “growth in value” and thereby manipulated people into believing that they all can get rich by putting them self in as much debt as possible with the credit that the parasites create from nothing.

Lets say (using the same ratio as Ingves did) that a house is sold for 100 000 euros. The bank then only need 280 euros in tier1 capital to back this up BUT they don´t have to add it directly – they can wait one year (according to the two Nobel price winners – see link above). Let´s say they take 4 per cent interest on these 100 000 they created from nothing (since, again: they haven¨t added anything yet to the tier1 capital). That would give the bank 4 000 euros in one year, They can easily take 280 euros from these 4 000 euros and put it as “accrued profits” in the Tier1 capital.

So it´s a total fraud!

The second document use the money multiplier which is proven wrong (economy professor Steve Keen demonstrates this in the article – see link in my previous post – the two Nobel prize winners Kydland and Prescott has empirically proven it also))

The banks wants to make the impression that they create credit/debt out of customers deposits. First of all- it sounds better if they lend out customers deposits then saying the way it is -“We just make credit/debt up from nothing”. Secondly they can pretend that they only make money on the spread between the interest that they lend out depositors money and the interest they give the depositors – when in reality the money the make is the difference between what they put in the tier1 and the interest they get from the credit they invented from air (see example below).

In the example I made in my previous post the profit for the bank would be the interest (4 per cent of the 100 000 euros they created as credit/debt) – that´s to say the 4 000 euros they got in one year minus the 280 they put in as tier1 – that’s to say 4000-280=39720 euros – that’s an extreme profit for putting up only 280 euros (ok, they have to take some of that and give to the depositors so they don´t get the idea to withdraw the cash the bank don´t have – but interest on deposits is close to nothing so it actually don´t make the profit much smaller). The fact that they don´t need to put up the 280 euros until they get the 40 000 euros in interest means that they actually didn’t risk anything – so all this talking about risks is bullshit.

The most extreme “risk” bullshit example is the credit/debt created for states and municipalities. The “risk weight” for creating credit/debt to states and municipalities are set to zero according Basel2. The formula for how much the bank has to put up is extremely simple:
The size of the loan * (Capital Adequacy Ratio * Risk weight) = needed capital base
Put in “risk weight” equals zero in the equation and the left hand side will be zero. So banks don´t need to put anything up when they make credit/debt to states and/or municipalities!

So the Irish people (or any country) should pay the banks back what the banks lent to them – NOTHING!

Yes, I agree with you. See the above submission to the Independent Commission on Banking for a better system.

By the way, I have read Steve Keen’s book.

This is a ridiculous proposition. Whatever doddering and ineptitude the ECB may be guilty of, they haven’t caused the French, German, Spainish or Italien banks to go under yet? So what makes the Irish ones so special?

Answer: Being Irish(And what goes with it)

I agree it is a absurd system
But the function of the risk reserves is to take losses not to fractionally reserve loans as you pointed out – they have not even done that , they have broken their own rules in a system where it is nearly impossible to loose money – truely unbelivable.
Money and debt / credit creation has to be divorced – unless we get full reserve banks who loan out their own deposits we will continue with this serfdom until we get complete economic collapse – then we will enter formal slavery again.

@Simon Twist
I read Steve Keens book as well – it´s good.

I also read Rickard Wernes ( coauthor of the paper you linked) book ‘Princes of the Yen’ – it´s he got some very good points.

@Keith Cunneen
Actually I´m surprised that the overnor of the Swedish Riksbanken, Stefan Ingves, are allowed to speak so freely. Listen to this:

The last remark is truly amazing when he argues that banks should not be allowed to lift bonuses until, at least 5 years after they start their “lending” (=creating credit from nothing and put people in debt):

“Because, maybe there was nothing there”

It´s absolutely unbelievable – he´s advocating that banks should have a 5 year period to check if they actually got any money! And that´s a hard regulation compared to the rules today where they can create credit/debt without knowing if they got any money at all and at the same time give themselves large bonuses!

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