The Central Bank have released their annual report (press statements from Governor Honohan here and from Chairman of the Regulator Jim Farrell here). The NTMA has also released its annual report here and its mid-year business review here.
Author: Karl Whelan
The Oireachtas Public Accounts Committee has placed a number of documents online that were given to it by the Department of Finance in relation to the government’s deliberations prior to its decision to issue a guarantee on the liabilities of the Irish banks in September 2008. The documents can be found here. Section A has the most relevant but there’s also some interesting stuff in Section B, which has material from a joint Finance\Central Bank Standing Group on Financial Stability.
Update: There’s a lot of material in the documents and I haven’t looked at it all. However, thus far, my impression is that while the documents are useful in shedding light on the extent of the government’s lack of understanding of the scale of the solvency problem in the banks, they are not very useful in explaining why the government decided to issue such a blanket guarantee.
Take a look at document 5 from part A. This contains notes from a meeting on Friday September 26 involving the Minister for Finance and representatives from the Central Bank, Financial Regulator, Department of Finance and the government’s advisers, Merrill Lynch. The notes state: “On a blanket guarantee for all banks — ML felt could be a mistake and hit national rating and allow poorer banks to continue.”
Moving on a couple of days to document 3 from part A, a blanket guarantee is one of the options presented to the government by Merrill Lynch on Sunday, September 28. However, the note questions the credibility of this approach, again mentions the implications for sovereign debt ratings and also points to a negative reaction for other European countries. The document is a bit inconclusive but the blanket guarantee still does not appear to be the preferred option of the govenment’s advisers.
Then on September 29, the government decided to introduce an almost-blanket guarantee. These documents do not make it clear why this decision was taken.
The Joint Oireachtas Committee on European Affairs has produced a report titled “European Monetary Union: Challenges and Options”. The report is available here and the executive summary is here. Senator Paschal Donohoe acted as Rapporteur on the Report, which was drafted in association with my former UCD colleague, Rodney Thom
The government has announced lending plans to SMEs from Bank of Ireland and AIB. It has also released the quarterly report of its Credit Reviewer, John Trethowen. Mr. Trethowen has concluded that he has “found no evidence of bank lending policies which constrained the supply of credit to viable businesses in either of the banks.” If this is correct, then the two banks have formulated plans to deal with a problem that apparently does not exist.
In judging these plans, it would be nice if we were provided with information that distinguished stocks and flows. Of the two plans, AIB’s strikes me as slightly more useful in stating that it has “total lending of over €13bn to SMEs at year-end 2009”. This puts the commitment to €3 billion per year in 2010 and 2011 in “new or additional credit” in some context. One would like to believe that this is a commitment to have total SME lending from the bank at €16 billion by the end of the year but I’m guessing this doesn’t have to be the case: Expiry of old loan agreements could, for all we know, match the €3 billion in new and additional credit.
What would be really useful here would be comprehensive statistics on SME lending in Ireland. It is my understanding the Central Bank are preparing to publish such statistics. Hopefully, these will be more useful in assessing the situation than the assurances of the banks or, with respect, Mr. Trethowen.