There’s been some discussion in comments here of some recent Barclay’s Capital research on the European banking sector and it raises a number of issues worth putting on the front page. (The Sunday Tribune also had a couple of nice articles using the Barcap research; one by Ian Guider and one by our old friend Jon Ihle.)
The BarCap research is not publicly available but FT’s Alphaville column dedicated three articles to it.
The first deals with the report’s discussion of twenty banks that it deems as Too Big to Fail. The list includes both Bank of Ireland and AIB, giving Ireland ten percent of Europe’s TBTF banks, so yet again we’re punching above our weight. The report discusses the implications of the TBTF banks having to carry additional regulatory capital because of their status as a particular risk to fiscal stability. AIB and BOI stand out as having the biggest capital requirements.
The second deals with the maturity profile of the outstanding senior debt of these 20 banks. Bank of Ireland stands out, in particular, as having very substantial funding problems this year. This point is further discussed in Jon Ihle’s article linked to above.
The third article discusses the idea that economic improvement may lead to credit losses turning out to be less than expected this year. I’d be surprised if the credit loss picture for the Irish banks improves much this year.