Irish Banks What’s Happened

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Irish Banks What's Happened?

The fears over the Anglo Irish Banks loan portfolio started a chain reaction that ended in the Irish government guaranteeing all banking deposits, personal and corporate. What a master stroke! The Irish banks are enjoying an inflow of the world's most precious commodity right now...capital.

The Irish cabinet took briefings from the head of several Irish banks the afternoon before the move was announced. The liquidity in the system was drying up fast and a possible bank run looked likely after the first refusal of the US Congress to pass the bailout package. This was the story...the state guarantee, eventually, was the result.

They won't be telling many Irish jokes in Westminster this year....no...this year there will be gnashing of teeth and the prospect of nationalising more UK banks thanks to the unilateral Irish move to give a government backed guarantee to all Irish bank deposits. Gordon Brown was furious and demanded that the bill be reversed. Reportedly, Brian Cowen, the Irish Taoiseach reminded Mr Brown about the unilateral way he behaved over the Northern rock Crisis. Game over.

The British Pm is worried that there will be a flood of money out of British banks at exactly the time they could least afford it...and you can see his point. Brian Cowen said that Ireland simple had to look after their own banks...sorry about that Gordon. It has a kind of "we're going to do it to you before you think of it and do it to us" feel about it.

In the first few days after the move, the noises coming from Westminster were very different from the ones coming from the Dial. Westminster said it wouldn't matter much (why all the fuss then?) and the Dial and the Irish treasury said it had seen a large swelling in the number of account openings. One large European company has reportedly transferred half a billion Euros in a single transaction. By acting in the way it did, the Dial made sure that all Irish banks would be recapitalised before the financial tsunami that is engulfing us all hit its shores with a vengeance.

It's looking more and more likely that the UK will have to follow suit as Germanys chancellor Merkel, after chastising Brian Cowen for his unilateral bank guarantee was forced to give a similar guarantee to German depositors...how embarrassing! This week will tell if the UK banking system needs such a guarantee...if it doesn't get it, the stream of money flowing to Dublin from the city could turn into a torrent if any more nasty surprised turn up.