Shane Ross

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Banking-This Crisis Is Not Over

Posted on: October 9th, 2008

The issue of banking is on the Order of Business to be discussed in the Senate, what is striking is that this crisis is not over, it’s worrying and should be at the forefront of the debate. I am struck by the fact that everybody is beginning to be critical of the regulator.

The regulator should resign because he has equal responsibility with others for what has happened. The issue of most concern, is that the guarantee which we gave is not convincing the markets that it has a great deal of credibility. What the Government did was not wrong; it was a good pre-emptive strike. To give a guarantee of €400 billion when one cannot possibly ever pay it defies people to see what it entails. The national debt is approximately €43 billion. We have given a guarantee on which we cannot possibly deliver, especially now when we are not a particularly healthy economy. We are not expecting to ever have to deliver but it is very unusual, in banking or commercial terms, for anybody to accept a guarantee from anybody who cannot pay it.

The credibility of this scheme is now in serious danger. I call on the Government to present the details of it to us immediately, not next week, or it will land us in more trouble than we expected. It does not matter what happens on the stock market, but the inability of the banks to borrow on the money markets is continuing. The details of the scheme need to be outlined immediately before things get out of hand. The markets continue to fall, which is an indication of what people think of what we have done, although that does not mean it is a reflection on what we have actually done. Nevertheless, it is important.

The government needs to present the substance of their actions, and we need to evaluate the contingency plans they are presumably developing.