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Thursday, 18th April 2024
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Credit crisis lessons Back  
There are some reassuring aspects to recent developments in the ongoing credit crisis, notably that action by central banks in helping to solve the liquidity problems by issuing Government paper against private mortgage paper is along the right lines. The contaminated securitised paper that is out there can be sidestepped, with the help of the guarantee provided by the taxpayer.

Not so reassuring is that the money markets are still frozen and the crisis continues. Hopefully, continued efforts to clean out the system, with skill will prevail in due course.

In the meantime, there should be no delay in applying the lessons that should already have been learnt from the crisis. One key lesson is that prudence, conservatism regarding credit, and the core values of sound banking need to be reasserted.

Hands across the border
Ireland now possesses a major international financial services industry, with, for example, the major US money centre banks all operating in Ireland. Such names have been to the fore in the credit market headlines, but while they may suffer temporary job cuts in some areas there is every reason actually that as a servicing centre of excellence Dublin could emerge strengthened from the credit crisis.

Recent reports that Ireland’s headquarters legislation, signed by the Government four years ago is beginning to attract increased international attention is also encouraging.

It is notable that HSBC has been mentioned in international press speculation in this regard. Our interview in this month’s issue with HSBC’s new head in Ireland indicates that HSBC is developing and consolidating its presence in the country. A headquarters move would complement that development.

It is notable too that HSBC’s operation is strongly positioned in both parts of the island of Ireland. As our regionalisation feature (Page 23) indicates, and as the first crossborder initiative involving Brian Cowen and Peter Robinson indicates, international financial services has the potential to spread across the island. Fears by some that the relaxation of minimum activities rules in the Republic will cause a loss of Irish jobs cross border are as ridiculous as suggesting that it is a bad thing that Dublin faces a loss of jobs to other regional centres within the Republic. As the feature shows, regionalisation results in a deepening of the financial services industry in Ireland, and likewise, the development of linkage across the border to Northern Ireland will also. The relaxation of “minimum activities” rules actually strengthens the Republic as a location for internationally mobile financial services, because it makes the south more attractive for them, and, indeed, as a headquarters location.

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