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Finance Magazine - October 2008 Issue

Ireland’s credit crisis - Where to from here? Ireland’s banking industry is at a crossroads
Irish banking, whose history stretches back to the 1700s, now faces its biggest crisis ever. Whether there will be a recognisable ‘Irish’ banking industry at the end of it will depend on the will of the industry, its customers, and the other major stakeholder, the state. The task will not be easy either; the restoration of a healthy banking industry will have to be achieved against a backdrop of negativity on the part of the public, and the difficulties that will arise from the transferance of these pressures to politicians, and public sector employees, which include the Regulator, and bodies such as the Central Bank and the Revenue Commissioners. The economic outturn in Ireland, and internationally, will also be critical, indeed decisive. In this issue we outline several of the factors that will impinge on the future, in plotting a roadmap back to sanity.
Bonds a strategic buy
Bonds are currently at historically cheap levels and may offer investors a good strategic buy. Donal O’Mahony of Davys says, ‘Corporate debt globally is now at unprecedentedly cheap levels, relative to both corporate equity and sovereign bonds. Implicit default expectations will not come close to realisation in the investment grade area (industrials and financials) leaving credit as a strategic buy, albeit with forced de-risking by leveraged players threatening even further spread widening in the near term.’
The home grown roots of Ireland’s credit crisis
Ireland’s over exuberance with housing credit was signalled in this publication and elsewhere as long ago as the mid 1990s – yet the boom continued, with the worst excesses (and what will be the source of the real long term problems) occurring only in the past four years to end 2006. Back in February 2000, William Slattery, a former deputy head of Banking Supervision in the Central Bank of Ireland published an article which was headlined: ‘Property price fall of 30-50 p.c. possible if credit growth not curbed’. The article caused a considerable stir at the time, and Slattery (subsequently head of Financial Services Ireland, and today chief executive of State Street, which employs some 2,000 people in financial services in the IFSC) spoke about it in various radio and television interviews. We re-publish that article again in this month’s issue (page 8). It speaks for itself.
Property price fall of 30-50 p.c. possible if credit growth not curbed (FINANCE: February 2000)
The article said: 'Predictions are being made of 20 per cent growth in property prices this year. Irish households are borrowing like never before. In the US, private debt has risen to 130 per cent of GNP and is seen as unsustainable. William Slattery says the same is true in Ireland in relation to property'.
Valuation of commercial property in turbulent times
Valuations in Ireland’s currently frozen commercial property market are problematic, and much clearly depends on them. Frank O’Neill describes the current situation regarding valuations in both investment property and in development land - the two areas of greatest importance to the banking system currently.
Banking system was operating from a fundamentally sound base, PricewaterhouseCoopers chiefs say
Ireland’s regulatory regime has held up well, say banking system investigators
Irish financials - after the credit crisis
Better treasury and reduced cost
Treasury landscape post-2008
Forex volatility likely to remain high
Diverging fortunes for the euro
Uncertain market for exporters and investors
The damage to Ireland Inc by postponing key infrastructure projects
New challenges for the hedge fund industry
Pension investment solutions in uncertain markets
In memoriam: Paul Tansey, by Ken O'Brien
Exposure draft SORP for authorised funds
China - targeting a new superpower
Budget 2009 - The Right Medicine?
R&D credits - some good news for financial services companies
Master of education
space space space space space space
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