EDITORIAL : THE INDENDENT, IRELAND

         

 

Cowboy banks gone but not forgotten

The Government's announcement that both Anglo Irish and Irish Nationwide are to be subsumed into the renamed Irish Bank Resolution Corporation marks the final disappearance of the two cowboy banks whose excesses during the Celtic Tiger years eventually bankrupted the Irish State.

And good riddance. Even by the lax standards of boom-time Ireland, Sean FitzPatrick's Anglo Irish and Michael Fingleton's Irish Nationwide were utterly delinquent. Even in the unlikely event that there are no more surprises, both of them have written off more than half of their loan books, a shocking rate of bad debts. When banking analysts describe Anglo and Irish Nationwide as having been the worst banks in the world, it isn't hyperbole but the plain, unvarnished truth.

It wasn't just the losses incurred by Anglo and Irish Nationwide in their reckless lending to builders and property developers. As Anglo and Irish Nationwide grew from less than 3pc of the market in the late 1990s to almost 20pc by 2007, the other banks were forced to compete as they desperately tried to stop the interlopers from poaching customers -- with disastrous results.

All of the other Irish banks, but particularly AIB, lowered their lending standards in a misguided attempt to compete with Anglo and Irish Nationwide. In effect, bad banking drove out good banking. Aided and abetted by regulators who chose not to regulate, lending grew almost seven-fold in the decade to 2007 while the proportion of Irish bank lending "secured" against property increased from one-third to almost two-thirds.

At the same time the tsunami of cheap credit drove prices to absurd levels. This meant that when the bubble burst in 2007, all the banks, particularly Anglo and Irish Nationwide, were vulnerable.

Now we are paying the price. All of the Irish banks, with the exception of Bank of Ireland, have been nationalised and the cost of bailing out the banks has reached €70bn, the equivalent of almost 60pc of national income. This makes the Irish bank bailout proportionately the most expensive in recorded economic history.

Anglo and Irish Nationwide may be gone, but they won't be forgotten. As part of the bailout, the Government issued promissory notes, effectively IOUs, of €25.3bn to Anglo and a further €5.4bn to Irish Nationwide. When interest is included these will cost the taxpayer a combined €3.06bn a year every year to 2023 and €2.8bn in both 2024 and 2025, a total of €43bn.

Meanwhile, although taxpayers have had the grim satisfaction of seeing Sean FitzPatrick declared bankrupt, Michael Fingleton has yet to return a cent of the excessive €27.6m pension payment that he received in 2007 or 2008's €1m "performance" bonus.

Anglo and Irish Nationwide highlight what can go wrong when weak regulators defer to cowboy bankers. Irish taxpayers will pay the cost for at least a generation. Nothing like this must be allowed happen again.

Curing Tallaght's ills

What has gone wrong at Tallaght Hospital? Yesterday's statement from the Health Information and Quality Authority (HIQA) that it "continues to be concerned" about the quality of care at Tallaght's A&E department is evidence of serious problems at the showpiece hospital.

HIQA's intervention came as the terms of reference for an inquiry into standards at Tallaght were announced. The inquiry was established following the death of a patient last March who was "accommodated" in a "virtual ward", in reality a corridor without equipment.

Ever since opening in 1998, Tallaght has been dogged by problems, and it is difficult to resist the suspicion the petty politics of its predecessor hospitals still plague Tallaght. That's not good enough. Tallaght's A&E treats 70,000 patients a year and they are entitled to the assurance their care won't be compromised by medical bickering.