Could the Swedish model work in Ireland?
- Thread starter Bronte
- Start date
Re: Willful ignorance and the Irish banking crisis.
Bronte
The swedish system nationalised the worst performing banks first then used a bad bank/good bank framework - it worked for the swedes and was a product of their particular economic circumstances that differ substantially from ours today. They based their model on the resolution trust corporation in the US (S&L's).The two banks nationalised didn't have anything close to the market dominance of AIB & BOI and their remaining banking system continued to function. Not so here as none of the Irish banks are functioning at this time.
If by reading share prices you suggest an appetite for investing fresh equity in banks then I don't believe this is the case. Nor do I believe investors will be attracted to finance reconstructing banks balance sheets for some time to come.
Bronte
The swedish system nationalised the worst performing banks first then used a bad bank/good bank framework - it worked for the swedes and was a product of their particular economic circumstances that differ substantially from ours today. They based their model on the resolution trust corporation in the US (S&L's).The two banks nationalised didn't have anything close to the market dominance of AIB & BOI and their remaining banking system continued to function. Not so here as none of the Irish banks are functioning at this time.
If by reading share prices you suggest an appetite for investing fresh equity in banks then I don't believe this is the case. Nor do I believe investors will be attracted to finance reconstructing banks balance sheets for some time to come.
Brendan Burgess
Founder
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Re: Willful ignorance and the Irish banking crisis.
kaplan
Do you have some good knowledge of the Swedish system? It is being quoted at length by others as the way to go.
Is there an article anywhere explaining the Swedish system and assessing its suitability for Irish banks?
if not, would you like to write a Key Post on it?
You can watch Bo Lundgren's speech [broken link removed].
Some comments on www.irisheconomy.ie here
kaplan
Do you have some good knowledge of the Swedish system? It is being quoted at length by others as the way to go.
Is there an article anywhere explaining the Swedish system and assessing its suitability for Irish banks?
if not, would you like to write a Key Post on it?
You can watch Bo Lundgren's speech [broken link removed].
Some comments on www.irisheconomy.ie here
Brendan Burgess
Founder
- Messages
- 52,281
I see that Darag has started a thread here
http://www.askaboutmoney.com/showthread.php?t=119388
But his understanding is based on one article.
It would be well worth doing a comparison of the Irish situation with the Swedish situation. People focus on the similarities, but what are the differences?
Brendan
http://www.askaboutmoney.com/showthread.php?t=119388
But his understanding is based on one article.
It would be well worth doing a comparison of the Irish situation with the Swedish situation. People focus on the similarities, but what are the differences?
Brendan
One big difference is the scale of the problem.
The Swedish took an immediate write down on all their impaired assets, but this left only 2 banks with solvency issues: one of which was a smaller commercial bank a la Anglo and the other was a bank that was part owned by the State anyway. The rest of the banks went on as normal.
If we took an immediate write on all the impaired loans, AIB, BOI and Anglo would all become insolvent overnight and would all have to be nationalised.
I think if it were possible to force losses on the banks without entirely eroding their capital that is what we would be doing, but we're way beyond that, and the consequences of total insolvency are just too stark.