B) tracking a rate which bears no relationship to the cost of money to the institution.
This is the point I am trying to get to. Are Tracker Mortgages used in other Countries? Who dreamt them up?
So in a nut-shell the Irish banks have a asset-liability mis-match... effectively using short-term money to fund long term positions (i.e. mortgages). The cost of short-term money has shot-up, so when the banks go back to re-finance (or roll-over the short-term money) they are getting squeezed massively... leading to losses on trackers.
To be fair, all banks do this - it's a definition of what a bank is - but Irish banks mismanaged their position very badly.
To be fair, all banks do this - it's a definition of what a bank is - but Irish banks mismanaged their position very badly.
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