The most recent round of stress tests on the Irish banking
system have, predictably, found that the banks are not
sufficiently covered should the worst happen (again).
Irish banks need a further 24 billion euro in capital and
liquidity before they can be deemed safe.
For each of the banks, this means:
Allied Irish Banks, formerly the biggest, most profitable
bank in Ireland, will need a further 13.3 billion euro.
Bank of Ireland will need 5.2 billion euro more in bailout
cash, in the process of which it will most likely become
Irish Life & Permanent, as predicted earlier this week,
will need 4 billion and it will have to sell-off its lucrative
And, finally, the Education and Building Society will take
1.5 billion and will be swallowed up by Allied Irish Banks.
The present exercise is on an exceptionally intensive
and elaborate basis and is designed to respond to market
skepticism about the banks, Irish Central Banker Patrick
Honahan told the press. This skepticism means that the
banks have to carry more capital than is actually needed in
order to convince international lenders of the banks
solidity under all circumstances.
Its hard to blame the markets. To date, the bailout
for the Irish banks has cost a whopping 70 billion euro.
For a country with fewer than 4 million people, thats
a pretty big bailout. It amounts to 17,500 euro for every
single Irish taxpayer.
But for anyone whos not an Irish taxpayer, the story
of the Irish economic and banking collapse has probably become
a terrific bore, having droned on and on for the best part of a
year, incomprehensible figures growing ever more
incomprehensible by the day.
And to an audience most likely inured to such numbers after
three years of relentless, grim financial horror, one can
forgive such jadedness. After all, the 70 billion euro compares
pretty favorably with the USs TARP program, which cost
So, to give the Irish banking collapse some scale, we can
turn to Michael Lewiss article in Februarys Vanity
Lewis asked us to consider the following, in relation to
Anglo Irish Bank: To get some sense of how 34
billion sounds to Irish ears, an American thinking in
dollars needs to multiply it by roughly one hundred: $3.4
trillion. And that was for a single bank.
Thus, by the logic of Lewiss arithmetic, that makes
the cost of the Irish bailout comparable to slightly more than
seven trillion dollars.
For the record, the article was entitled, When Irish
Eyes Are Crying.