Mon 1 Dec 2008
Shinsei Bank - a model for Irish banking reform?
Posted by antoin under Uncategorized , Politics , Ireland , banksJ.C Flowers is one of the companies apparently interested in investing in and restructuring Irish banks, in particular, Bank of Ireland. The same company took over Long Term Credit Bank of Japan and restructured it into Shinsei (’rebirth’) Bank which according to Joichi Ito describes as ‘an example of how legacy companies in Japan can be turned around with good management and smart methods’.
A lot of people are concerned that foreign investors will do something radical with the Irish banks. But the reality is that this is what is required. Our banking is not anything like as efficient as it could be and our bankers are nowhere near as smart as they thought they were. If the sector does not restructure itself now, it will have restructuring forced upon it by competition from across the eurozone within a few years. It is worth reading what former Bank of Ireland CEO Michael Soden has said. Leaving things the way they are is just not an option.
December 1st, 2008 at 4:50 pm
Have you seen the post by Gerald O’Neill from Amárach at the weekend? http://www.turbulenceahead.com/2008/11/dont-bank-on-it.html
It is interesting to watch the whole “should we consolidate the banks into larger banks”, “should we let a smaller bank fail, in order to preserve the principle of moral hazard”, “should we bring in a foreign owner” from afar.
I’d be in the “keep the situation of a bunch of smaller Irish-owned and well-managed banks”. If one fails, then it is “creative destruction”, albeit more dangerous than the beneficial “creative destruction” which happens in the software industry.
I’d worry that a foreign fund may turn a large Irish bank into another Eircom.
People may question if they are “well-managed”, but certainly compared to the situation here in the US they are. As an anecdote, I applied for a Citibank air-miles credit card which I planned to use as a monthly sink for business expenses, and I was given a ludicrous credit limit of $12,500 right off the bat, and then was plagued with “just cash this cheque to get thousands of dollars” junk-mail from Citibank. That is despite me only having a couple of years of US credit history. Similarly, I used to get offers for “home equity loans” (i.e. what we used to call “second mortgages”, which were for people in dire straits, not people wanting 52-inch TVs) all the time, though not recently, ha ha.