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Banking Crisis

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Having provided guarantees to the banks on very favourable terms, the Government must follow these up with equity injections, as is being done in many other countries, in order to underpin our fragile banking system, re-enforce its guarantees and participate in the upswing which will ultimately occur.

While this will impact on Exchequer borrowing, massively dilute existing shareholders and shred the reputations of many high-flyers, it is surely more prudent to inject new equity before problems arise rather than as the "the last option" favoured by the Minister for Finance.

If, God forbid, an Irish bank was to default on any significant scale, it is hard to see how the other banks could respond without jeopardising their own stability with disastrous national consequences.

To mangle a phrase often attributed to banks, the Government should lend them umbrellas before it rains and take them back once the sun starts shining.

This letter was published in the Sunday Business Post on 2nd November 2008.

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This page contains a single entry by Brian published on October 24, 2008 2:27 PM.

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