• Irish bank bailout

The Irish government's underwriting of Eu400bn of liabilities from just six of its banks is proportionately the most dramatic step yet in the credit crunch.

The Irish economy is worth about Eu190bn which means that were the US government to provide a guarantee on the same scale, the liabilities would be in excess of $30,000bn.

According to some analysts, the Irish government's move puts the Irish banks in a better position to obtain funds compared to their international rivals. And, it was said, it could be a template for other bank rescues.

What makes this one to watch for the hotel industry is how much Irish banks have lent on commercial property including hotels. The big three Irish banks – Anglo Irish, Bank of Ireland and Allied Irish – are all covered by the scheme, which runs for two years. And all three are big hotel lenders.

The Irish government's statement said: "The decision has been taken by government to remove any uncertainty on the part of counterparties and customers of the six credit institutions."

Deposits – which were already covered up to Eu100,000 – plus bonds, senior debt and subordinated debt are all covered.

The government statement also said: "The guarantee is being provided at a charge to the institutions concerned and will be subject to specific terms and conditions so that the taxpayers' interest can be protected."

However, there were few details given by the Irish government on the nature of these terms and conditions. A particular concern must be how much impact the greater regulation will have on how the banks do business.

On the other hand, UK banks in particular are already squealing about the unfair competition. So far, this has related to how successful the Irish banks have been in attracting deposits thanks to the guarantee.

Another possibility provided the government imposed terms and conditions allow it, is that Irish banks become more aggressive in lending relative to their rivals.

This would be good news for the hotel sector although it will raise the cost to the Irish government of its debt (the perceived risk of default by Ireland doubled after the announcement, according to credit valuation agency CMA) and ultimately impose the cost on Irish taxpayers. It is hard to see a sensible government allowing this to go too far.

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