domestic property market: loans of more than €240bn have been extended to homeowners, property developers and construction companies. Last Tuesday, as he faced interrogation from the members of the Joint Committee on Economic and Regulatory Affairs, Pat Neary said that he was only really concerned about €15bn of those loans.
He told the deputies and senators that "speculative lending to construction and property development in Ireland amounts to €39.1bn, of which €24bn is supported by additional collateral or alternative sources of cashflow and realisable security. This leaves a balance of €15bn secured directly on the underlying property. There will undoubtedly be some losses on these exposures. However, any such losses would occur over a number of years and would be offset by profits on
performing loans over the same period." Neary, so it appeared, was worried, but not that worried.
Under closer examination by the committee members, however, his confidence was dented. He agreed that some of the "additional collateral" that he had referred to was made up of share portfolios (which would have plunged in value in recent months), other properties (which would also have fallen sharply in value) and properties with rental income. In good times, all of that
collateral might have seemed prudent and safe: in a recession, it could be worthless.
Neary also maintained that the banks' combined capital was in the region of €42bn, a figure that gave him plenty of confidence that they were more than adequately capitalised and still had plenty of reserves to weather the storm.
Read On...
No comments:
Post a Comment