Merger of Irish banks an attractive notion
The kind of boss a merged AIB and Bank of Ireland might want to hire to help them negotiate the much tougher road ahead might have a CV that reads as follows.
Someone with overseas experience would be a big help.
It might be asking a lot to track someone who had worked across various continents from Australia to Scandinavia with the US and Canada.
Someone who worked for such international names as Citicorp in the US and Hoare Govett in Britain and who had senior executive experience with a multinational bank where he had responsibility for over 30,000 workers might be deemed fit for such a task.
In 2002, Bank of Ireland recruited such a man.
His name was Mike Soden and he had held several key positions in some of the banks mentioned, before finally making it back to his native shore to take the helm at the bank.
One of his first notable comments on the banks in Ireland was to suggest the merger of AIB with Bank of Ireland.
For a variety of reasons Soden’s star faded pretty quickly and he was forced to resign.
Hindsight is a wonderful thing, but in suggesting a merger, Soden probably saw the banks here as too fragmented for the size of the market.
Competition concerns would have made it very difficult to get the banks together, but Soden could have pointed to the fact that Holland, with a substantially larger population than us, had less players and had not suffered any lack of competition as a result.
In today’s nerve-jangling market environment the notion of a bigger bank able to withstand the onslaught looks like an attractive idea.
It is clear the Irish banks have been caught up in a crisis bigger, indeed substantially bigger, than that of their own making.
It would be too easy to call for the executives who provided all the funds for the biggest party this country has ever enjoyed to be singled out for blame.
Even those of us who had seen much tougher economic circumstances during the 1970s and 1980s got caught up in the hype and we also started to believe that the bad days had been exorcised forever.
Now we face the possibility of a three-year recession and the banks are under severe siege.
Arguing that they are well-capitalised is futile.
It has already been conceded that some of them will need an injection of funds and Goodbody’s Eamonn Hughes pointed to a €1.5bn hole in Bank of Ireland’s balance sheet that suggests a rights issue will be needed down the line.
Jonathan York of the New York-based SunGard Ambit, a major supplier of risk management software to the global banking sector said the recent crisis has highlighted a crucial flaw among many of the operating in the financial markets.
He contended that when looking at their ability to survive banks should spend more time assessing how their business strategy and portfolio will be seen by outsiders.
He concluded that in times of uncertainty the most peripheral banks start to get picked off, which is what we have witnessed across the global economy.
In that sense the banks here were probably saved by their lack of investment in subprime derivatives, but in the end they had to have Government support to keep a number of them from going under.
Things can never go back to the way they were and the lessons of this crisis is that living beyond our means carries a high price.
Just how high will only emerge as the Irish banks come to terms with their current lot.
