Comment: Don’t fret, ECB will prevent new banking crisis...
The word sweetly captures the quiet delight being felt in Athens, Lisbon and Dublin.
Members of Europe’s bailout club will have taken note of official assurances that all is well with Deutsche; the denials that it might ever need financial assistance.
They will also have detected the creeping panic among German politicians and technocrats.
After all the hard medicine dished out to the periphery, the painful austerity, threats and hard bargaining, could you imagine if the biggest threat to Europe’s economic wellbeing emerged instead from Frankfurt?
The more conspiratorial-minded will have noticed that Deutsche’s most recent problems follow a fine imposed by the US Justice Department for mis-selling mortgage-backed securities.
It came days after the European Commission ruling that Ireland had granted Apple illegal state aid.
As the Frankfurt titan teetered last week, Ireland marked a black day in its recent history: September 30 when eight years ago the late Brian Lenihan emerged from Government Buildings in the early hours of the morning to announce the bank guarantee.
Lehman Brothers had pulled the pin from Ireland’s banking grenade. With no support or clear direction coming from Brussels or Frankfurt, it was the best the Government could come up with.
Now Germany could face its own Lehman Brothers moment.
But let’s not indulge too long in the schadenfreude. On Friday, the newly-appointed director of credit institutions at the Central Bank also appeared to be cognisant of the date.
Ed Sibley keeps an eye on risk and he is not happy with what he’s seeing.
Mr Sibley sent a chill up the spines of delegates attending a banking conference.
“There is some evidence”, he said, “that memories appear short, both within the banks and outside them”.
He went on: “Engagement with the banks has already shown some evidence of a return of more aggressive lending practices and cultures, and issues with risk appetites, the pricing of loans relative to risk and the effectiveness of board oversight over new lending.”
Less than a decade after the most harrowing financial episode in the history of the State, a senior banking supervisor is saying banks are showing signs that they’re back doing the same old carry-on.
Mr Sibley seems to suggest they are turning a blind eye to certain risks in the pursuit of new business, possibly mispricing loans and doing so without effective oversight at board level.
Some in the Irish banks might be yearning for the bad old days of light touch regulation, but there is a new regime in place.
It no longer falls to the Central Bank to police lending here.
The ECB now ultimately calls the shots in Dublin. Or at least that’s the theory. So, don’t fret about the future of Irish banking.
The ECB in Frankfurt has it under control — just like it does at Deutsche.
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