PAUL MILLS: Story of scorpion and the frog

The banks are a lot like the story of the scorpion that wanted to cross the river, then managed to find a ride on a frog and, contrary to his promise, stung the frog so that they both drowned, writes Paul Mills.

As they drowned, the frog asked why he did it. The scorpion answered that “he couldn’t help himself”, because it was in his nature.

The banks didn’t drown the last time they stung, mainly because the Government saw most of the lenders as just too important to let fail. The banks continued to behave like the scorpion.

All lenders came up with a way of increasing profits by cajoling people to give up their tracker mortgages. Funny that they all came up with the same idea, at the same time.

One of the banks decided, being all patriotic and wanting to tackle housing shortages, to lobby the Government to reduce Vat on construction firms to encourage them, well, to build.

This time, even a minister took them to task. Clearly, bankers had forgotten that over-relying on the construction industry got the country into a big mess only a few years earlier.

Last time taxpayers’ incentives were on offer, builders pocketed most of the largesse by increasing prices for first-time buyers. The banks have not learned from their mistakes. Given their propensity to behave like the scorpion, we need to reduce the opportunities for them to sin again.

A good way might be to change the rules of banking.

We have two large banks and the small also-rans. Unfortunately, credit unions are not at the races.

A real effort is needed to encourage competition. That, of course, may undermine profitability of current banks, the almost 81%-government-owned AIB and 14%-owned Bank of Ireland.

German savings banks have been around for decades, lending to SMEs and providing home loans at well below Irish rates. The Government continue to put the interests of banks, despite their behaviour, ahead of the people. The banks have revealed their own nature.



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