Banks still in the dock

A new normal dawns for the Irish banking sector.

It is going to be more expensive for everybody, from small retail customers looking for anything from car loans to mortgages right up to businesses looking for capital to fund expansion plans.

Two key developments in banking book-ended the Celtic Tiger years. The former US Federal Reserve chairman Alan Greenspan dropped interest rates to very low levels at the beginning of the last decade in an effort to stave off the collapse of the dotcom bubble. This released a huge amount of liquidity into the financial system. At the same time, the German economy was still struggling. The ECB kept interest rates low in an effort to boost growth in the eurozone’s largest economy. German workers were saving instead of spending, which meant German banks were awash with cash.