ECB chief Mario Draghi (front centre) addressing a joint Oireachtas committee yesterday

Last night

With an average interest rate of 3.15% compared to a Euro zone average rate of 1.77%

…Mario Draghi, head of the European Central Bank – addressing the Oireachtas Finance Committee – described the lending market here as being in a ‘monopoly or quasi-monopoly situation’.

Meanwhile…

…The ECB chief also rejected suggestions that the bank presses member state lenders to dispose of non-performing loans in fire sales.

He was responding to Sinn Fein’s Finance spokesman Pearse Doherty who asked if the ECB was pressuring banks to sell NPLs onto vulture funds.

Mr Draghi said the ECB didn’t have a preference as to how the banks reduce their problem loan levels. He said they have to examine the details of all proposals, including, as Mr Doherty suggested, a NAMA-type arrangement for the purchase of NPLs from the banks.

Mr Doherty said the high level of non-performing loans here was a legacy of the refusal of the ECB to allow the government to burn bondholders, which cost the Irish people dearly.

Mr Draghi said he did not want to engage in a reconstruction of the past.

Too little competition in ‘monopoly or quasi-monopoly’ mortgage market – Draghi (RTÉ)

Yesterday: Draghi Into The Light

16 thoughts on “Legacy Issues

      1. Fact Checker

        Doherty actually has a good intuitive grasp of economics and asks intelligent questions.

        He is admirable in that he generally goes into a committee room to learn something.

        Reply
        1. andy

          Yeah, I’d agree with that. He’s not bad and seems to try figure stuff out.

          I can’t say the same about McGuinness.

          Reply
  1. b

    ” the high level of non-performing loans here was a legacy of the refusal of the ECB to allow the government to burn bondholders”

    non performing loans were assets of the banks, bondholders were liabilities of the banks

    not sure of Doherty’s line of thinking here?

    Reply
    1. SB

      Could it be that if we didn’t have to pay back these unsecured creditors, the excessive taxes of the last decade wouldn’t have been required, giving more consumers enough disposable income to be able to service their mortgages?

      Reply
      1. b

        that’s probably his reason, but completely ignores that massive deficits we were running that needed to be funded by borrowing

        the high level of non performing loans were as much a function of people borrowing too much against over priced assets – not burning the bondholders would not have stopped the crash or stopped home prices falling

        and burning the bondholders would have resulted in the banks that owned the loans being starved of capital and unable to raise new money – loans would have have been allowed to stay underperforming for 10+ years and would have been called in aggressively

        Reply
      2. Owen C

        Don’t really see how that’s the case. People don’t stop paying their mortgage when take home pay reduces by 5-10% (ie the tax increase we have seen). They stop paying when take home pay falls by 50-100%.

        Reply
  2. Brother Barnabas

    “I do not want to engage in a reconstruction of the past”

    going to tell revenue that next time they want to audit me

    Reply
    1. Boj

      I’d have hoped that one of our reps would ask ‘WHY NOT?’ to that statement. Strong chance that they just sit there and nod. The reconstruction of our past would highlight the destruction of our futures (put an echo on the word futures when reading). Happy Friday!

      Reply
  3. Rep

    “the high level of non-performing loans here was a legacy of the refusal of the ECB to allow the government to burn bondholders”

    Can someone explain this to me? Is the logic that if the bondholders were burnt, the banks wouldn’t have to chase the loans anymore? Surely it can’t be that?

    Reply
  4. Fact Checker

    The burden of financial regulation is MUCH higher than ten years ago (we all know why…….)

    Regulation is to a large extent a fixed cost. Ireland is a small market, so the cost has to be spread over a lower number of customers.

    Ireland also has very borrower-friendly legal system.

    It’s not a huge mystery why European banks aren’t rushing in to enter the market.

    Reply

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