Liabilities of Irish-owned banks 'are third highest in eurozone'

THE TOTAL liabilities of the Irish-owned banks are the third highest in the eurozone, amounting to €575 billion or 309 per cent of GDP, according to research by stockbroker Davy.

Releasing a report in response to repeated claims that Irish bank liabilities amounted to almost 900 per cent of GDP, the stockbroking firm said the liabilities of all credit institutions in Ireland totalled €1,424 billion or 839 per cent of Irish GDP.

However, the broker said that the figure of Irish bank liabilities of almost 900 per cent was “bogus” as it included the subsidiaries of foreign-owned banks.

The €575 billion in liabilities of the Irish-owned banks compares with a eurozone ratio of 232 per cent, excluding Cyprus, Malta and Slovakia, Davy said. The Government had agreed to guarantee €440 billion of these liabilities, amounting to 237 per cent of GDP.

Davy said there were “myriad” reasons why Ireland had such a large presence of foreign credit institutions, including the low corporation tax rate, lighter-touch regulation and the presence of a large, foreign-owned multi-national manufacturing sector.

The broker added that saying Ireland’s liabilities were 839 per cent of GDP is equivalent to Luxembourg’s being 2,000 per cent of its GDP.

Economist Rossa White said that Luxembourg was a useful country to compare to Ireland as it is also a hub for treasury and fund administration.

Luxembourg’s total banking liabilities totalled €733 billion at the end of 2007.

“But it is nonsense to suggest that is the liability of the Luxembourg state,” he said. “The meaningful figure for Luxembourg – ie, its liabilities to domestic residents – is about 166 per cent of its GDP.”