FINANCE

Finance

Finance

Macro-Economic Stability

Banking system of Europe is in a much heightened stage and the financial institutions and government itself are taking part in it. There has been a very massive decline in the overall growth of the organisation and a very strange level of government borrowing is showing a really alarming situation (www.deloitte.com).

Source: (www.deloitte.com)

The consistent increase in the borrowing of government are telling that the government is expecting improvement but there is no change in the economy and need of borrowing more and more is felt each year.

A major reason behind the financial condition of the overall bank is showing a very close relation with the decline of the country's macroeconomic variables. This is due to the fact that the most dominant leaders of the banking industry (Bank of Ireland and Allied Irish Bank) are the banks which are having a major government ownership. The condition which was almost a collapse of the banking system became the reason the Government guaranteeing for the liabilities on behalf of six principal Irish financial institutions from past few years.

Following graph is showing that the overseaseas depositing are increasing must significantly in the Irish banks:

Source: (www.irisheconomy.ie)

Collapse of banking sector

The stock prices of the all the foreign borrowings done by different banks of as high as €110bn and only four years ago they were found to be €15bn. Irish banks were now considering the option of borrowing from abroad a great deal this was because of outpaced growth in the domestic deposits. Funding gaps were now in need of being filled and this was possible through acquiring more and more the foreign debt. This was the time when foreign banks show their interest in investing in the Irish economy which was mostly used in purchases of property (Alan, 2012).

The risk took by the banking sector of Ireland is almost devastating. The basic reason of the collapse is also recognised to be the property bubble's unhindered expansion which was financed by banking system by making use of wholesale market funding (www.guardian.co.uk).

Allied Irish bank, Bank of Ireland and Anglo Irish bank all are partially or fully government own banks of Ireland. All the three banks were included in the list of banks which were badly hurt in the global recession. The catastrophic bank lending was increased massively and the credit extension was also on their peak (Clark and Hariman, 2012).

Bank of Ireland, Allied Irish Bank and Anglo Irish Bank being a dominant part of the banking industry were effected a great deal through all these financial troubles occurred in the Irish Market.

The following illustrations are the figures generated by the central bank of Ireland and are showing some really important concerns regarding the net assets banks are having the the economy.

Source: (www.irishfunds.ie)

The graph below is making the picture even clearer to be understood.

Source: (www.irishfunds.ie)

German and British financial institutions

The bucket-loads of the cash were being channelled by the banks this was being done by the savers which were from abroad to the residents of ...