July 2006: A good country to be a Banker

According to another of those interminable and infernal reports that we are plagued with these days, Ireland is now the second wealthiest nation in the world. But you all knew that already, didn’t you? Surely you have noticed how every second house in the country has a Porsche nestling comfortably beside the latest Mercedes model? No? Well, like all other reports, this one couldn’t be wrong, could it?

After all, even the Bould Bertie declared last week, in his own succinctly eloquent way, that the “boom times are getting even more boomer.” Quite.

This startling fact about how rich we all are was revealed in a “Wealth of the Nation” report published by Bank of Ireland Private Banking. The only nation to outdo us was Japan, apparently. We are ahead of the Good Ol’ US of A, probably because of Bush’s spending on war machines. We topped the Old Enemy too, Great Britain. France and Germany, the big European powers, are floundering in our wake. And Italy can have the World Cup because we have head-butted them in the chest when it comes to riches.

The bank’s boast is that each person in this nation has a net wealth of about 150 grand.  This is news to m. And I’m sure that it is news to my bank manager too, although I’m in no hurry to ring him to find out. Most of my fellow miners at the coalface of life were similarly surprised at the news of their newfound wealth. A quick check on our bank balances revealed the real truth

Like the official definition of “poverty”, this report’s definition of “wealth” is slightly different than many of us have in mind. The definition of “wealth” conveniently takes into account such things as residential property, pensions and company equity. Stripped of these star players, the Rich World Cup table takes on a slightly different look, from an Irish point of view. Our individual wealth now drops to a pitiful 18 grand per person and places us an even more pitiful eighth in the table.

I wonder does this eighteen thousand Euro include the SSIA money that we have scraped up over the past five years? If so, in the Rich World Cup, we have a relegation battle on our hands. As yet another report this week put it, we are “growth rich and wealth poor”. Now that’s more like it. Bertie might have said that we have “wealth boom but growth boomer”. Somehow, I think I know which statement sums it up for most of us.

The stark differences between the two statistics outlined above highlight how much reliance this country’s economy is on a booming property market. We now have over 300,000 millionaires in this state but they are not millionaires in the true sense of the word. Many of them owe vast amounts of money on their properties to the banks, which for years have encouraged them to take out bigger and longer-termed loans.  An ordinary house in the more desirable areas of Dublin costs over a million because of this policy. Does this make the present owner, who borrowed to the hilt to get his hands on it, a true millionaire?

I’m no expert in economics, but any report that claims that Ireland is the richest country in the world makes me nervous. Of course, when you look at who produced this report, the penny drops, in a manner of speaking. Banks have a vested interest in promoting this image. Politicians, especially those in government, will grab this golden nugget from this report and use it as proof as to how they have saved our nation and led it to world glory on the economic playing fields. They will not tell us at the hustings that a third of the nations wealth is held by 1% of the population. Now that is a statistic to really make you nervous.

Meanwhile, the bank managers and financiers lounge in their leather seats like lizards and marvel at how they have once again pulled the wool over our eyes. Hot on the heels of these indigenous reports comes another tome from the European Commission. This one tells us that Irish banks are the most profitable in Europe.

Their pre-tax profitability ratio is 50%, with the European average at less than 30%.  Irish consumers pay almost twice as much in credit card costs as the European average. The story is similar when it comes to the costs of loans in the Republic: we pay almost twice as much as our European friends.

Remember the “Yellow Pack” bank staff, those raw recruits who were literally taken in by the Irish banks at lower wages? There are part of the reason why Irish banks have such massive profits. The European Commission report cites Ireland’s “low base costs” as another reason for the banks‘ huge margins of profit.

The bottom line is that Ireland is one of the best places in Europe to be a banker. And we have a right shower of bankers here.


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