Ireland’s banks have received a good wad of cash to help with their troubled balance sheets. Hopefully, the government’s helping hand will goad banks to return to the business of banking and provide loans to an expanding economy. Investors may play the government’s move with an Ireland close-end fund (CEF).
The Irish government will try to relieve the pressure on its banks by taking over $100 billion worth of bad real estate loans, reports Stephen Beard for Marketplace.
So far, the Irish government has done a good job with handing its budget deficits, says Owen O’Callaghan with BNP Paribas. The government has cut unnecessary spending, or at least spending that is not matched by revenues. However, if borrowers default on the troubled loans that the government hast just acquired, the Irish government could end up owning a lot of empty commercial property.
After Ireland launched its “bad bank” scheme and outlined plans to replenish their capital base, the public’s reaction was varied, report Steve Slater, Padraic Halpin and Andras Gergely for Reuters.
Irish business group IBEC believed that the move was a “key milestone on the way to restoring international confidence in the Irish economy.” Sebastian Orsi of Merrion Stockbrokers says that “it’s a tough review of the capital requirements but it should give certainty over the amount of capital that’s required and the ability of the banks to withstand any future losses.”
Matthew Elderfield, new head of financial regulation, remarked on how the banks have been given a serious reprieve by removing the toxic loans off their balance sheets, but further aid will still be required to speed the recovery of banks and the economy alike. Central Bank Governor Patrick Honohan stated that banks have been given a solid footing and should be able to refocus their attention on supporting the Irish economy. [Will the Luck O’ the Irish Spread to ETFs?]
For more information on Ireland, visit our Ireland category.
Currently, there is no single country-specific ETF for Ireland, but iShares, PowerShares and State Street all have Ireland-focused funds in registration as we write. An investor may still invest in Ireland’s closed-end fund (CEF) for the time being. [The Difference Between CEFs And ETFs.]
- New Ireland Fund (NYSE: IRL)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.