Tuesday 19 September 2017

Rehn lauds Irish efforts but warns of fresh dangers

Laura Noonan

Laura Noonan

THE EU's economics chief Olli Rehn yesterday praised the "significant" progress made by Irish banks but warned that the "very dangerous" crisis in Europe's financial markets could threaten Ireland's recovery.

The comments came at the Irish Bankers' Federation (IBF) annual conference, where a senior RBS boss warned lending would fall and loans would become more expensive if regulators didn't lay off, and a senior AIB boss admitted his bank had suffered from "poor engagement" and "poor communication" with its customers.

Mr Rehn addressed the conference through a video message recorded on Tuesday afternoon after his planned trip to Dublin was derailed by "crisis-related matters".

The Finnish commissioner says Ireland is "well on track" to create "a smaller and better capitalised banking sector, which can regain investor confidence and provide financing".

He also praised Ireland's "determined efforts" to implement its bailout programme, efforts he said "should be the prime example for all European policy-makers".

"Tough decisions remain ahead but I have full trust that they will be taken with the same determination as the decisions so far," he added, stressing that he was "optimistic" for Ireland's future.

Despite those positive messages, Mr Rehn warned that recoveries from financial crises "tended to be a protracted affair" and could only occur if growth resumed and "financial market turbulence calmed down".

Turbulence

"We are indeed in a very dangerous situation [throughout Europe]," he stressed. "If we don't get an upper hand on this turbulence soon, the standstill we are now experiencing will turn into a new recession.

"No part of Europe would be saved from the consequences, including, of course, Ireland, which so much depends on the growth of its export markets for its recovery."

Mr Rehn will hold a meeting of European finance ministers next week to discuss the latest Greek crisis and a new round of bank recapitalisation that could see €300bn pumped into Europe's banks.

Yesterday's IBF conference also heard from Brian Harzter, a senior RBS official who has responsibility for the Ulster Bank division in Ireland.

Mr Harzter stressed that Ulster would "remain a core part of RBS strategy" and would "play a key role" in the Irish banking landscape as long as "our ultimate ability to earn a decent return on capital was not prohibited" by "oppressive" regulation.

The career banker said that some people argued forcing banks to hold more liquidity would not affect lending.

"As a banker, I can tell you that if regulators require banks to hold more capital and liquidity, the result will be banks lending less, lending at a higher cost, and probably both," he said.

Meanwhile, AIB's head of personal and business banking Bernard Byrne surprised the conference by sharing a host of negative feedback about AIB from a recent survey, including complaints from both staff and customers.

"People on the branch side are confused about what's going on," he said.

"They feel that they're in chains, they're frozen."

The bank has vowed to redouble its efforts to restore trust with customers and staff.

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