The cost of the Irish banking ‘guarantee’
The Government says that the amount involved being guaranteed is €400bn. The current standard rate for interbank credit default swap insurance is 2%. So, this guarantee is worth €8bn per annum to the Irish banks.
The six banks could all have been purchased outright on Monday afternoon for approximately €10bn.
The insurance certificate was issued without a premium even being discussed What kind of negotiating position is that? We still don’t know what the banks will be charged for this ‘insurance’, or even if they’ll be charged at all if they never claim.
Can I have that sort of cover on my car insurance, please? I promise I’ll start paying premiums when the car is totalled.
October 2nd, 2008 at
10:11 in
Politics (Ireland) | tags: banking crisis, credit crunch, insurance, Politics (Ireland)
Yup, Absolutely crazy stuff.
We’re now in the position of having guarnteed the banks borrowings with no idea of what we’re going to charge them, how much we’re liable for, what they’re going to do with the new borrowings they take on and what they’re going to do to clean up their balance sheets.
I’m terrified of this. I fear the government has just put all our necks on the line.
My sentiments exactely Keith.
The Irish tax payer is being asked to guarantee this 400bn….is this guarantee based on projected tax revenue?
btw the FT100 is down 5.2% so far today