Ireland and Iceland in Crisis A: Increasing Risk in Ireland

Yale Program on Financial Stability Case Study 2014-4A-V1

14 Pages Posted: 20 Mar 2015

See all articles by Arwin G Zeissler

Arwin G Zeissler

Yale University - Yale Program on Financial Stability

Karen Braun-Munzinger

Bank of England

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: December 1, 2014

Abstract

Ireland went from being the poorest member of the European Economic Community in 1973 to enjoying the second highest per-capita income among European countries by 2007. Healthy growth in the 1990s eventually gave way to a concentrated boom in property-related lending in the 2000s. The growth in the aggregate loan balances of Ireland’s six major banks greatly exceeded the growth in gross domestic product (GDP); as a result, bank loan balances grew from 1.1 times GDP in 2000 to over 2.0 times GDP by 2007. Given the small size of the domestic retail depositor base, the Irish banks increasingly used the wholesale market to fund loan growth, despite its risks. The property-related lending boom proved unsustainable during the global financial crisis, and, on September 29, 2008, the government of Ireland took the unprecedented step of guaranteeing the deposits and substantially all other liabilities of the major Irish banks.

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

Zeissler, Arwin G and Braun-Munzinger, Karen and Metrick, Andrew, Ireland and Iceland in Crisis A: Increasing Risk in Ireland (December 1, 2014). Yale Program on Financial Stability Case Study 2014-4A-V1. Available at SSRN: https://ssrn.com/abstract=2579075 or http://dx.doi.org/10.2139/ssrn.2579075

Arwin G Zeissler

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Karen Braun-Munzinger

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
73
Abstract Views
553
rank
317,742
PlumX Metrics