Aynsley tells Spanish not to copy Ireland
IRISH BANK Resolution Corporation chief executive Mike Aynsley has advised the Spanish authorities not to follow Ireland’s lead and create just one bad bank but to consider a number of bad banks to tackle the country’s banking crisis.
In an interview with The Irish Times, Mr Aynsley said he has been in contact with senior officials within the Spanish authorities as Madrid attempts to deal with its deepening banking crisis and devise ways of purging soured loans from its struggling lenders.
He advised them to be “broader minded” and consider setting up bad banks, not just one bad bank as Ireland did with the National Asset Management Agency.
“What you are really looking at doing is a clean-up of the banking system, not a partial clean-up of the banking system,” he said.
“Looking back for Ireland, yes it [Nama] was the right place to start but it wasn’t, in retrospect, a broad enough look at the extent of the problems that were emerging in the banking sector.”
The failure to remove all the problem loans from the Irish banks froze new lending and created a perception the banks were still broken, said Mr Aynsley.
This led to a flight of bank deposits and a drain on the European Central Bank, which pressed the last government to apply for a EU-IMF bailout to reduce the ECB’s exposure to the Irish banks.
“These are the series of unintended consequences not from negligence but from unawareness of the extent of the emerging problems and the breadth of the required response to the problems,” said Mr Aynsley.
“In structuring its response, [Spain] can do that with a far better knowledge base than Ireland had at the time.”
The Australian banker said the power to stem the euro crisis lies with Germany.
“Until the Germans come to the table and resolve this problem once and for all, we are going to lurch from one short-term fix to another. This is all about the long-term transfer of value from one part of the euro zone to another,” said Mr Aynsley.