Sri Lankan banks should maintain minimum non performing loans (NPL), Partner, an Irish financial expert said in Colombo last week.
Partner BDO Ireland, Brian Mcenery said that the non performing loans which were accumulated by the housing segment was the main reason for the Irish financial crisis in 2008 which even led to the collapse of the oldest bank in the World, Monte Dei Paschi Di Siena of Venice, Veneto Bank, Irish Bank and Lehman. He said that banks started lending at attractive rates and even the Real Estate agents offered property at very low rate.
The then government also has a tax of 9% for each time a property was exchanged as they found that it was an easy way to collect revenue from this property boom.
Even the then prime Minister of Ireland who then had to exit said that there was no housing bubble which prompted more buying. In addition banks’ incentives to borrow for housing, regulatory risk relaxation also aggravated the situation. He was delivering a presentation at a breakfast meeting on “Good Banking, bad Banks, non-performing loans – Ireland Experience” hosted jointly by ICC Sri Lanka and BDO cordially invite at Kingsbury Colombo.
He said when the crisis came up it was estimated that cost of bank recovery was over 70 billion pounds and people even had to part with their private helicopters, Lamborghini cars and items such as diamond necklaces to bail them out.
He said that due to the crisis the Irish bank’s NPL which was at .6% in 2007 increased to 1.9% to 2008, 9.7% to 2009, 13% in 2010, 16% in 2011, 25% in 2012 and to 26% to 2013.
He said that regulators even should look at NPL of banks more carefully to avoid a repeat of this crisis in other countries. (SS)
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