Archive for May, 2010

Credit Crunch Fall Out – why competence matters

Wednesday, May 12th, 2010

What are we to make of the news that Anglo Irish Bank is looking for an insurer to take a 50% share in its indebted client Quinn?  The reason is that the bank fears that without an insurance company leading the business, it will not recoup €2.8bn of loans made to the privately held company.  The Quinn family has said simply that it will not be able to pay them back.  AIB are looking for a company that does not yet have interests in the UK and Ireland – who are presumably willing to take the risk in order to buy into the market.

Quinn are in trouble with the Irish and British regulators because of their lack of capital, and the fact that they have allegedly been growing business by loss leader pricing.  Their business methods have raised concern for some time with UK competitors allerting the FSA about unfair competition.  Meanwhile the administrators are preparing a prospectus for the sale of the company. 

What a heady mix of developing consequences of competence issues  – bank and business.  And a clear demonstration of the limits of oversight – both regulatory and risk management systems.  This particular nightmare has added political colour as communities North and South of the UK/Irish border fight to maintain their jobs, and the Irish State must be groaning at the extent of the outstanding loan.  

It begins to put the Goldman Sachs fraud allegations into perspective.

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