Leave My Bank Alone!

Since the Government brought in its guarantee scheme under which it can force mergers, there has been talks of consolidation in the baking sector. Their has also been talks that the only two major banks that will be left will Bank of Ireland and AIB. I personally hope not.

I have been a customer of Permanent TSB (and TSB before that) for as long as I can remember and I must say the service there is excellent. I have never had an issue with them. They also are not exposed as much as BOI and AIB to bad debts from developers. So I was delighted to read a post over on Turbulence Ahead which points out the folly of merging to many banks in our sector. He points to an interview with Nassim Nicholas Taleb (embed below). In the interview he points out difference between big banks and small banks and the importance of diversity in the banking sector as when banks "fails then it isn't catastrophic for the rest of the system." I have to agree with Gerard when he says "we need to let weaker banks fail - though protecting savers - whilst maintaining low barriers to entry for new banks to ensure diversity: and less vulnerability to shocks."

There is room for some consolidation in the way the EBS and Irish Nationwide could be merged with one of the major players in the market without losing too much of the diversity in the system. According to finfacts.ie there are 14 commercial banks in Ireland. So the loss of two banks through merger or acquisition will still leave us with a healthy banking sector that would be able to absorb shocks. Exactly what we need.