We can learn a lot from how Denmark handled its crash
JUSTICE is not only supposed to be blind, she is supposed to be unemotional. So it proved in the ‘trial of the decade’ involving the three former senior executives of Anglo Irish Bank.
Some analysts have suggested that there was more to the surprisingly muted public reaction than just the deadening hand of judicial proceedings. They surmise that people have replaced anger with a more general understanding of the complex processes which led to the collapse of Anglo and the near-collapse of the entire banking system.
There may be something in that but it probably also has a lot to do with the passage of time and even the feeling that the worst is over. The level of residual anger may well depend on the size of an individual’s losses from the crash – whether income, employment or family – and that varies a lot from person to person.
In December 2008, the Government had announced a €10bn recapitalisation of the banking system, after studies by PricewaterhouseCoopers and Merrill Lynch. We now know that this was a laughable fraction of what the banks really needed but it hardly got a chance to calm things down.
The reminder of the loans’ significance came from a new book about the international financial crash by Cornelia Woll, professor of political science at Science Po Paris. She hit on the idea of comparing how similar countries dealt with their banking crises, to see if any general lessons could be learnt.
Countries are similar in different ways. The US and UK are paired together in the book because of their comparable financial systems. Ireland and Denmark are chosen because they are small, open economies with large banking sectors.
But what the book shows is how very different they really are.
With a population not much larger than the Irish Republic, Denmark had almost 140 banks at the start of the crisis. Even that was 100 fewer than before the general Nordic banking crisis of the late 1980s.
This, to us, puzzling plethora of banks is a common feature of continental countries. A large number gives more options for closures and mergers in a crisis than having just a few institutions, all of them “too big to fail”.
It is worth remembering that the collapse of Barings after Nick Gleeson’s rogue trading was the first major failure in Britain or Ireland for more than a century. This is quite unlike the banking history of the USA or several European countries.