Asset Management Companies and the Global Financial Crisis in Ireland and Spain

The Global Financial Crisis (GFC) significantly affected a majority of European Union (EU) countries with three-quarters of member states experiencing a systemic economic crisis between late 2007 and 2011, and all others experiencing instances of financial market stress. The crisis triggered many countries to rapidly undertake large scale market interventions to ‘save’ their banking systems and stabilise their economies. Consequently, close to half a trillion euro of taxpayer’s money was expended by EU countries in banking sector ‘bail-outs’ since the start of the crisis in 2008. This paper focuses on estimating the economic impacts of one of these rescue mechanisms, impaired asset measures via the creation of Asset Management Companies (AMCs). Applying Leontief’s Input Output (IO) and multiplier analysis, this research estimates the broader direct and indirect impact of two of the most significant AMCs implemented in the EU after the GFC, Ireland’s NAMA and Spain’s Sareb. The results demonstrate that beyond the initial banking system stabilisation objectives, AMCs had notable effects on economic activity, value added, income and employment in both countries. Looking to the future, policy makers may wish to view these direct and indirect economic impacts as a discrete contribution that these entities make to the economy. This may therefore frame considerations of the impact of future AMCs as not just associated with economic stabilisation, but also with wider measurable effects.