This excerpt taken from the IRE 20-F filed May 29, 2009.
Challenging economic environment
The Groups businesses are subject to inherent risks arising from macroeconomic conditions in the Groups main markets, particularly conditions in Ireland, the UK and the US. Adverse developments, such as the ongoing deterioration in general economic conditions and in global financial markets, have already adversely affected the Groups earnings and are likely to continue to affect its results, financial condition and prospects.
The global financial system has been experiencing difficulties since August 2007 and the global financial markets have deteriorated very significantly since September 2008. This has resulted in severe dislocation of financial markets around the world resulting in material declines in the values of nearly all assets classes and unprecedented levels of illiquidity. This has caused the development of substantial problems at a number of large global commercial banks, investment banks and insurance companies, many of which are the Groups counterparties in the ordinary course of its business. Banks and other lenders have suffered significant losses and have become reluctant to lend due to the increased risk of default and the impact of declining asset values on the value of collateral.
There are growing indications of a deep and prolonged global recession. Despite measures by the European Central Bank and the UK and US Governments to stabilise the financial markets, the volatility and disruption of the capital and credit markets have continued. These conditions have already adversely affected the Group and have exerted downward pressure on stock prices, liquidity and availability of credit for financial institutions, including the Group, and other corporations.
The above described adverse macroeconomic conditions have caused a decline in demand for business products and services and decreases in business and consumer confidence, lower personal expenditure and consumption, increases in debt service burden on both consumers and businesses, and limitations on the general availability and cost of credit. These conditions have affected significantly and will continue to affect the Groups customers and, by extension, the demand for, and supply of, the Groups products and services and the Groups financial condition and results of operations. In addition, higher unemployment, reduced corporate profitability, increased corporate and personal insolvency rates higher and borrowing costs may reduce borrowers ability to repay loans and may cause prices of residential and commercial property or other asset prices to fall further, thereby reducing the value of collateral on many of the Groups loans and significantly increasing write downs and impairment losses.