Can the Iron Bank be with financial problems?

[John Suburbs]

I think the Iron Bank is definitely in trouble and it is Illyrio who is orchestrating its downfall.

First, it doesn't matter if the IB loans to slavers or not. Everyone else it loans to -- wine-sellers, dress-makers, dealers in spices, fabrics, foodstuffs -- all trade with slavers, since virtually every city south of Pentos is a slave city. So with less money coming in from the slave trade, that means less money to buy wine, dresses, fabrics, etc., and loan repayments to the IB will suffer.

Now let's look at Westeros. The IB has loaned at least a million gold pieces to the IB, which has not stopped repayment on that loan. In response, the bank has called in its loans across Westeros. Nominally, whenever a bank starts calling in its loans it is a sign that it's in trouble. It means they are willing to sacrifice future profits to shore up its balance sheet right now. Some may argue that this is in fact a pressure tactic to get the crown to resume its debt service, bit even if this is the case it will likely backfire on the IB. Without those serviceable loans, the economy of Westeros will suffer and the crown's ability to pay its loan service will only diminish.

This is why

Spoiler

the IB is loaning to Stannis. If he gains the Iron Throne, he will pay back all the loans with interest. But Stannis is currently freezing in the Wolfwood and has not even taken Winterfell. Suppose he fails? Then the money it has just loaned Stannis is out the window as well.

Still another sign that the IB is in trouble is Jon's request for a loan to see the Night's Watch through the winter. What was Tycho's initial response? No way, now how. Really? A few thousand in gold to keep a few thousand people fed through the winter and the wealthiest, most powerful and eminently stable bank in the history of the world can't even handle that? It isn't until Jon offers up the collateral from the wildlings that the deal is struck.

What's likely to put the IB over the edge, however, is fAegon. If he takes the crown, he owes nothing to the IB and could summarily declare that the usurpers' debts (including those to Houses Lannister and Tyrell, two potential threats to fAegon's rule) are their own and nothing is owed by House Targaryen. Sure, the IB could send a Faceless Man after him, and then his heir if necessary, but all that would do is send the continent right back into civil war where there will likely be no champion to unite the 7K under one rule, which means each great house becomes its own kingdom again, none of which owes a dime to the Iron Throne.

At this point, it will only take one depositor to be refused a withdrawal to start a run on the Iron Bank, just like it did with the Rogare Bank. This will ultimately deprive Braavos of its reserve currency, making the Iron Coin virtually worthless and crashing the Braavosi economy. Then Pentos can finally tear up the crooked peace deal that Braavos forced on it those many years ago that restricted its trade and diminished its ability to defend itself. Illyrio wins.

And who might that one depositor be? I think none other than Littlefinger, whose "financial wizardry" stems from the fact that he has been bankrolled by Illyrio this whole time to drive up the crown's debts and ultimately take down the IB.

P.S.: if anyone wants to see a current real-world parallel to all of this, Google the words "repo market".

[Aline de Gavrillac]

On 12/7/2019 at 3:15 PM, Lord Varys said:

There is no indication that the Iron Bank is in any difficulty, so that's that.

But the idea that the Iron Bank is in any way involved in the slave trade is just nonsense not backed by any facts. Sure, there is slavery in most of the Free Cities, but there is no indication that all people there own slaves - even in Volantis most slaves are likely owned by the rich people and the state, not the average citizen who owns a small tract of land or is free man earning his keep as a worker or fieldhand.

If the Iron Bank is investing in enterprises in the Three Daughters or even Volantis they likely do not directly or indirectly fund the slave trade. They might also finance enterprises and people who own or employ slaves but those are not likely to be particularly significant.

We know for a fact that Braavos has a zero tolerance policy on slavery. The Braavosi even free slaves that enter their city aboard slaver ships. It is not convincing that they would allow their bank a policy contradicting that. If that were the case there would also be exceptions to slavery in Braavos like they are in Pentos. In fact, Braavos would then be Pentos, pretending to have abolished slavery but continuing it clandestinely

 

On 12/10/2019 at 8:58 PM, The Ghost Beyond the Wall said:

I don't really think the IB is in any financial problems atm. They seem to just want to collect the debts owed to them, and are willing to be very persistent and send their agents to claim the money owed them if the indebted refuse to pay. I don't really think Daenaery's upheaval of the slave trade system is harming them economically, as they are staunchly opposed to slavery and would likely support someone who reduces such a heinous practice. 

The Iron Bank is not the only financial institution in Essos.  The Slavers must have their own system in Meereen.  The First Bank of Meereen is in financial trouble at the moment but that is not enough to spoil the profits for the bank in Braavos.  They didn't balk at lending money to the Watch.  Means they have money to lend.

[Lord Varys]

2 hours ago, Aline de Gavrillac said:

The Iron Bank is not the only financial institution in Essos.  The Slavers must have their own system in Meereen.  The First Bank of Meereen is in financial trouble at the moment but that is not enough to spoil the profits for the bank in Braavos.  They didn't balk at lending money to the Watch.  Means they have money to lend.

Sure, there are banks all over the place in the Free Cities, and the Ghiscari must have their own as well.

The Iron Bank likely also does invest to no small degree in enterprises outside of Braavos, considering its great power but this doesn't mean they actively fund the slave trade. Or are not preparing right now to profit from the disruption of the slave trade by helping to ruin various known slavers by buying up their debt or doing some other things like that.

[Back door hodor]

Interesting to see others thoughts on this topic...

Personally I have always thought the IB and Dani would be become allies due to her anti slavery agenda, dragons or no dragons.

As to the IB being overdrawn and in financial trouble I dont see it. In FaB the Rogare bank fails because the Rogares gained  control of Lys and used thier bank as thier own private war chest...there is absolutely no evidence that the iron Bank is doing anything of the sort, in fact we see them actively supporting rivals to those that owe and wont pay(Stannis for example). 

Meereen under dani is in trouble because the remaining slaver cities(Volantis, Quarth and the rest of slavers bay) are basically enacting a trade war against Mereen, on top of besieging the city by land and sea in the later parts of the book.

[divica]

On 12/13/2019 at 4:16 PM, John Suburbs said:

First, it doesn't matter if the IB loans to slavers or not. Everyone else it loans to -- wine-sellers, dress-makers, dealers in spices, fabrics, foodstuffs -- all trade with slavers, since virtually every city south of Pentos is a slave city. So with less money coming in from the slave trade, that means less money to buy wine, dresses, fabrics, etc., and loan repayments to the IB will suffer.

 

12 hours ago, Lord Varys said:

Sure, there are banks all over the place in the Free Cities, and the Ghiscari must have their own as well.

The Iron Bank likely also does invest to no small degree in enterprises outside of Braavos, considering its great power but this doesn't mean they actively fund the slave trade. Or are not preparing right now to profit from the disruption of the slave trade by helping to ruin various known slavers by buying up their debt or doing some other things like that.

I think the problem isn t really that. For exemple, slaves are responsable for a high percentage of dresses made. With danny harming the supply of slaves that make dresses not only these slaves become more expensive but the dresses also become more expensive and less abundant.

If we apply this logic to other industries and materials, interrupting slave trading affects the entire economy in essos. Everything is more expensive and scarcer. So the people that owe Money to the IB have less means of paying back and might even be bankrupt. On the other hand people that deposit their Money there are withdrawing their Money because they need it.

And this isn t even taking into account the amount of Money that they must have lost in astapor and probably meeren...

[The Ghost Beyond the Wall]

7 hours ago, Back door hodor said:

Interesting to see others thoughts on this topic...

Personally I have always thought the IB and Dani would be become allies due to her anti slavery agenda, dragons or no dragons.

As to the IB being overdrawn and in financial trouble I dont see it. In FaB the Rogare bank fails because the Rogares gained  control of Lys and used thier bank as thier own private war chest...there is absolutely no evidence that the iron Bank is doing anything of the sort, in fact we see them actively supporting rivals to those that owe and wont pay(Stannis for example). 

Meereen under dani is in trouble because the remaining slaver cities(Volantis, Quarth and the rest of slavers bay) are basically enacting a trade war against Mereen, on top of besieging the city by land and sea in the later parts of the book.

Yes I agree. It seems that they both share strong anti-slavery sentiment and would be natural allies. Could you imagine, the Iron Bank of Braavos teaming up with the last dragon lord, despite the long history Braavos has with the dragon lords of the Freehold who were their enemies? That would be something special to see. I don't think Daenaerys knows much about economics, but if she were to take the IT, maybe the IB would think she is more capable of paying back the debts than the current monarch. Dragons would be a heck of a tax collection method

[Lord Varys]

6 hours ago, divica said:

I think the problem isn t really that. For exemple, slaves are responsable for a high percentage of dresses made. With danny harming the supply of slaves that make dresses not only these slaves become more expensive but the dresses also become more expensive and less abundant.

If we apply this logic to other industries and materials, interrupting slave trading affects the entire economy in essos. Everything is more expensive and scarcer. So the people that owe Money to the IB have less means of paying back and might even be bankrupt. On the other hand people that deposit their Money there are withdrawing their Money because they need it.

And this isn t even taking into account the amount of Money that they must have lost in astapor and probably meeren...

We know next to nothing about the roles slaves play in the Three Daughters, Lorath, Qohor, and Norvos. There are slaves there, too, of course, but the five to one ratio is only in Volantis, and in the Ghiscari cities it is obviously much worse. There are people who own pretty much nothing in Volantis, too, who live without (m)any slaves. And both there and in Norvos the haves and the have-nots do not even live in the same part of the city.

I very much doubt that slave labor plays the same role in those cities than it does, perhaps, in Volantis or in Slaver's Bay. Despite that - you do realize that even in Meereen circumstances for slaves didn't change much after they were freed. They still had to work to make a living, and they continued in their previous professions. So indeed they would continue sowing and making clothes - the only difference being that they are no longer slaves.

The idea that the Braavosi invested in the slave trade in the cities of Slaver's Bay is pretty much ludicrous. The Ghiscari are rich as hell thanks to the slave trade, they likely do not need any foreign investments and would have their own banks.

[James Fenimore Cooper XXII]

22 hours ago, Aline de Gavrillac said:

 

The Iron Bank is not the only financial institution in Essos.  The Slavers must have their own system in Meereen.  The First Bank of Meereen is in financial trouble at the moment but that is not enough to spoil the profits for the bank in Braavos.  They didn't balk at lending money to the Watch.  Means they have money to lend.

 

20 hours ago, Lord Varys said:

Sure, there are banks all over the place in the Free Cities, and the Ghiscari must have their own as well.

The Iron Bank likely also does invest to no small degree in enterprises outside of Braavos, considering its great power but this doesn't mean they actively fund the slave trade. Or are not preparing right now to profit from the disruption of the slave trade by helping to ruin various known slavers by buying up their debt or doing some other things like that.

Savvy investors know how to profit from current events.  They make their money either way.  I believe that is the point George is making.  They failed to collect from Cersei so they're willing to back Stannis even when he is not in a good fighting position.  I don't doubt that some of their business dealings will be indirectly affected by the slave trade but that effect is not necessarily bad.  Most of their commerce is directly connected to shipping and trade goods.  I don't think they will knowingly do business with slavers BUT some of the ships they loaned money to may use slave labor.  So yeah, those ships that use slave labor will see profits go down.  But the influx of former skilled slaves needing to borrow and build businesses is the new source of revenue. 

3 hours ago, The Ghost Beyond the Wall said:

Yes I agree. It seems that they both share strong anti-slavery sentiment and would be natural allies. Could you imagine, the Iron Bank of Braavos teaming up with the last dragon lord, despite the long history Braavos has with the dragon lords of the Freehold who were their enemies? That would be something special to see. I don't think Daenaerys knows much about economics, but if she were to take the IT, maybe the IB would think she is more capable of paying back the debts than the current monarch. Dragons would be a heck of a tax collection method

Westeros will undergo an Ice Age.  Not much revenue will come out of that place for a long time.  The NW won't be able to pay off its debts and the Lannisters are not about to pay the crown's debts unless they can get the wights to do the mining for them. 

[The Ghost Beyond the Wall]

3 hours ago, James Fenimore Cooper XXII said:

 

Savvy investors know how to profit from current events.  They make their money either way.  I believe that is the point George is making.  They failed to collect from Cersei so they're willing to back Stannis even when he is not in a good fighting position.  I don't doubt that some of their business dealings will be indirectly affected by the slave trade but that effect is not necessarily bad.  Most of their commerce is directly connected to shipping and trade goods.  I don't think they will knowingly do business with slavers BUT some of the ships they loaned money to may use slave labor.  So yeah, those ships that use slave labor will see profits go down.  But the influx of former skilled slaves needing to borrow and build businesses is the new source of revenue. 

Westeros will undergo an Ice Age.  Not much revenue will come out of that place for a long time.  The NW won't be able to pay off its debts and the Lannisters are not about to pay the crown's debts unless they can get the wights to do the mining for them. 

Certainly I agree, the Lannisters won't pay back the debts, they are in a precarious position in terms of power as it is, and Cersei is admittedly an awful regent who had no intention of paying the debts back anyway. But may haps someone will (Stannis, Daenaerys someone else) and the IB will ally with them imho, as they have already started to do with Stannis (though where he will get the gold from, I am not sure). Basically, the IB has a reputation to uphold in terms of collecting their debts, and I am almost sure someone will pay the debt Westeros owes, or it just ultimately becomes moot in the grand scheme of things, IDK. 

[867-5309]

Stannis will do what lords do.  Tax the hell out of the peasants, farmers, merchants, and traders.  That is, if there are any of them left after the white walkers, war of the five kings, and battle of ice.  There won't be many.  It's a dead end and that was a bad loan to support him.

The Iron Bank will try to get it out of Dany because she's the only one who has resources in Essos.  Benerro and his church might pay off some of the debts from Westeros because she is their symbol for freedom.  IB might have to write off some of the debt, for the first time in their history.  These are unusual times. 

[John Suburbs]

On 12/15/2019 at 3:02 AM, divica said:

 

I think the problem isn t really that. For exemple, slaves are responsable for a high percentage of dresses made. With danny harming the supply of slaves that make dresses not only these slaves become more expensive but the dresses also become more expensive and less abundant.

If we apply this logic to other industries and materials, interrupting slave trading affects the entire economy in essos. Everything is more expensive and scarcer. So the people that owe Money to the IB have less means of paying back and might even be bankrupt. On the other hand people that deposit their Money there are withdrawing their Money because they need it.

And this isn t even taking into account the amount of Money that they must have lost in astapor and probably meeren...

Exactly. As Illyrio explains to Tyrion ". . . the world is one grate web, and a man dare not touch a single strand lest all the others tremble."

[Only 89 selfies today]

The bank is not in trouble at the moment but they soon will be when winter finally arrives.  They have too much invested in Westeros.  Winter will be a time of famine.  The IT will not have the resources to pay. It won't matter who has the throne.  And it won't only be the iron bank.  The financial institutions will all collapse as the economies collapse. 

[Tyrion1991]

On 12/6/2019 at 8:00 PM, divica said:

In regards to a discussion in another topic this seems increasingly more likely.

In westeros we know that the IT has a huge debt to them and several lords have loans that the IB is trying to force a payment.

However in essos Danny's war  is harming the economy of a lot of people and astapor was completly destroyed. This should make the Iron bank lose a lot of Money because people that owed them Money are either dead or became poor. Things are so serious that even people from qarth are getting involved and try to send danny away...

So with huge problems in both essos and westeros shouldn t the IB be facing financial problems?

And are there more clues that the economy in essos might be facing problems?

And I don t think we can ignore that the IB might be scared that danny will win the war in mereen because of her dragons and completly shatter the slave business. That should have a great effect in the economy in essos...

 

She’s damaging the slave trade. Braavos isn’t part of the slave trade and a big deal is made that slavers bay has no other form of economic activity other than the training and trading of slaves. This is a core reason Dany can’t sort things out and just put her Freedmen out into the farms and craft shops.

I think it’s an ideological one. They seem to hate the Valyrians and dragonriders because “no one man can have all that power, the clocks ticking” as a wise man once said. So, they are going to back anyone who fights Dany. The Braavosi rep with Jon even gives it the whole mysterious “we take dragons seriously” talk. Because, you know nobodies ever done anything bad without dragons before so if we rid the world of them then everything will be fine right before the Flammable Undead horde kills everyone.

[The Green Bard]

On 12/6/2019 at 3:00 PM, divica said:

So with huge problems in both essos and westeros shouldn t the IB be facing financial problems?

It occurs to me that Stannis possibly took his loans with the idea that he probably would never have to pay them back.  He may even mean fo the Iron Bank to go belly up.  On top of that George definitely put the story of the Lyseni Bank going belly up in F&B, so we know he considers these things.  Given what is happening on our world with a virus that might hit 2% of the population max, I'd say that a long night which will kill significantly more, I'd say yes, the IB defaulting is possible, even probable.

[Loose Bolt]

Iron Bank has been around a long time and there is a possibility that it has massive investments in assets like ships, buildings, farms, businesses (like bordellos), monopolies of buying or selling something in some cities, rights to collect taxes or custom revenues ...

So I think that without seeing actual Balance Sheet of Iron Bank it would impossible to answer question about financial condition of IB.

[John Suburbs]

8 hours ago, Loose Bolt said:

Iron Bank has been around a long time and there is a possibility that it has massive investments in assets like ships, buildings, farms, businesses (like bordellos), monopolies of buying or selling something in some cities, rights to collect taxes or custom revenues ...

So I think that without seeing actual Balance Sheet of Iron Bank it would impossible to answer question about financial condition of IB.

We do know that it has begun calling in loans across Westeros. While this might be a pressure tactic to get the Iron Throne to resume its debt service, it would be a foolish move. If numerous lords, traders, craftsmen and others are suddenly forced to pay back their loans in full, then economic activity in the 7K diminishes even further and the throne has even less revenue coming in to pay its debts.

In normal circumstances, a bank suddenly calling in all of its loans is a sure sign that it's in trouble. It means it is willing to forgo revenue in the future because it is in desperate need of cash now.

[Rufus Snow]

No chance the IB is 'in trouble'. Everyone is thinkiing too modern - the Iron Bank is lending gold (maybe silver too) that it actually has, not a fiat currency which it could create out of thin air like modern banks do. It can't lend on a fractional reserve basis as it only has actual, real gold.

The World Book tells us the IB is larger than all the other banks of the Free Cities combined, and each of those has at least one bank. It is WAY bigger than any of its customers. There's no way Stannis could hope to bankrupt the IB, even the Iron Throne can't hope to do that. It would take ALL of its customers to default to bring it down, and even then it wouldn't matter.

WHY doesn't it matter? Because the big category error everyone is making is thinking that the Iron Bank is a financial institution. It's not. It is effectively the Foreign Ministry of Braavos. It is an arm of government, a tool for fighting against dragons and slavery and tyranny. The Iron Bank is 'international collusion' writ large. Profit is not the motive. The making and breaking of princes is item one of its mission statement, not a footnote like everyone (especially those princes themselves) seem to believe. Braavos has an agenda - the IB plays to that, the FM play to that, the Sealord plays to that. That's how you 'keep your hands clean' in a world without fake news, facebook and tr*ll farms....

[Aline de Gavrillac]

A prolonged winter will hurt all economies in every part of the world.  Except candle-making.  The Iron Bank can easily survive with the loss of the slave trade.  Maybe they don't do business with the slavers.  It may not even affect them.

It can survive even if Cersei were to default on the throne's debt.  The bank can survive if the Night's Watch defaulted on its loan.  It may even survive if Stannis were to also default on his loan.  But if all three were to take place as well as the loss of economic activity because of the Long Night . . . yes it will be economic collapse.  The world will revert back to the hunting and gathering stage.  At least Westeros will.  It is inevitable.  The known world will have to be rebuilt and that includes financial systems.