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Archive for January 30th, 2013

NAMA’s litigation department is having a slow start to the new year with only the second application made yesterday in Dublin’s High Court. The applicant is National Asset Loan Management Limited represented by Beauchamps solicitors. The respondent is named merely as “Mary Kelly” and, as is usual with recently-filed applications, there is no solicitor on record. The case reference is 2013/277 S.

Although Ireland has a very expensive judicial system, it is not possible for third parties to get details of applications, so we don’t know which “Mary Kelly”, NAMA is suing, nor do we know the gripe or the remedy sought by NAMA. We found out in NAMA’s report and accounts for Q3,2012 that it has in the past made applications merely to seek rectification of a mortgage and charge. So we have no idea who the “Mary Kelly” is, but knowing how some of you out there think, it might be worth saying that Paddy Kelly’s wife is Maureen and Paddy’s son, Simon Kelly’s wife is Joanna.

In the past, NAMA has taken legal action against individuals to enforce personal guarantees or to secure personal judgments, but it should be stressed that we do not know if either of these objectives lies behind the current application. NAMA generally doesn’t comment on court cases, not even to confirm the identity of respondents.

This is the second application by NAMA in the Dublin High Court in 2013 and there has yet to be an application against NAMA this year. Last year, NAMA initiated about 40 cases in the High Court and was on the receiving end of about 10.

 

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Back in November 2012, we examined the mystery of why one of Ireland’s allegedly richest men, Denis O’Brien was not in NAMA. After all, he had huge – “systemic”, some might say – borrowings at a NAMA bank and he has dabbled in property. Denis isn’t the only mystery –  Sean Quinn has €2.9bn of borrowings with Anglo and famously, has amassed a property portfolio.

Today, we find out that Denis is now buying NAMA property directly from NAMA. Nothing major for the time being, it seems, as the Irish Times reports that Denis has just paid €1m for two adjoining warehouses on the quays in south Dublin Docklands, riverside buildings that seem destined to be transformed into restaurants to serve this bustling commercial area of Dublin. And good luck to him with the development.

Now, Denis was none too pleased when the Sunday Independent reported on his borrowings with Anglo, or IBRC, though the Sindo did stress that Denis “has not missed an interest payment and is considered the bank’s best-performing large borrower” The paper stopped short of reporting if the loans were performing or were in breach of any loan covenants including Loan to Value covenants, but it should be stressed that there is no evidence whatsoever that there is any such non-performance or breach. The paper went on to report that Denis was “understood to be hoping” to reduce his borrowings at Anglo to €300m in 2012 – there was no word of borrowings, if any, at other NAMA banks.

Of course, by remaining out of NAMA, Denis is free to buy NAMA assets even if – and to stress, there is no evidence of this at present or of there being a prospect of it in future – he were to be in default on his loans.

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Noonan’s Day of Nonsense

Tomorrow is 31st January, 2013, and there will be a special “Noonan’s Day of Nonsense” on here, where some economic and governance issues will be examined, issues on which our Minister for Finance Michael Noonan has recently made pronouncements tantamount to gibberish,  There’s a temptation to label 31st January generally “Noonan’s Day of Nonsense” and to keep track of the Minister’s failings over the forthcoming year, but that might be tempting fate into preserving the Minister in his position for another year.

Increasingly, the Minister, who will be 70 years of age in May 2013, seems uninterested in delivering on his democratic duties in providing transparency to actions taken in his name. He is inconsistent, evasive, at times ludicrous and all the while, billions are being spent and transacted at his ultimate behest, and when called to account on what is happening to our money and its governance, he spouts complete gibberish.

And this is the man most practically responsible in the State to deliver a debt deal which will encompass the promissory notes.

Now it is true that we are in the middle of an economic crisis, and as we have seen in other countries, the limits of democracy can be curtailed in the name of the common good during such turbulent times. It should also be recognized that Fine Gael is still riding high in the polls and at 26-28% most recently, you have to be impressed at how resilient that party has emerged from a very difficult budget and the already substantial stock of divisiveness over the abortion debate. It is just over a year to the next significant elections, local and European, so the calculation might be that any middle finger given to the organs of democracy in 2013 might be forgotten by June 2014.

But do we really have to put up with this drivel?

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This will really rub salt into the wounds.

It has emerged that Anglo, or the Irish Bank Resolution Corporation is in breach of the terms of its banking licence. It’s not a secret, IBRC stated as much in its last financial report for the first six months of 2012 but the statement on page 18 of that report seems to have gone unnoticed until now. It says

“At 30 June 2012, the Bank is not in full compliance with all Irish regulatory requirements. While the Bank ensures that the relevant Authorities are kept fullyinformed in this regard, non-compliance may result in the Group being subject to regulatory sanctions, material financial loss and/or loss of reputation”

However, it emerged yesterday that IBRC is still in breach of the terms of its banking licence. This was confirmed by Minister for Finance, Michael Noonan who was responding to a series of questions from the Sinn Fein finance spokesperson Pearse Doherty.

So let’s get this clear. We have poured €34bn into IBRC including €30bn of promissory notes on which we are scheduled to pay a further €17bn in interest between now and 2031. IBRC has closed it branches, sold most of its deposits and doesn’t take new deposits, doesn’t advance new loans and is simply running down its loan book. It’s dead.

It is supposed to keep its banking licence to continue to obtain loans from the Central Bank secured on its promissory notes. No banking licence means no Central Bank loans. And of course without Central Bank loans, IBRC would collapse tomorrow, its creditors would get paid by whatever assets remained in the bank.

You might have thought that the €663,000-a-year chief executive officer of IBRC and his €500,000-plus a year juniors might have at least have been able to ensure IBRC complied with the terms of its banking licence.

Somewhere up in Cavan this morning, and perhaps in a court room in Dublin 1, there may be eyebrows raised at a bank in breach of its banking licence terms, attempting to hold to account the probity of others. And what on earth is governor of the Central Bank of Ireland, Patrick Honohan doing about breaches that appear to be permitted for at least seven months and are still ongoing.

The full parliamentary questions and responses are shown below (there is an error in the responses and it is page 18 of the H1,2012 IBRC report – and not page 14 as stated by Min Noonan – that contains the statement referred to):

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, the name of the licensed institution on the banking licence used by Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares..

Minister for Finance, Michael Noonan: I have been advised that Anglo Irish Bank Corporation plc is the name of the licensed institution on the banking licence used by IBRC.

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, if Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares, can meet Central Bank of Ireland banking licence criteria as set out in the Licensing and Supervision Requirements and Standards for Credit Institutions..

Minister for Finance, Michael Noonan: IBRC currently has a banking licence and is regulated by the Central Bank of Ireland. However, I have been advised that as disclosed previously in the Bank’s published accounts, as it is an organisation in wind down, IBRC is not in full compliance with Irish regulatory requirements. Page 14 of the 2012 Interim Report clearly discloses the following under ‘Regulatory Compliance Risk’:

“Regulatory compliance risk primarily arises from a failure or inability to comply fully with the laws, regulations, standards or codes applicable specifically to regulated entities in the financial services industry. The Bank continues to operate as a regulated entity and, as such, is therefore subject to certain minimum prudential and other regulatory requirements. At 30 June 2012, the Bank is not in full compliance with all Irish regulatory requirements. While the Bank ensures that the relevant Authorities are kept fully informed in this regard, noncompliance may result in the Group being subject to regulatory sanctions, material financial loss and/or loss of reputation.”

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 215 of 22 January 2013, if Irish Bank Resolution Corporation, in which he is the sole shareholder of 100% of the shares, has been assessed by the Central Bank of Ireland for authorisation requirements as detailed in the instructions paper entitled Checklist for Completing and Submitting Bank Licence Applications..

Minister for Finance, Michael Noonan: I have been advised that IBRC was subject to the relevant Central Bank of Ireland approval process at the time of the granting of its licence.

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Maybe it’s the doing-away with the annual bonuses (or most of them!), maybe it’s the 15% forced waivers of salaries over €200,000, maybe it’s the stream of criticism for lackluster performance or maybe it’s because Ireland is in a bailout programme and doesn’t need to be issuing large amounts of debt, but for whatever reason, 9 staff or 2% of the 500 total staff at the National Treasury Management Agency, have quit or left the NTMA so far in January 2013. In 2012, just 5% of the NTMA staff quit in the entire year and back in 2009 the quitters came to a mere 1%.

The figures were revealed in the Dail yesterday by Minister for Finance Michael Noonan in response to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty.

Remember that NTMA staff are not covered by the same cooling-off period that applies to civil servants. So an NTMAer can quit the NTMA one day and go work for a supplier or customer of the NTMA the next day. No questions asked. And conflicts of interest are avoided because of the honour system whereby staff at the NTMA are covered by a range of legislation that compels them to cross their hearts and hope to die that they will forget all the confidential information they’ve gleaned during their NTMA tenure, and they must pinky swear not to use, or even remember that information in their new employment.

Deputy Pearse Doherty: To ask the Minister for Finance if members of staff at the National Treasury Management Agency are exempt from the standard practice of a cooling off period for senior civil servants moving from public sector into private sector employment; if this is true, the reason such an exemption applies; the number of staff that have transferred from the NTMA to the private sector in the past four years, by year; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan:  The Civil Service Code of Standards and Behaviour contains provisions regarding acceptance of outside appointments and of consultancy engagement following resignation or retirement.  This code does not apply to directors or employees in State bodies in the wider public service.

I am informed by the National Treasury Management Agency (NTMA) that the number of employees who have resigned from the NTMA since 2009 is as set out in the table below

NTMAquitters

*Includes staff who have submitted their resignation and are serving their notice period.

I am also informed by the NTMA that its employees have notice periods of one or three months and six months in the case of the Chief Executive.  All NTMA employees are subject to section 14 of the National Treasury Management Agency Act, 1990 which prohibits an employee from disclosing any information obtained while carrying out their duties as employees of the NTMA. NTMA employees are also subject to the Official Secrets Act. I am informed by the NTMA that contravention of the NTMA Act and the Official Secrets Act is a criminal offence and that the prohibition on disclosing confidential information applies indefinitely and extends to former employees.

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