“On the issue of the involvement of the former head of the Shareholder Management Unit, the officer went on holidays to Australia on 12 December, 2012 and did not return to the Department until January 14th, 2013 at which time he tendered his resignation and in accordance with normal practice will not take up duty in the banks for another two months. Hence there is effectively a cordon sanitaire in operation for three months in this instance.” Minister Noonan in the Dail this week
The Shareholder Management Unit in the Department of Finance has 25 staff and a budget of €4.2m in 2013. 10 of the 25 staff at the Unit are on secondment from the National Treasury Management Agency. The Unit is responsible for the management of our stakes in the banks – we own 15% of Bank of Ireland and hold €1.5bn of preference of preference shares, we own 99.8% of AIB/EBS, we 100% own Irish Life, we own 99.5% of Permanent TSB, we own 100% of IBRC, which manages the legacy business of Anglo and Irish Nationwide. The Unit is also believed to look after NAMA.
Until recently, Michael Torpey was the head of the unit, but on 16th January 2013, he was appointed to a senior position at Bank of Ireland and will take up his position there by the end of March 2013. On 9th January 2013, the Department of Finance announced the sale of €1bn of so-called “Contingent Capital Notes” in Bank of Ireland. The disposal of the €1bn took many by surprise – it was announced on the morning of 9th January that the Government was inviting bids and in the afternoon, it was announced that a sale had taken place.
It is an odd transaction, and it appears that it was Bank of Ireland and NOT the Government which picked up most of the costs of the sale. Strange really, if you hold shares in Glanbia, you normally wouldn’t expect Glanbia to pick up the tab if you sold those shares. Minister for Finance Michael Noonan repeatedly refuses to provide detail on the sale, and says that Bank of Ireland’s decision making and fees are confidential.
The appointment of the head of the Shareholder Managament Unit raised eyebrows – here was someone who, since August 2011, has been knee-deep in the entrails of our banking sector.
So a key question of the sale of the €1bn of CCNs is “how involved was Michael Torpey”?
The response from Minister Noonan seems to imply that Michael Torpey was not involved in the sale at all. Michael went on holidays on 12th December 2012 (14th December, according to a previous statement by the Government). Not only did he go on holidays but he went on holidays to Australia, on the other side of the world. He didn’t arrive back until 14th January 2013 – five days after the sale of the €1bn Bank of Ireland CCNs.
Do you believe Michael Torpey had no involvement in the sale? So on 9th January, this poor man in Australia might have flicked on the financial news on TV or picked up the Financial Times or read some of the Irish press online, and found out about the sale of €1bn of our stake in Bank of Ireland in that manner? He’d be lucky not to have a heart attack!
Pull the other one, Minister Noonan.
And to the notion that Michael Torpey was the other side of the world and therefore couldn’t have been involved in the sale, Michael Dundee taught us in the 1980s that the Aussies do have phones.
The parliamentary questions and responses used as a source for the above, are shown below.
Deputy Pearse Doherty: To ask the Minister for Finance in view of the fact that he is the owner of 15% of the ordinary shares in Bank of Ireland, and owner of preference shares most recently valued at €1.473 billion, if he will confirm if the recent disposal by him of €1 billion Contingent Capital Notes was in the interests of Bank of Ireland; and if so, if he will provide the basis for this position..
Deputy Pearse Doherty: To ask the Minister for Finance if he will provide the overall costs incurred by Bank of Ireland in the recent disposal by him of €1 billion contingent capital notes..
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the date on which the €1bn billion contingent capital notes were first offered to the market.
Deputy Pearse Doherty: To ask the Minister for Finance following the recent disposal of €1bn contingent capital notes, if he received advice as to the optimum period over which the CCNs should have been marketed before any sale was closed; and if he will make a statement on the matter.
Deputy Pearse Doherty: To ask the Minister for Finance following the recent disposal of €1bn contingent capital notes in Bank of Ireland, if he will outline the involvement in the disposal, of the former head of the Shareholder Management Unit in the Department of Finance, (details supplied); and if he will make a statement on the matter.
Minister for Finance, Michael Noonan: I propose to answer questions 220, 221, 222, 223 and 224 together.
As announced by my Department on January 9th, the State was successful in disposing of its entire €1 billion holding of Contingent Capital Notes (CCN’s) in Bank of Ireland (BOI). The transaction was a very positive outcome for the State on a number of levels. It will enable us to reduce our indebtedness, it has had a positive impact on investor sentiment and it has also helped to underpin the value of our remaining banks investments. The transaction also reflects positively on Bank of Ireland, as will any further such disposals by the State in the future. Exit by the State over time from its bank investments is Government policy and the eventual separation of the State from the banking sector is an objective for which there is strong support across the political spectrum.
As I have stated before, the sale was managed by officials in the Department’s Shareholder Management Unit, with many years’ experience working in financial markets. Having established at the outset that there was sufficient demand to secure an underwriting position from the investment banks, the date the CCN’s were offered to the market was January 9th, 2013 the day the book build process began. In response to your question on the optimum period of marketing for the CCN’s, it is important to recognise that Bank of Ireland had been active in the market in both November and December raising €1.0bn through the issuance of an Asset Covered Securities (ACS) bond and €250m of subordinated debt. This meant that investors were fully up to speed with the bank’s investment proposition by the time the State looked to execute its own transaction.
On the issue of the involvement of the former head of the Shareholder Management Unit, the officer went on holidays to Australia on 12 December, 2012 and did not return to the Department until January 14th, 2013 at which time he tendered his resignation and in accordance with normal practice will not take up duty in the banks for another two months. Hence there is effectively a cordon sanitaire in operation for three months in this instance.
Finally I have been informed by the Bank that they are not in a position to provide the costs incurred in the recent disposal of the CCN’s as it is commercially sensitive.
Deputy Pearse Doherty: To ask the Minister for Finance the number of staff in the Shareholder Management Unit in the Department of Finance and the cost of the SMU in full year 2012 and the budgeted cost in full year 2013.
Deputy Pearse Doherty: To ask the Minister for Finance the present number of staff in the Shareholder Management Unit who are seconded to the SMU from the National Treasury Management Agency and if he will set out in bands of three months the number of secondees and their duration of secondment from the National Treasury Management Agency to the SMU..
Deputy Pearse Doherty: To ask the Minister for Finance the number of persons presently working in the Shareholder Management Unit in the Department of Finance who are not employees of the Department of Finance or secondments from the National Treasury Management Agency..
Minister for Finance, Michael Noonan: I propose to answer questions 65, 66 and 68 together.
The number of staff in the SMU is 25. Of this number, 10 are on secondment from the NTMA and 10 are Department of Finance employees. The secondment of NTMA employees is not time limited as the NTMA Banking Unit was seconded to my Department for so long as is required by the Department to fulfil its functions in respect of the banking sector. The remaining staff in the SMU are on secondment from AIB. The term of their engagement finishes, on average, in May 2013.
Nine NTMA employees were initially seconded to the SMU in August 2011. Additional secondments since then have been, at my request, to increase the number of staff in the SMU and/or replace staff who resigned from the NTMA.
The costs of the SMU, borne by the Department of Finance in 2012 were €3.6m and the budgeted cost for 2013 is €4.2m.