Archive for June, 2012

Quote of the Week

“Producing a solution is incredibly hard, however, because the euro area faces a serious of interlocking problems.” Karl Whelan, Economist and UCD professor – and tireless and unthanked good egg who been prodigious with giving his time, trying to help the country overcome the financial crisis. Karl is now writing for Forbes.com and this is from his first contribution. Some of you might think that Karl means “series” rather than “serious” but that ignores the possibility of the American trend for converting adjectives to nouns eg “yesterday I had a sad” instead of “yesterday I was sad” and what better noun to describe the EuroZone crisis as in “it has a serious”!

“It was a bit of a let-down when he didn’t turn up. We were expecting a very heated discussion, seeing as he is such a public protagonist of Nama” unidentified Fianna Fail TD. NAMA held a meeting at Leinster House with Fianna Fail TDs and senators during the week. Missing from the meeting was the Fianna Fail senator from Kerry, Mark Daly who was otherwise engaged in a cross-party field trip to the US. Senator Daly has been accusing NAMA of all sorts of shenanigans for over a year now, yet refuses to provide details when challenged even under the privilege afforded to him in the Seanad. To date, the best he has come up with is a sale of a property on Baker Street in London involving NAMA developer, McAleer and Rushe, yet the senator accepts that this was a Bank of Ireland transaction, and nothing to do with NAMA. You’d hardly describe the Senator as a NAMA protagonist. Antagonist, maybe.

“I would be relatively cautious, in the sense that we really need to have a time-series of data. So if it levels out, or starts to slowly go up over 6 to 9 months then I think we can start to suggest that we might be or we’re at the bottom and we are bumping along the bottom and hopefully things will begin to rise again very slowly. But on the way down we’ve had periods where its kind of slowed down and its almost looked as if its levelling off then its fallen again, and then it slowed down and fallen again. So it might be a tiny little blip, or it might be the start of something else” Professor Rob Kitchin from NUI Maynooth whose IrelandAfterNAMA blog has kept us informed about housing, vacant housing and more general economic and social developments in the aftermath of the banking and property sector collapses in 2008. Professor Kitchin was speaking on RTE Radio’s Drivetime on Monday. The Independent’s Charlie Weston leapt on the contribution and extracted the “We are at the bottom and we are bumping along the bottom and hopefully things will begin to rise again very slowly” to support the Independent claim “Rob Kitchin, said there was tentative evidence the property market was bottoming out” For God’s sake, will someone place a property advertisement in the Independent to stop this rubbish.

Graph of the Week

The IMF has been keeping track of the cost of the global financial crisis that kicked off in 2007, and at the start of June 2012 published an update to its “databank”. Its analysis shows that the Irish banking crisis has been nearly the worst ever, anywhere in the world. Here is one of its graphs which shows apart from Iceland, Ireland is top of the world league on one measure. Apart from Iceland which has seen its currency devalued, debt written off and is now back in the bond markets, has unemployment at half Ireland’s level and indeed, is repaying the IMF sooner than scheduled.

Table of the Week

From the same IMF report, we get this table showing world banking crises from 1970 onwards and in terms of what the IMF calls “Output Loss”, Ireland is number three after Burundi andKuwait. What this country is shouldering to bail out the banks is truly horrific for a modern developed economy.

Image of the Week

Dimissed by some as “a cheap little power game”, the handshake between Irish republican Martin McGuiness and Queen Elizabeth II was indeed “historic” and as all handshakes are, “symbolic” – the original intention of the handshake being to demonstrate that you are not carrying a weapon. And the photograph showing a queen smiling from the eyes, dressed in green, engaging in the simplest of gestures with the embodiment of Irish republicanism with unionist partner in government, Peter Robinson looking on approvingly, and just off-camera, Irish president Michael Higgins – it was indeed “historic”. How was it to meet the Queen, someone asked Martin afterwards.  “Very nice” came the reply.

This coming week will see the Orange Order visiting Seanad Eireann where there will be speeches from the loyal orders and from senators including Sinn Fein. Which seems like a small departure from the Order’s “no speaking with republicans” position. Historic.

Last (last) chance of the Week


On Wednesday, we had the damning judgment in Dublin’s High Court where three of the Quinn family were held to be in contempt of orders given by the Court last summer. At stake is €500m of property, some or all of which the Quinns were held to have attempted to place beyond the reach of Anglo, or IBRC as it is now known. Yesterday, the Quinns were to hear their fate for their contempt, and imprisonment was a strong possibility. Instead the Quinns have been given three weeks to undo their fairly blockheaded attempts to bilk Anglo. Given the progress in the case so far, you might be sceptical of any success for Anglo from all this, but you never know. Presumably one of the transactions the Quinns will need undo is get the USD 500,000 back from their Ukrainian employee Larissa Puga (pictured above, left from the BBC Northern Ireland Spotlight programme). In this week’s judgment, the Judge held that Larissa’s contract had been improperly modified so as to provide for the USD 500,000 termination payment, and there appears to be an implication that the payment was made so that Larissa would accept a claim by a hitherto-unknown Belize company on a Kiev shopping centre. What chance does Anglo have of getting that USD 500,000 back? It remains to be seen of course, but the view on here is, to re-use that mildly vulgar expression we have down our neck of the woods again, “they have their shite”

Word of the Week


Last weekend, there was a tragic incident in Dublin city centre in which journalist Eugene Moloney was killed. Two people have since been arrested, one was released without charge and the other has been charged with manslaughter. Both RTE and the Independent covered the story describing the incident as “murder”, the Irish Times referred to “killing” and “death”. Murder has all sorts of legal and criminal meanings. Manslaughter is legally quite different. But national broadcaster and Ireland’s best selling daily newspaper (currently) know better, it seems. Next week’s phrase of the week is at this stage looking like “EU debt deal”, about which there is threadbare detail and in terms of Ireland, other than a mention in the EU summit statement which generally looks encouraging, there is nothing tangible to suggest that anyone other than the people of Ireland are expected to bear the burden for losses already incurred by our banks.

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It has been a very long time coming but yesterday, the Minister for Justice, Equality and Defence Alan Shatter introduced a new bankruptcy Bill for individuals in Ireland. In a country where one in seven mortgage accounts is either in arrears for more than 90 days or has been restructured with less than the contracted monthly mortgage payment being made, there is obviously a debt problem. In fact when former US president Bill Clinton addressed a business forum in Ireland last October 2011, he said that the biggest challenge facing this State was the mortgage crisis. Under the existing draconian bankruptcy rules which involve a bankruptcy period of five to 12 years, there are about 30 bankrupts per annum in a country of 4.6m, by comparison the UK has over 60,000 per annum in a country of 62m, a rate that is more than 500 times that of Ireland. The new Bill is aimed at modernising our bankruptcy laws and providing an efficient and humane system which balances the needs of debtors and creditors.

The verdict? Certainly the scheme for those with unsecured debts is comparable to the rules in the UK and should provide for a quick and easy means for those who can’t pay to have a quick resolution. However, all eyes have been on those with secured debts, particularly mortgages, and the provisions here are quite restricted.

There are two aspects of the bankruptcy legislation as it relates to secured debt which differ from other jurisdictions with which I am familiar, and which have the potential to undermine the promised potential of this legislation

Firstly, the person seeking bankruptcy must be able to demonstrate that they will not be able to pay their debts over a five-year period.  According to the Bill “it is his or her opinion there is no likelihood of the debtor becoming solvent within the period of 5 years commencing on the date of the making of the declaration” So if you are a mortgage-borrower with six months of arrears today and a property which has declined 50% from peak, on what basis can you demonstrate that you will not be able to become solvent in five years. Obviously, it will depend on the future direction of house prices and there is no guidance given in the legislation as to how future asset prices might be determined.

Secondly, the person seeking bankruptcy must be able to demonstrate that they have co-operated with their mortgage lender for a period of at least six months and that they have not agreed to any alternative arrangement. The Bill says “the debtor has made a statutory declaration declaring that he or she has co-operated for a period of at least 6 months with his or her creditors who are secured creditors as respects the debtor’s principal private residence in accordance with any process relating to mortgage arrears operated by the secured creditors concerned which has been approved or required by the Central Bank of Ireland and which process relates to the secured debt concerned and that notwithstanding such co-operation the debtor has not been able to agree an alternative repayment arrangement with the secured creditor concerned, or that the secured creditor has confirmed to the  debtor in writing its unwillingness to enter into an alternative repayment arrangement”

In other words, notwithstanding the fact that you are hopelessly insolvent with massive negative equity, your bank can seemingly stop your bankruptcy bid by providing you with temporary relief on your monthly mortgage commitments.

Interestingly if you are already a bankrupt like Sean Quinn or Anglo’s Sean Fitzpatrick, then you can’t seek bankruptcy under this legislation.  And if you have debts in excess of €3m, again there is no change to your prospects as you will not be covered by this new Bill. The two exemptions are curious.

The Bill will now be subjected to debates in the Dail and Seanad, and the expectation is that it will be operational by the end of this year. It would seem from an initial review however that amendments will be needed if Ireland is serious about adopting a modern personal bankruptcy regime.

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This morning, the Central Bank of Ireland (CBI) has released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 31st May 2012 and shows that during the month of May 2012, deposits by ordinary households and businesses reduced marginally by a nugatory €78m at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The decrease of €78m from €107.6bn in April 2012 to €107.5bn in May 2012 means that deposits were practically flat during the month after the previous months impressive €3.7bn increase. Deposits are now back at May 2011 levels which is indeed very positive but are still down €17bn from October 2010, the month before the IMF/EU bailout. Private sector deposits fell at covered banks in the past 12 months by just €39m, but this masks heavy falls June 2011 when the intensifying Greek crisis undermined confidence across the PIIGS countries. After four months of modest rises and with a €1.2bn increase in March 2012 and €3.7bn in April 2012 and despite the insignificant €78m decline in May 2012, I think it is fair to say there are signs of stabilisation.

The CBI doesn’t provide an analysis of deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits increased by €109m in May, which brings such deposits to €92.1bn, the same as the June 2011 level. Total deposits from all sources in all Irish banks increased by €7bn in May 2012 – the first increase since August 2011, mostly attributable to deposits from the Rest of World.

The Department of Finance hasn’t bothered to produce a “deposit trends” note for May but the note for April 2012  can be seen here . It confirms what the CBI is saying, and it shows retail deposits at the covered banks increasing by €2bn in April 2012 and such deposits now stand at €151bn. These figures include deposits at overseas operations of Irish banks eg the Bank of Ireland/Post Office joint venture in the UK. However the Department does say that one half of the increase in the month is from deposits at Irish branches. So again, the bouquet is positive, and should be welcomed as good news.

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank of Ireland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

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NAMA’s foreclosure action continues apace but at a less intense pace than earlier this year. We learn from today’s edition of Iris Oifigiuil that two more companies have fallen.

First up is Horison Developments Limited to which NAMA had Simon Coyle of Mazars appointed as a statutory receiver on 22nd June 2012.. Horison is controlled by Capel Developments directors Brian Molloy, Edward Keegan, Liam Kelly and Thomas Molloy,

Secondly we have Clubko Limited to which NAMA had Martin Ferris (or Martin V Ferris, which presumably differentiates him from the Kerry Sinn Fein deputy) from Ferris and Associates as a statutory receiver on 25th June, 2012. Clubko is controlled by pub supremo Hugh O’Regan with minority shareholdings held by Delores Barry and a company called Beldent Limited.

Remember you can see a comprehensive list of Irish foreclosure action by NAMA here and in this regularly updated spreadsheet.

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(The new properties added in May 2012, click to ENLARGE)


NAMA has today published its now regular monthly list of properties subjected to foreclosure action – the list shows NAMA foreclosed properties at the end of May 2012. The full list is here, the list of new properties added is here, and you will find previous editions of the monthly list which was first launched in July 2011, here. It is hoped to have the list in a spreadsheet format shortly, available here.

You should read the full list of NAMA’s terms for accessing the lists here. But in summary, this is what you’re looking at:

(1) Real estate property subject to loans in NAMA to which receivers have been appointed. The receiver’s website is shown against each property.

(2) This is all the real estate foreclosed sorted by country, and then region.

(3) Not all of the property may be for sale.

(4) Contact the receiver with enquiries or expressions of interest in the first instance. Only pester NAMA if you’re not getting any response from the receiver and make allowances for receivers being busy with queries, particularly after a new release of foreclosed property.

(5) If you think there are mistakes on the list, contact NAMA.

Comment and analysis here shortly.

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It was just before Christmas last year when Minister for the Environment, Community and Local Government Phil Hogan announced with fanfare that NAMA had agreed to make 2,000 homes available for social housing. In a country where there are nearly 100,000 households on the housing waiting list, the announcement was roundly welcomed. Six months later, and we learn that not a single home has so far come available.

Yesterday in the Dail,  Sinn Fein TDs, Pearse Doherty, Sandra McLellan and Martin Ferris asked the Housing Minister, Jan O’Sullivan about progress with releasing NAMA controlled homes for social housing. More than half the 2,000 homes are apparently unsuitable or have been otherwise sold/rented. Though there are 405 homes “at various stages of the approval process and 719 are being appraised”, contracts have been signed in respect of 58. But these 58 are likely to have been the 58 apartments at the Beacon South Quarter which were sold to the Cluaid Housing Association. Last summer 2011. In other words, since the fanfare of the 2,000 homes announcement six months ago, not a single home has in fact been acquired for social housing.

Deputy Martin Ferris : To ask the Minister for the Environment, Community and Local Government the steps he is taking to ensure that housing secured for leasing under the National Assets management Agency will not leave tenants isolated from community and services.

Deputy Sandra McLellan: To ask the Minister for the Environment, Community and Local Government the reasons properties offered by the National Assets Management Agency for leasing were deemed unsuitable..

Deputy Pearse Doherty :To ask the Minister for the Environment, Community and Local Government if he will give an update on the development of the National Assets Management Agency properties for social housing; and if he will endeavour to secure housing from NAMA for local authority ownership..

Minister of State at the Department of Environment, Community and Local Government, Jan O’Sullivan: I propose to take Question Nos. 16, 31 and 43 together. Since the announcement in December 2011 thatNAMA would commit to providing up to 2,000 units for social housing by the end of 2012, my Department, the Housing Agency and NAMA have been working together with housing authorities and approved housing bodies towards achieving this target.  The units being advanced through NAMA will in general be provided through the Social Housing Leasing Initiative under the standard terms and conditions that apply.

To date over 2,000 units have been examined with a view to determining their suitability for social housing.  Of the original number, 701 have been deemed unsuitable by housing authorities.  Housing authorities assess the suitability of these properties with regard to location, local demand, the nature of the accommodation and sustainable community principles.

A further 372 have been withdrawn, usually by property owners, as circumstances have changed.  In some cases the properties concerned have been let on the open market or sold and are no longer available as vacant units.

At present demand has been confirmed for nearly 1,200 available units and these are currently being processed.  It is important to note that while demand has been confirmed in respect of practically all residential developments proposed by NAMA, the requirement to provide for an appropriate mix of tenures and to avoid undue segregation in housing means that local authorities will only ever deem a certain proportion of units within individual developments suitable for social housing.  Discussion and negotiation has commenced in respect of these properties involving approved housing bodies, local authorities, the property owners, financial institutions, receivers and other relevant parties.

Of these 1,200 properties, contracts are signed in respect of 58 units, 405 of these units are at various stages of the approval process and 719 are being appraised.  It is  expected that units will be tenanted in the second half of the year.  NAMA continues to work with a view to identifying additional units suitable for inclusion in the programme.”

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Having studied the statements emerging this morning after yet another marathon EU summit, I am still scratching my head to see what all the fuss is about.

The markets certainly believe something has agreed which strengthens the debt sustainability of Spain, Italy and Ireland with bond rates tumbling this morning. Though having said that, Ireland’s benchmark 9-year bond is presently at 6.77% down from 7.1% yesterday, but 6.8% is the same as just a few weeks ago before Spain asked for a bailout or “credit facility”. Spain’s 10-year bond is at 6.6% which is down from the 7% yesterday, but still at an elevated unsustainable level.

So has there been a Big Bang, a new dawn in Europe and the seeds of a solution to the four-year old crisis?

If there is, I can’t see it.

There is no development apparent in the announcements which will see Ireland’s bank-bailout generated debt shared or reduced. And in Ireland’s case, that’s the issue – the 40% of debt:GDP which the country is shouldering to bail out banks. What we get is a fund which will loan money directly to banks. The fund will not absorb losses. The fund will want its loans back. There is no Santa Claus.

The summit statement from European Council president Herman van Rumpuy goes as follows:

“We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.”

Ireland’s banks are already recapitalized, in fact we have the most capitalized banks in the EU. There is a distinct possibility of additional capital being required for Irish banks – Matthew Elderfield has flagged €4bn of additional requirements, and if the mortgage crisis results in the crystallization of losses at the banks, then that too will generate a need more capital, as will a deterioration in the economy. But there is absolutely no indication that some Santa Claus will shoulder losses in individual countries’ banks.

What does this mean for us? Nothing, as far as I can see. No-one is suggesting any new fund will foot the bill for bank losses – past, present or future losses/losses in Ireland, Spain or elsewhere. Think about it – who would pay for such losses? Germany? France? China? Santa Claus?

Ireland gets a specific mention in the summit statement. And there is a compliment for our “well-performing adjustment programme” – so far we have met all financial targets in the Memorandum of Understanding, but with another €5,000 per household of adjustment needed with the “low hanging fruit” well-and-truly picked, that adjustment programme will be increasingly difficult to comply with. But what is meant by the “situation of the Irish financial sector”? We have bailed out the banks to the tune of €68bn – €28bn of extant promissory notes, €5bn in NAMA bonds and the rest in cash, which given we are running deficits, is borrowed. There is no suggestion of a refund for cash already injected into the banks, and if there is some debt writedown on the promissory notes, who will pay for that?

What we have got today from the EU is some more L’Oreal skin cream which smells pleasant, moisturises the skin and leaves a nice texture. What we have, however, is skin cancer and these announcements by themselves don’t deal with the disease of actual bank losses.

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