He mightn’t have earned credit amongst the developer community when he claimed NAMA was trying to put all of its developers into three bed-semis and Ford Cortinas, but developer and businessman David Agar this week demonstrated his finer qualities when he won €30m in a court settlement following a case he had taken against Ulster Bank, part of the RBS group.
Harry Wilson at the Daily Telegraph yesterday evening reported that David has settled a High Court case which was initiated in December 2010 (High Court reference 2010/11057 P) . The case involved the misselling of interest rate swaps – insurance policies sold to borrowers to protect them against future interest rate rises on their loans – and according to the Telegraph, the win means that Ulster Bank will “write-off swaps and loans worth €30m as well as covering Mr Agar’s legal costs, which are believed to total about €1m.” Given the win seems to correspond with an Ulster Bank loss, there is unlikely to be any benefit to NAMA. As the case was settled, there won’t be a judgment.
Misselling these swaps, or insurance policies, involved the banks selling these policies where it was inappropriate to do so or where the cost exceeded potential benefits – the banks have been held to have had a professional duty in advising their borrowers in relation to these insurance policies which boosted bank profits and bonuses.
The win is believed to be the tip of an iceberg of potential losses faced by British (and Irish) banks for misselling these insurances to their borrowers, and comes in the wake of other malfeasance by banks including the overcharging – alleged by some to be deliberately orchestrated with knowledge and consent going all the way to bank boards – of interest on lending by Irish banks. Yesterday, the Evening Herald revisited the old story of Anglo’s overcharging, which the present CEO has said might cost the bank up to €100m. The Herald reminds us that Anglo will waive its rights under the Statute of Limitations of six years, in meeting claims of overcharging of customers.
UPDATE: 29th July, 2012. A couple of people have privately asked who David Agar’s solicitors were in this case. According to the Court Service, the solicitors on record is Downes, presumably Downes in Dublin 2, telephone 01-676-2546. Also to access case details at the High Court, you have firstly to accept the Court Service terms and conditions here, and then enter the case reference or other search information to get the case details. For what it is worth, Ulster Bank was represented by A&L Goodbody.
David Agar deserves full credit for pursuing the banks for mis-selling SWAPs to its customers. It is an area that has been given a lot of publicity in the UK but virtually none here. Again, I wonder is this a deliberate policy on behalf of the government and the media to limit the damage to the banks of their fraudulent activities, based on the fear of further billions of losses. It is to be noted that Anglo also aggressively deliberately pursued this lucrative scam.
In the UK “Bully-Banks” has organised the victims into a fighting group. See copy of recent email below:
BEGIN
Bully-Banks now has a membership of over well over 1,200
individuals who together own over 600 SMEs each of which has been
mis-sold an IRSA. The establishment of such a large membership in
such a few months is something that gives us great hope going
forward. We believe that the increased number of members will
transform our capabilities going forward.
* Bully-Banks is now a group of people who have claims against
various banks to an aggregate value in excess of £300 million. We
now need to organise ourselves taking into account that fact and
the influence it gives us as a group.
Lobbying Activities
* Our lobbying activities have been quite successful so far. We are
greatly indebted to the cross-party group of MPs led by Guto Bebb
and Toby Perkins. We are also indebted to every MP who has met with
their constituents and who have taken up their constituents’
complaint that they have been mis-sold an IRSA.
* The issue of the mis-sale of IRSAs is definitely in the public
arena. Our challenge is how to take our lobbying campaign forward
and to make it deliver an effective solution.
The Financial Regulator
* We have achieved significant success in prompting the FSA to
conclude that IRSAs have been mis-sold. We have in the process
established a line of communication betweek the FSA and
Bully-Banks.
* The agreement between the banks and the FSA announced on 29^th June
(“the Agreement”) is however a major disappointment. For the
reasons already communicated to Bully-Banks’ members and to the FSA
we believe the Agreement is fundamentally flawed.
* We need to create an effective response to the Agreement by taking
our concerns about the Agreement to the body supervising the FSA
and ultimately to Parliament.
Media Coverage
* Together we have achieved significant success in prompting media
coverage of issue of the mis-selling of IRSAs. Continued media
coverage is essential if we are to increase our membership
further.
* We need to develop and implement a strategy to sustain media
coverage over the next six months.
The Next Few Months
The Agreement between the FSA and the banks is misconceived. We are
convinced that it will not deliver a solution to the problems caused by
the mis-selling of IRSAs and our planning is based on that conviction.
Bully-Banks’ Membership
* We need to increase the membership of Bully-Banks. An increased
membership will deliver increased resource, an increased status in
discussions with government and an improved negotiating position
with advisors and service providers. We can also use that
increased membership to deliver more compelling evidence of the
banks’ activities.
* To that end we have available a PDF of a very simple advert which
we should be grateful if members would place in their local papers
raising awareness of the issue and of Bully-Banks. We are asking
members to select a local paper and arrange and pay for the
insertion of the advert. We also ask members to let us know the
name of the local paper in which they place the advert. The advert
can be found on
[2]http://bully-banks.co.uk/wp-content/uploads/2012/01/bully-banks-adve
rt.pdf
Links:
2. http://bully-banks.co.uk/wp-content/uploads/2012/01/bully-banks-advert.pdf
* The first meeting of the members of Bully-Banks that took place at
Bicester was a very positive event and generated a great deal of
energy for the campaign. Given the activity that has taken place
since our last meeting, we believe that it would be very worthwhile
to bring members together again.
* We are investigating the possibility of holding a National Meeting
of the members of Bully-Banks and are focusing on a meeting in the
Birmingham area. We do not know how many members would be able to
attend the meeting but we are hoping that every member would make
the effort (That would produce an attendance of over a thousand
people at current membership levels.) A meeting of that scale
would enable us to generate media attention and assist us in our
lobbying activities.
* Our initial thoughts are to try and arrange a meeting on a Sunday
as soon as we can. We are already investigating appropriate
conference facilities and their availability. If there are any
members with hotel and conference facilities that could be
available for such a meeting may we ask you to contact us through
[3]membership@bully-banks.co.uk or by phone to Paul Adcocks on
07918 716 234 in the first instance.
Links:
3. mailto:membership@bully-banks.co.uk
* In addition we are considering holding a number of regional
meetings throughout the country and would ask any members with
hotel and conference facilities that could accommodate from 100 to
200 members to contact us through [4]membership@bully-banks.co.uk
or by phone to Paul Adcocks on 07918 716 234 in the first
instance.
Links:
4. mailto:membership@bully-banks.co.uk
* If you have strong feelings about whether you would prefer a
national or regional conference please let us know your views (and
your reasons) by emailing us on [5]membership@bully-banks.co.uk .
Links:
5. mailto:membership@bully-banks.co.uk
Lobbying Activities
* We need to take advantage of the Parliamentary Summer Recess and
take our dis-satisfaction with the Agreement between the FSA and
the banks to the Treasury Select Committee. We will do this working
in tandem with the cross-party group of MPs.
* We need to ensure that we contact every single MP over the summer
months to communicate to them the essence of our case and to secure
their help as we continue our campaign in Parliament after the
Summer Recess. To this end we will be preparing a second
Bully-Banks’ Report.
The Financial Regulator
* We will co-ordinate the response of Bully-Banks’ members to the
banks as the banks begin to implement the Agreement. To this end we
are asking members to keep us informed of communications from their
bank about the Agreement, action being taken by the bank pursuant
to it and details of the proposed review of their case.
* We will monitor the implementation of the Agreement by the banks.
Again we will ask members to keep us informed of all developments.
* We will review how we can assist individual members in their
response to their bank as they implement of the agreement.
* One of the major issues is that of time. Waiting to see how the
Agreement is implemented is a major handicap for SMEs given the
financial difficulties they face as a result of the mis-sale of an
IRSA. This delay is a particular concern given that we are
convinced that the Agreement will not deliver a solution. Once
again delay and procrastination will be to the banks’ advantage and
will only handicap and damage Bully-Banks’ members.
Media Coverage
* Maintaining media coverage is a key activity for us.
* We need members to be prepared to provide stories that will
maintain the media’s interest. (For example we are currently
trying to identify Relationship Managers from within each bank
who are prepared to talk about the way in which they were briefed /
trained by their bank to sell IRSAs and they way in which they were
set targets in connection with the sale of IRSAs. If you are still
in contact with your Relationship Manager at the time you were sold
the IRSA and still have a reasonable relationship with them, may we
ask you to see if they would be willing to discuss those matters
with a journalist on an anonymous basis. Do let us know the name
and contact details if you know of a Relationship Manager who is
prepared to have that discussion.).
Legal Action
* In the light of the Agreement between the FSA and the banks, we
believe that it has become much more likely that the solution to
the problems caused by the mis-selling of IRSAs will have to found
in the courts. In simple terms, the FSA has failed us. We will
challenge the FSA’s decision by lobbying Parliament but we need to
address how we go forward if we fail to get the FSA’s decision
reversed.
* We are in discussions with a number of firms of solicitors and
counsel to see how we can best assist individual members. We are
discussing the possibility of class actions or test cases and how
we can best deal with the issues of law that arise is many of our
individual cases. We are also discussing how we can best share
information, evidence, legal opinions etc amongst our membership
and their advisors to assist them in the preparation of their
cases.
* Clearly the issue of the funding of the actions is crucial. We are
looking at Conditional Fee Agreements (“CFAs”) with solicitors and
counsel to cover the costs of Bully-Banks’ members’ legal fees and
the necessary ATE Insurance against a banks’ costs in the event
that an individual legal action is unsuccessful. The issues are
complex and we are taking our time before we come to the membership
of Bully-Banks with a proposal as to how we should go forward.
Clearly we hope that the aggregate number of Bully-Banks’ members
will both facilitate the availability of CFAs and the ATE Insurance
and enable us to reduce the costs involved in each of these.
* The matters are complex and we do need to improve our understanding
of the alternatives available before communicating alternatives and
/ or recommendations to the members of Bully-Banks.
* Once Bully-Banks has agreed with the members how the membership
would like to move forward on these issues there is a significant
co-ordination activity to ensure the cost effective provision of
legal advice on the various issues that arise (e.g. the sharing of
legal opinions on the technical legal issues that arise amongst the
membership).
* Bully-Banks’ role in these matters will need to be clarified and
formalised going forward. This will require a constitution and
election of officers. We will be preparing the draft constitution
and the necessary formalities before bringing them to the
membership.
* We ask for your patience and support as we organise these matters.
Mis-Sellling Line
* As and when new members join Bully-Banks many of them wish to talk
to an existing member of Bully-Banks. They may do this shortly
before joining (to gain confidence about the decision they are
about to make) or just after they have joined. They all wish to
have a better understanding of Bully-Banks and most gain great
confidence from a personal conversation with an existing member.
Often they wish to talk about their own situation and sharing it
with another individual who has also been mis-sold an IRSA can be
of great personal benefit to them.
* It is a really important part of Bully-Banks, the sharing of common
experiences, and it often gives real benefit to the new member. We
are asking for help from existing members to better manage the work
load and the effectiveness of our response to these type of phone
calls.
* We are proposing to set up a telephone service whereby an
individual can phone in and be directed to a member of Bully-Banks
(in broadly the same part of the UK as the caller) who is willing
to have a conversation with the new member and share experiences.
* We are therefore setting up Bully-Bank’s “Mis-Selling Line” and we
need, say, twenty of our members spread across the UK to volunteer
to take these calls. If you are willing to talk to prospective or
new members of Bully-Banks please phone Jan Hutchinson on 01202
701047. Jan will need your phone number and email address. Jan
will be co-ordinating the existing members who volunteer to talk to
new members on the “Mis-Selling Line”. She will be allocating
callers to regional volunteers to talk to them as and when calls
are received. If you are willing to talk to prospective or new
members do call Jan.
Actions To Take
1.
There is a section on Bully-Banks’ website called “What You Can Do”.
Do read it and make sure that you have issued your “Subject Access
Request” to your bank if you have not already done so. There is also a
separate suggested letter to send to your bank in connection with the
Agreement between the FSA and the banks the object of which is to make
sure you get in the queue for the review. The link is
http://www.bully-banks.co.uk/what-you-can-do/
2. The FSA have issued “clarification” of the Agreement with the banks
and it is available on
[7]http://www.fsa.gov.uk/library/other_publications/interest-rate-swaps
/interest-rate-swaps-faqs
Links:
7. http://www.fsa.gov.uk/library/other_publications/interest-rate-swaps/interest-rate-swaps-faqs
3. Finally, Jeremy Roe was interviewed by Sky News in late June before
the Agreement between the FSA and the banks was announced. That
interview is now available on the home page of
[8]www.bully-banks.co.uk.
Links:
8. http://www.bully-banks.co.uk
Many thanks.
Bully-Banks
[9] Follow Bully-Banks on Twitter | [10]Like Bully-Banks on on
Facebook | [11]Forward to a friend
Copyright © 2012 Bully Banks, All rights reserved.
You are receiving this email because you signed up for the Bully Banks Newsletter on our website.
Our mailing address is:
Bully Banks
Downe House
Hartland
Hartland, Devon EX39 6DA
END
I am sure the Ulster Bank is feeling a lot less arrogant and bullying today.
In relation to the Evening Herald article, Cormac Murphy is naive in the extreme if he believes the statement that “no finding of intentionally misstating the rate has been made in the Anglo case, it is understood.”
Well Cormac – it isn’t understood. The dogs in the street are ell aware that Anglo ran its own version of DIBOR known by the Anglo executives fondly as “TIBOR” after Tiernan O’Mahony, Anglo’s former Head of Treasury, who set it. The Anglo Board knew what was happening. It was even implemented in the USA – a dangerous strategy. And if you are checking your Anglo statements, note well that this was not the only way that clients were deliberately scammed in the manipulation of interest rates. The 360/365 scam was also used. Do not trust the “cheque in the post”. My advice is to contact BankCheck to run the numbers independently.
IRSA = Interest Rate Swap Arrangement
Whatever happened to caveat emptor,dont get in the water of you can’t swim,especially with sharks.
Greed pure unbridled by both parties,if you don’t understand why or what you are doing, how about don’t do it !
@JG. Hi John. The SWAPs were all conditions of the loan agreements. Remember the mis-selling of various shady insurance products by the banks as part of their mortgage offers?
@Poacher I really don’t have enough information on the swaps to properly evaluate,but were they a condition of the loan ?
The above comments regarding the ‘loss’ reminded me of that great line in The Guard.
“Sergeant Gerry Boyle: You lads always announce seizure of drugs worth a street value at $10 million or $20 million or half a billion dollars. I wonder what street it is you’re buying your cocaine on, because it’s not the same street as I’m buying my cocaine on.”
@John,
In the UK, the Daily Telegraph has latched onto, and championed the issue
http://www.telegraph.co.uk/finance/rate-swap-scandal/9222628/MPs-to-discuss-interest-rate-swap-mis-selling-claims.html
http://www.telegraph.co.uk/finance/rate-swap-scandal/
Caveat emptor may generally apply, but in the UK they have already held that so-called payment protection insurance was widely missold and billions have been refunded to consumers.
You might have expected business customers to have more cop-on, but it has been held that mis-selling of interest rate swap arrangements also occurred and that banks had a duty to customers not to sell them products which were inappropriate or where risks were not adequately explained.
David Agar’s victory is the first one I have come across in Irish courts, where it appears the same standards as in the UK seem to be applied.
I imagine that the phone at David Agar’s solicitors, Downes will be busier than usual tomorrow!
@NWL ‘victory’ it was settled out of court,w/o any acknowledgement off wrongdoing or misfeasance,but agreed with costs.What did he win,if you have banking relationships you don’t end up in court,the relationship is self policing,the bank wants you to do well and prosper.
Baesd on Agars ridiculous interview with Niamh in the Sindo,he should never have been sold then,unlikely he comprehended what he did.
The swaps were probably unwond,he got released of any personal guarantees best case.Well done David, now how we doing about paying back NAMA and the Irish state what you owe !
We had a load of yield chasing mom and pop investors burnt in Auction Rate Securities,guess what ?
If you had a big enough AC and were a viable long term borrower/customer,you got your money back from Chase/BofA etc.Key word is investors chasing higher yields.
“Auction-rate securities, which were issued by cities, schools, hospitals and others, are long-term debt instruments that are resold with updated interest rates in periodic auctions held by banks. Many investors bought them on the advice of their brokers, who often touted them as a higher-yielding, but still safe, alternative to cash. Then, in early 2008, Wall Street dealers suddenly stopped buying the securities at auction.”
http://online.wsj.com/article/SB10001424052702304879604575582272276490314.html
@John. There are no banks left in Ireland, John – just busted flushes. They have all morphed into collection agencies and there is no such thing as a “banking relationship”. Ulster Bank has been a particularly nasty “bully-bank”, as it is widely rumoured that it is on its way out and doesn’t give a toss about its customers. In fact, it is planning to sell one billion euro of its clients’ assets and has not yet told them anything about its intentions. It is even selling customers’ assets to its own in-house acquirer fund West Register.
West Register is RBS’s investment company which acquires property from “financially distressed” situations, with a view to exiting when market conditions improve.
And who “encourages” the “financially distressed” customer to sell?……. Got it in one!
So… What banking relationship? There is just the bully boy one.
@John. I have loan offers from most of the Irish banks. All of them required SWAPs as a condition. It was a sweet way of adding substantially to the profits without the borrower being aware of it. In many cases more were made from the SWAPs than from the margin on the loan.
In one case, I even have a bank requiring a SWAP that was 6 times the length of the loan! I kid you not.
@WSTT hi wstt,seriously people like Agar,shock horror the bank/advisor acted in its own interest.Stop the press….if anything more a sad pathetic indictment of the lack of financial acumen and street smarts of Irish Developers.Did they never socialize have a pint with guys who worked/ran these shops ?
Chase just got a bloody nose over this but really,everyone in financial services knows the “game”.He’s hardly a widow and orphan,if he was solvent viable customer they would have worked it out,as gentlemen do!
“Several brokers told The New York Times that they had been encouraged to favor JPMorgan funds, and they described a broader culture that emphasized sales over client needs. Also, in the marketing materials of one major offering, JPMorgan published hypothetical performance results, even though actual returns existed, according to internal bank documents reviewed by The Times. In each case, the actual gains were lower than the theoretical results.”
http://dealbook.nytimes.com/2012/07/11/jpmorgan-pushed-sales-of-its-funds-even-at-clients-expense-brokers-say/
Hi John, They were sold as loan protection against rising interest rates – except the banks and everyone else knew that rates were not rising – anything but! However, they were a condition of every loan.
There is only one bank in Dublin that was/is in any way staffed by gentlemen and that is BOSI. And it’s no longer got a banking license. Just a one way ticket off the island.
@WSTT sorry to hear that,perhaps NAMA could fill the void !
Sounding very warm and cuddly lately,perhaps the dalliance with the overseas investors did not pencil or “macro” out.
Article in Irish Times this morning on the case Ulster Bank swap case:
http://www.irishtimes.com/newspaper/finance/2012/0730/1224321085903.html
What with IT issues (ever hear of Disaster Recovery Units?), mis-selling swaps and the parent being part of the trio that “cooked” the LIBOR rate, the bully-bank in the bowler hat and orange sash is not having the best July.
Should get its marching orders!
@WSTT, thanks for link. The only case on the Court Service for David Agar and Ulster Bank is one dated December 2010 so not sure where Suzanne is getting her “Mr Agar, whose property interests include the Harcourt building in Dublin, took the case against the bank earlier this month.”
The issue does now appear to be on the Irish media radar at least, and it will be interesting to get comment from the Central Bank/Financial Regulator on the history and exposure to swaps misselling.
The UK’s Telegraph has championed the issue and their banking correspondent Harry Wilson can be contacted on Twitter via @harrynwilson (there’s an “n” in the middle there!)
Sam Morrison, the north’s biggest retail landlord and probably’s BoI’s biggest property client in the north, paid £8m to get out of one of his swaps.
http://www.bbc.co.uk/news/uk-northern-ireland-18848630
PBN, co-owned by Paddy ‘Golden Circle’ Kearney, have also been giving out about swaps:
“The report added that in 2008, the banks effectively ordered it to commit to medium-to-long term fixed interest rates not long before the Bank of England began slashing its base rate.
PBN said this cost them about £8.5m in 2009 alone – the sum total of the company’s losses in that year. ”
http://www.bbc.co.uk/news/uk-northern-ireland-11940511
gentlemen, firstly i would like to thank everyone who has contributed to this topic, we have issued legal proceedings aginst our bank (RBS) for the mis-selling of the IRSA, however distubingly it would appear that (RBS) are to appoint KPMG as the ”independent advisors” to the bank!! which frankly smells very dodgy!! our company found itself being put into admistration february 2012, and KPMG are the administrators and LPA recievers, !!! we have managed to HALT proceedings against our property holding company as the ruling from the FSA has allowed this, but i fear that the BANK and KPMG are firmly locked in together, so i fear no impartiality will prevail hear. its disgusting to think that we still live in an era, where we cannot trust the Banks.
however i do think justice will endeavour, and i personally will stop at nothing to bring our bank to justice over thier greedy and criminal ways.
DG
Ulster Bank-looks like they are marching ahead,most likely maintain a presence in the north but last one out turn off the lights in the south !
“Minister for Finance (Deputy Michael Noonan): I have been informed by the Central Bank that it has not received any formal application to change the regulatory or legal status of Ulster Bank Ireland Ltd from that of a subsidiary of Royal Bank of Scotland Group. However, there are some informal indications that Ulster Bank Ireland Ltd may change its regulatory status and be subject to regulation by the Bank of England and the UK Financial Services Authority as in the case of its parent, Royal Bank of Scotland.”
http://debates.oireachtas.ie/dail/2012/07/12/00078.asp
I am trying to get a transcript of the case up to the point of the settlement in order to assess the arguments. I will also meet the barrister involved. However, it is hard to get details at this point due to the confidentiality of the settlement.
The reporting seems a little off the mark. My feedback is that the bank sold a 40 million swap in excess of the loan and that the settlement required that the SWAP was torn up “ab initio”. Compensation was paid on that basis.
I’m sure that the “chattering classes” will have the full details in a couple of days.
Meanwhile, it couldn’t have happened to a nicer bunch of bankers with a “W”.
@WSTT, your criticism of the Irish media does indeed seem right on the mark,
As far as I can see, no Irish (Republic) media outlet reported that last week, both AIB and Bank of Ireland have said they will allow the UK regulator to review their sale of interest rate swap products, but only in the UK apparently.
“Allied Irish Bank UK, the Bank of Ireland, Co-Operative Bank, Clydesdale and Yorkshire banks, Northern Bank and Santander UK have all said they will allow the regulator to review their sales of these products.
This coincides with the recent announcement on behalf of the UK’s big four banks, Lloyds, Barclays, HSBC and the Royal Bank of Scotland, which have reached a settlement agreement over the debacle.”
http://www.compliancy-services.co.uk/fsa-authorisations/fsa-reveals-7-new-banks-open-to-rate-swap-scrutiny/2077
It seems neither the Central Bank nor (Irish) Financial Regulator has a position on this issue other than it is a matter for the individual borrower to assert their rights, ultimately in court if needs be.
This matter is beginning to appear on the periphery of the domestic political radar, and it is hoped there can be a blogpost on the subject later in the week.
Any details on the receivership at Harcourt Street or “The Harcourt Building”,it was my understanding that a stay had been put in place pending the outcome of this part of the case.
Looks like the Man Group has packed up too,over 10,000 sq.ft available for sub-let as of today,with a k/o in 15!
“The first floor is held under a 25 year full repairing and insuring lease from the 1st April 2005 subject to a current passing rent of €577,572.60 per annum. The next Rent Review is due on the 2nd April 2015. The Lease contains a Break Option on the 31st March 2015. ”
http://www.realestate.bnpparibas.lu/pages/actualites/fiche.php?s_code=ie_officemarket_The_Harcourt_Building&l=es&r=286&t=bnppre&ctx=0&s_wbg_menu=376&s_id=0
Thanks NWL yet again. More info in one post than a year of RTE.
Hopefully pressure may build to force CB to look at the Spivs favourite form of legalised theft – Payment Protection Insurance. UK Regulator to its credit has at least been looking into it. Practices here were just as smelly – dealers dangling car loans in front of the young and foolish and slipping in expensive and often worthless PPI as part of the “deal”. Car dealers I know hated selling PPI, but the pressure was relentless.
JG, David Agar was more financially literate than many developers, he has no PGs
Banks often sold long swaps, sometimes for 30 years, well in excess of the loan term, they were punted on the basis that the borrower was hedging against its refinancing risk, which was total bollox.
The bank arranging the swap might make a c20bps annual credit spread, but the real cocaine high came from the accounting which allowed you to take the entire PV of this credit spread into your current year profit and loss.
Two banks in the uk refused me credit for not taking out such swaps.
@DCB NWL is doing a post on this later in week,agreed Agar has publicly claimed numerous times that he has no PG’s.One aside to this case is the use of funds with conflicting reporting.But will hold back too many comments until NWL does his post,as they do take a lot of work and tend to be quite good !
Indo-it was a non cash buy out.
“The bank claims the property carried total debt of €33.8m by the end of 2005 when still jointly owned by Mr Agar and Mr Shovlin. In March 2005, it advanced €36m to Mr Agar to purchase the property outright from Mr Shovlin.
It claims Mr Agar bought Mr Shovlin’s 50pc interest in a non-cash transaction whereby he exchanged his shareholding in another property-related company with Mr Shovlin in return for full ownership of the Harcourt property.”
http://www.independent.ie/business/irish/ulster-bank-fights-developers-claim-it-wasnt-entitled-to-install-receivers-3032883.html
Examiner-a little different !
“Opening the case, his counsel Mark Sanfey said Mr Agar had a relationship with the bank going back to 2000. In 2005 he borrowed €36m to buy out his former partner’s stake in the Harcourt Building. The interest rates applicable for that loan was 3.84% for five years and 3.54% for seven years. ”
http://www.irishexaminer.com/business/kfsnsnidcwql/rss2/
He may have won this battle,but lost the war,regardless of ‘swaps’ the building at the center of this dispute is highly leveraged,expecting it to hit the market via receivers shortly.
Finally on financial literacy…again from Examiner..je ne comprends!!!!
“The case arises out of a number of interest rate swap products on loans Mr Agar entered into with Ulster Bank. He claims those products were recommended to him by the bank following a meeting in July 2007 but their effects were not explained to him. “
Would I be excessively naive in suggesting that swaps, whatever they are, should be banned?? I did notice that short selling was ‘suspended’ recently (again) – what not banned? or at least only allowed for banks who have spivs and bookies as clients?
Yes, they are at th basic level a good thing. The alternative is to borrow on a fixed rate loan were if rates move against you there is a loss if you repay early, just as there is on a swap, but if rates move in your favour and you repay on a loan with a swap you make a profit whereas under a fixed rate loan you would not make any gain, for borrowers simple swaps are better than the alternative.
@DCB, There are many derivative interest rate hedging instruments. SWAPs are just one of many. However, they are the most profitable for the issuing bank especially as the banks (with the help of their auditors) chose to book all the projected annual profits in year one.
There are only swaps and options, every derivative is made up of just those two building blocks. Most derivatives, especially in Ireland, were simple swaps.
@DCB we utilize defeasance if rates move against you.Never had a swap pushed at me from lender,offered it but not conditional.Most RE companies handle internally their interest rate exposure,independent of lenders,some hedged some did not bother.But CMBS were a much larger factor I think stateside.Non factor in Ireland but a few out off the UK,they were the only real game over here,off course most of them blew themselves up with lax underwriting.But it’s starting to pick up again.
http://www.defeasewithease.com/Articles/01012005.pdf
The point that even experienced commentators in Irish media are misleading people on is that someone buying CFD’s is not “hoping to buy shares off the radar” and is not hoping to buy shares at all as has been suggested. Taking ownership of shares is actually the worst case scenario.
It might be bananas or banks… the point is not the shares but the gamble on the movement of the price.
The gamble. Gambling. Just like horse racing.
A whole different ball game from ownership of shares and voting etc.
If I am wrong please set me straight. If am right please set RTE and TV3 straight.Is there Irtish for the word derivative?
@sf ca writer, You are right and the Irish media are ignorant of the true nature of CFDs. They are as you quite rightly point out nothing but a gamble of the price movement.
@wstt thanks, I heard an interesting interview on public radio today , someone said that educated people will often say ‘I am no good at math’ but never say ‘I am no good at reading’. the reality is we like to replace numbers with words, and are probably all better with math than we think,, plus there is an insidious monopoly of math skill among a few great often good minds. Anyway thanks for the ongoing education.
@DCD, Yes they were – but that was because they were the most profitable for the issuing bank.
There were also caps, collars, swaptions, futures, long hedges, short hedges, cross hedges, arbitrage, cash matching, duration and the minimum variance approach.
With the exception of caps, none of these were used – too complicated for the Anglo and UB Treasury guys (most of whom didn’t pass inter maths) and not profitable enough.