What is stopping the launch of the credit guarantee scheme for SMEs?

[UPDATE 5th October 2012. The scheme has still not been launched. In the Dail this week, Minister Bruton was questioned by Fianna Fail’s Dara Calleary and by Sinn Fein’s Dessie Ellis and his response was that the scheme launch was “imminent”]

If you read the recent IMF “Selected Issues” report on Ireland published on 10th September 2012, you might have been surprised to see reference to a “partial loan credit guarantee scheme” launched in Ireland in August 2012. The reference is on page 25 of the report in a section which examines similar loan guarantee schemes for small and medium enterprises (SMEs) in the UK, US and elsewhere. The UK scheme in particular has been very successful, launched in March 2012, by June it had seen 10,000 loans with a value of GBP 1.5bn guaranteed – that’s GBP 1.5bn transmitted to wealth and employment producing domestic companies in the space of just three months.

In Ireland  we have been talking about a loan guarantee scheme for SMEs for nearly a year, but as yet, despite the IMF thinking it has been launched and despite the evidence in other countries of the benefit of such a scheme, we appear to be still sitting on our hands as SMEs, who now regard availability of finance as just as critical as having customers, still go to the wall.

The scheme was announced in Budget 2012 in December 2011, in April 2012 Minister for Jobs, Innovation and Enterprise Richard Bruton launched the Bill to give effect to the scheme and the Act giving effect to it was passed into law in July 2012. But where is the scheme?

This week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked Minister Bruton about the scheme which the IMF believed had been launched. He also asked about the company administering the scheme, our old friends Capita, which Minister Bruton correctly states is based in Maynooth but it is part of the UK’s Capita group which has a highly colourful history in the UK where it has been dubbed “Crapita” by satirical current affairs magazine Private Eye. Capita is to receive €199,000 a year for administering the scheme – judging by the patchy performance of the Capita group, let’s hope that more than €199,000 is actually advanced to SMEs!

The full exchange is below:

Deputy Pearse Doherty: To ask the Minister for Jobs, Enterprise and Innovation in relation to the temporary partial credit guarantee scheme which he announced in April 2012, the actual launch date of the scheme; the number of applications received to date under the scheme; and the total value of loans advanced under the scheme..
Deputy Pearse Doherty: To ask the Minister for Jobs, Enterprise and Innovation in relation to the temporary partial credit guarantee scheme if he will provide an overview of marketing initiatives undertaken to notify and inform the target audience about the scheme.
Deputy Pearse Doherty:To ask the Minister for Jobs, Enterprise and Innovation in relation to the temporary partial credit guarantee scheme the expected annual value of the contract with a company (details supplied) for the oversight, management and operation of the scheme; and in relation to the tendering process and appointment of the company, the total number of tenders submitted..

Minister for Jobs, Enterprise and Innovation, Richard Bruton: I propose taking questions 168, 169 and 170 together.

As the Deputy will be aware, the Credit Guarantee Act 2012 was passed by both Houses of the Oireachtas and signed into law by the President in July 2012. The Act was commenced and came into operation on 30 August 2012. I have now made, with the consent of my colleagues the Minister for Finance and the Minister for Public Expenditure and Reform a scheme under section 5 of the Act and officials in my Department are working on the final arrangements to launch the scheme. The scheme launch is imminent.

Regarding the cost of the operator, I announced last April that the contract for the practical oversight, management and operation of the scheme was awarded to Maynooth-based company Capita Asset Services following a competitive tendering process. It is expected that the annual cost under the contract will be €199,000.

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240 of us are emigrating every day according to latest population estimate

“No longer shall our children, like our cattle, be brought up for export” then-President of the Executive Council, Eamon de Valera in the Dail in 1934

It is a bittersweet coincidence that today, the Central Statistics Office (CSO) publishes two reports – one is the population estimate for the State at April 2012 which claims that 87,100 people emigrated in the year to April, and the other is the livestock slaughterings report for August 2012. It seems that once again, our children are in fact being raised like livestock for export. The population of the State in April 2012 is estimated to have been 4,585,400 an increase of 10,500 over the previous year. The 10,500 increase comprises births of 74,000, deaths of 29,200, emigration of 87,100 and immigration of 52,700. Emigration is estimated to have increased from 80,600 the previous year and is now at the highest absolute level since at least 1987 and just below the rate per 1,000 population that emigrated in 1989. Last year’s emigration estimate means that an average of 240 people emigrated for each of the 365 days.

The low annual increase will have an impact on residential property demand. If we simply take the 10,500 increase and apply the average of 2.7 persons per household, we need 4,000 homes for the increased population. Of course our households are also fragmenting at a rate which suggests we need 17,000 new homes each year just to accommodate smaller household sizes. And there is also obsolescence of existing property which isn’t really measured in Ireland. Back in 2010, the National Institute for Regional and Spatial Analysis figured we had an overhang of vacant property of over 100,000 units, so nationally we continue to have an overhang.

Ireland is unique on the planet for seeing its population today below the level in the 1840s. Yes we had a famine which saw 2.5m die or emigrate, yes we were under permanent occupation by our hostile neighbour which partly resulted in the Industrial Revolution bypassing the country, but even after liberation in the 1920s it was still 50 years before the decline in population really started to reverse. We may have missed the Industrial Revolution, but with the aid of foreign direct investment, we leapfrogged to the Information Age. We have a peaceful country with no military enemies, untouched by natural disasters with an abundance of natural resources to sustain ourselves, yet we have again returned to mass emigration on a scale seen in the 1950s and 1980s.

This is a man-made disaster.

[The table at the top of this blogpost extracts information in today’s CSO publication and calculates annual population, birth, death and emigration rates per 1,000. The second table was produced on here and originally published in August 2011]

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NAMA claims alleged leak of information “will not have material impact on prices”

NAMA continues to come under pressure in the Dail to give an account of its actions and consequences following the alleged unauthorised removal of information by former employee Enda Farrell. On Tuesday, both the Fianna Fail and Sinn Fein finance spokespersons challenged the minister with responsibility, Minister for Finance Michael Noonan over the affair. Deputy McGrath’s oral questioning and the first of Deputy Doherty’s written questions were reported here yesterday. This blogpost deals with additional written questions from Deputy Doherty that have become available today, and which are reproduced in full below.

We get confirmation that it was indeed the 12th of September 2012 when NAMA referred the matter to both An Garda Siochana and the Office of the Data Protection Commissioner.  This was five weeks after NAMA became aware of the original matter, the purchase of the property in Lucan to Enda Farrell. NAMA is being coy about the Garda investigation and does not confirm if statements have been provided. Deputy Doherty asks about controls at NAMA to stop the unauthorised removal of data, and we gets an answer in the present tense and we don’t know if the controls referred to were in operation during Enda Farrell’s tenure. We learn that “NAMA has also sought orders against any of the identified third party recipients” Deputy Doherty asks how NAMA can prevent potential purchasers who may have seen unauthorised data getting an advantage over others, and the answer might flabbergast some – NAMA says that its sales process is so robust and open to competition that NAMA claims that even if a potential buyer had access to the information allegedly taken, that they wouldn’t have any advantage over other buyers!

Of course we know that NAMA has sold property off-market, including two landbanks in Cork. We also know that there is a general paucity of transactions in the State which make valuation by independent valuers very tricky. And now we are asked to believe that even if you know NAMA’s “bottom line”, the condition and history of the loan, that you wouldn’t benefit from that information. Well at least Enda Farrell should be reassured about the financial damages that NAMA might claim!

As Deputy McGrath said, the practice of selling property off-market stinks. The response provided by NAMA about the utility of information allegedly taken also stinks.

Deputy Pearse Doherty: To ask the Minister for Finance in relation to the alleged unauthorised disclosure of information at the National Asset Management Agency by a former employee, the date on which NAMA notified the Office of the Data Protection Commissioner of the alleged unauthorised disclosure; the steps NAMA has taken to minimise the impact of the alleged unauthorised disclosure on its own operations and on those of its debtors.

Minister for Finance, Michael Noonan: I am advised that the unauthorised disclosure was notified to the Office of the Data Protection Commissioner on 12 September 2012.

I am advised also that NAMA has instituted legal proceedings against the former employee and his spouse seeking a number of reliefs, including an injunction to prevent them from using, disclosing and/or dealing with confidential information. NAMA is also seeking a number of Court Orders, including an Order directing the former employee and his spouse to provide a full account on affidavit in respect of all confidential information that either of them has removed from NAMA.

This is to include the identity of all persons who have had access to the information or who have been made aware of its existence and/or contents and the identity of all persons to whom the information has been supplied. These proceedings are currently within the jurisdiction of the courts and I am therefore not in a position to discuss them further.

Deputy Pearse Doherty: To ask the Minister for Finance in relation to the alleged unauthorised disclosure of information at the National Asset Management Agency by a former employee, the controls National Asset Management Agency has in place to prevent a recurrence of the alleged unauthorised disclosure of information..

Minister for Finance, Michael Noonan: I am advised that NAMA employs a wide range of measures to prevent unauthorised disclosure of confidential data. These include practical measures such as the deployment of email monitoring technology to prevent email attachments from being forwarded to personal and non-corporate email accounts. IT controls also ensure that data cannot be saved from the NTMA network onto external storage devices, such as USB keys, CDs, etc. I am advised that the Board of NAMA is currently reviewing the findings of a recent investigation by Deloitte and, as part of that review, will assess the implications in terms of NAMA’s current data control procedures.

Employees assigned by NTMA to NAMA are bound by a number of statutory obligations in respect of the confidentiality of information to which they have access by virtue of their employment by NAMA. These include obligations imposed under Section 14 (1) of the National Treasury Management Agency Act 1990 and under Section 202 of the NAMA Act 2009. NAMA staff are also subject to the provisions of the Official Secrets Act 1963. Contravention of these statutory obligations constitutes criminal offences and, under Section 7 of the NAMA Act, a person who commits such offences may be liable to a substantial fine or term of imprisonment or both.

Deputy Pearse Doherty: To ask the Minister for Finance in relation to the alleged unauthorised disclosure of information at the National Asset Management Agency by a former employee, the date on which NAMA notified An Garda Síochána; and if statements have been provided to the Gardai by NAMA and if so the number of same..

Minister for Finance, Michael Noonan: I am advised that the unauthorised disclosure was notified to An Garda Síochána on 12 September 2012 and that NAMA has provided, and will continue to provide, all information required by the Gardaí as part of their investigation.

Deputy Pearse Doherty: To ask the Minister for Finance in relation to the alleged unauthorised disclosure of information at the National Asset Management Agency by a former employee, the steps NAMA has taken to ensure no potential purchaser of assets associated with its loans, derives any advantage over competing purchasers as a result of obtaining unauthorised commercially sensitive information in relation to NAMA loans..

Minister for Finance, Michael Noonan : I am advised by NAMA that it has instituted proceedings in the High Court against the former employee and his spouse seeking a number of reliefs, including an Order directing the former employee and his spouse to provide a full account on affidavit in respect of all confidential information that either of them has removed from NAMA, including the identity of all persons who have had access to the information or who have been made aware of its existence and/or contents and the identity of all persons to whom the information has been supplied.

These proceedings are currently within the jurisdiction of the High Court. NAMA has also sought orders against any of the identified third party recipients.

I am advised that the sale of assets by NAMA debtors and receivers are conducted in line with NAMA Board guidelines, a requirement of which is that disposals are conducted on a competitive basis in accordance with prevailing market practices for the asset class and jurisdiction to which the sale relates.

The guidelines require that sales agents prepare a final report and recommendation addressed to the debtor and copied to NAMA, including a summary of the marketing campaign, a list of all parties who expressed interest in acquiring the asset or were contacted during the marketing campaign and a recommendation as to the best price that is reasonably obtainable for the asset.

I am also advised that, in the case of the sale of loans or loan portfolios, it is common practice for NAMA and other loan vendors to establish data rooms which provide extensive information to potential purchasers on loans which are being made available for sale and on the collateral securing them. Potential purchasers must sign non-disclosure agreements before they are allowed to have access to such data. All potential purchasers of NAMA loans have access to the same information for any loan sales transactions being contemplated.

While the review of the unauthorised documentation is still on-going, I am advised by NAMA that the level of information available to potential purchasers is significantly more detailed than any information that might have been included in the recent unauthorised disclosure of data by a former employee of NAMA.

Therefore, NAMA does not anticipate that the recent unauthorised disclosure will have a material impact on the prices realised on its loan sales.

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Minister Noonan again confirms gross cost of IBRC bailout at €52bn

The blogpost on here last week about the overall cost of bailing out Anglo Irish Bank and Irish Nationwide Building Society – now merged together into Irish Bank Resolution Corporation or IBRC – seems to have sown some confusion. The authoritative IrishEconomy.ie website referred to the blogpost, but that article by Dr Stephen Kinsella was pulled, and I understand that there was some unhappiness about the claim that the gross cost of bailing out IBRC would come to €52bn, which would mean an overall gross cost of the bank bailout of over €85bn, and a net – after deducting ELG fees, the current value of stakes in the banks and Irish Life, dividends, profit on central bank loans and other interest and fees – of around €70bn, equal to about 45% of our GDP.

In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty pursued the issue with the Minister for Finance Michael Noonan, and it indeed seems to be the case that the gross cost of bailing out IBRC will be €52bn. In this context “gross” does not only mean “obscene” but also the total outlay needed from the State, though there will be some return of value to the State, and the “net” bailout cost should be less than €52bn.

Firstly, Minister Noonan confirms that it remains the plan to pay €48bn to IBRC in respect of the promissory notes, comprising €31bn for the notes themselves and €17bn for interest. These payments are scheduled to be made each year until 2031, the Minister helpfully provided the schedule. So alongside the €4bn of cash injected into IBRC, it is correct to say the gross cost of bailing out IBRC is expected to be €52bn.

But what about the return of value from IBRC and also from the Central Bank of Ireland which makes a profit on its loans to IBRC, which is in turn returned to the Exchequer? With respect to the CBI’s profit between 2012-2031 from loans to IBRC, Minister Noonan refuses to provide an estimate, baldly stating “the Bank does not comment on ELA operations” So the finance minister of our State is unable to provide us with an estimate of an intrinsic part of the net cost of bailing out our banks. You might describe this state of affairs as “gross” with the “obscene” meaning of the word.

But what about the performance of IBRC? Professor Karl Whelan, the economist, central bank expert and all-round good egg has been assuming that IBRC will break even from Jan 2012- 2022. In the first six months of 2012, IBRC reported a loss of €742m. IBRC is running up costs at €300m per annum. It has a challenging Irish loan book, a territory which now accounts for most of its loans, its INBS mortgage book is dreadful. It lost an important court case to bondholders in the UK over the summer, a judgment which is being appealed but if it is upheld then it may open the doors to perhaps hundreds of millions of euro of claims. So the view on here is that IBRC may continue to run up large losses each year. But what does the sole shareholder of IBRC, namely Minister Noonan, think? He doesn’t know and doesn’t want to hazard a guess! That’s right, even the Permanent TSB CEO Jeremy Masding can tell us he expects PTSB to return to profitability in 2014/5, but Minister Noonan can’t do the same for IBRC! Again “gross”.

What Minister Noonan has done is again state “IBRC has confirmed that the Bank’s CEO has previously indicated that the likely outcome, based on current assumptions, for Anglo Irish Bank at the end of the Bank’s long term forecasting/commitments horizon in 2020 is in the region of €25 – €28 billion.” But what does likely outcome mean? When IBRC chairman Alan Dukes and CEO, Mike Aynsley previously talked in 2010 of “€25 – €28 billion”, they were referring to the “cost” of bailing out Anglo, one component of IBRC. In August 2012, Mike Aynsley talked of the cost of IBRC being €25-28bn. In other words, Mike Aynsley would have you believe that since 2010, when the estimated bailout cost of INBS alone was €5.4bn and Anglo was €25-28.5bn, it is now the position that the expected outturn has improved to be an overall total for €25-28bn. Minister Noona refers to the €25-28bn cost being for Anglo only. It is both confused and lacking in credibility.

Elsewhere Minister Noonan confirms that IBRC is valuing its €843m face-value subordinated bonds at €124m in its balance sheet. So if NAMA makes an overall loss by 2020 then IBRC will just need write off another €124m, which is small change in the overall scheme of things.

So where does all of this leave us? We have a gross cost of the IBRC bailout of €52bn, a net cost for Anglo only of €25-28bn but you would have to be very dubious about the credibility of this estimate, and Mike Aynsley might be long gone before he is called to account on it, and remember he is the person who thought losses at Anglo would be €10bn after he was in the role of CEO for nearly six months. We are likely to see a profit at the CBI on its loans to IBRC but Minister Noonan bizarrely can’t provide an estimate of this.

This is the full text of the questions and answers this week.

Deputy Pearse Doherty: To ask the Minister for Finance if he will estimate by year the interest received, and receivable in future, up to 2031 by the Central Bank of Ireland in respect of the provision of Exceptional Liquidity Assistance secured by the so-called bailout promissory notes to Anglo Irish Bank, Irish Nationwide Building Society and their successor, the Irish Bank Resolution Corporation; if he will estimate the costs deducted and deductible by the Central Bank of Ireland from interest received and receivable in future on such promissory note secured ELA before the excess profit is returned to the Exchequer..

Minister for Finance, Michael Noonan: The Central Bank of Ireland has advised me that one of the functions of the Central Bank, similar to other central banks, is to grant Exceptional Liquidity Assistance to a credit institution when this is deemed necessary for financial stability purposes. These amounts are published monthly. The Bank does not comment on ELA operations. As outlined in the Bank’s Annual Report for 2011 (pg.107), the Bank earned interest income of €1,627.8 million on ELA operations in 2011 (2010: €516.4 million).

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No 281 on 18 September 2012, to confirm that when he states “I can confirm that, under current arrangements, the scheduled payments on the Promissory Notes are due to continue until 2031 that he means that a total of circa €48bn is scheduled to be paid to Irish Bank Resolution Corporation up to 2031 in respect of the promissory notes”, and that further to Parliamentary Questions Nos 283 and 284 on 18 September 2012 to confirm that when he states “I have been advised that in calculating the projected final net asset position IBRC take into account interest from all assets including customers, securities and Promissory Notes” that the ultimate net asset position which was previously estimated by the management of Anglo for that bank at €3-4bn, takes account of the €48bn of scheduled payments on the Promissory Notes..

Minister for Finance, Michael Noonan: I can confirm that under current arrangements the scheduled payments on the Promissory Notes are due to continue until 2031 and a total of €48bn is due to be paid. I enclose again the proposed schedule of payments. IBRC has confirmed that the Bank’s CEO has previously indicated that the likely outcome, based on current assumptions, for Anglo Irish Bank at the end of the Bank’s long term forecasting/commitments horizon in 2020 is in the region of €25 – €28 billion. This forecast of €25-€28 billion does not include the coupons payable on the residual Promissory Note between 2020 and 2031 but does take into account interest from all assets including customers, securities and Promissory Notes up to 2020. €bn Total interest

Paid: A Total Capital Reduction: B        Repayments:

A + B

31/03/2011                  0.55                   2.51               3.06

31/03/2012                     –                      3.06               3.06     **

31/03/2013                  0.49                   2.57               3.06

31/03/2014                  1.84                   1.22               3.06

31/03/2015                  1.75                   1.31               3.06

31/03/2016                  1.65                   1.41               3.06

31/03/2017                  1.55                   1.51               3.06

31/03/2018                  1.44                   1.62               3.06

31/03/2019                  1.32                   1.74               3.06

31/03/2020                  1.19                   1.87               3.06

31/03/2021                  1.06                   2.00               3.06

31/03/2022                  0.91                   2.15               3.06

31/03/2023                  0.75                   2.31               3.06

31/03/2024                  0.57                   1.52               2.09

31/03/2025                  0.45                   0.47               0.91

31/03/2026                  0.39                   0.52               0.91

31/03/2027                  0.33                   0.58               0.91

31/03/2028                  0.26                   0.65               0.91

31/03/2029                  0.19                   0.73               0.91

31/03/2030                  0.10                   0.81               0.91

31/03/2031                  0.01                   0.05               0.05

16.8                   30.6               47.4

* These numbers may not tot exactly as a result of rounding

** The March 2012 repayment was settled with a long term Government bond.

Deputy Pearse Doherty: To ask the Minister for Finance as the sole shareholder in the Irish Bank Resolution Corporation, further to the publication of the report and accounts of the IBRC for the six months ended 30 June 2012 when a circa €750m loss after tax was reported, the year in which he expects IBRC to return to a position where it generates a net-after-tax profit..

Minister for Finance, Michael Noonan: I have been advised by IBRC that they are continuing to work to achieve the agreed objectives in the joint restructuring plans which are to dispose of the assets of the Bank in an orderly fashion and to minimize capital losses to the Shareholder.  The performance of the Bank during the wind-down period will be driven (inter alia) by the actual recovery rates achieved for assets, the performance of the domestic and global economies and prevailing interest rates in Europe over the duration of the plan. It is difficult to predict the timing of a return to profitability and the final net asset position of the Bank, given the current uncertainties in financial markets, the continued deterioration in asset values (particularly in Ireland), and the complexities, timescales and risks involved in deleveraging.

Deputy Pearse Doherty: To ask the Minister for Finance if he will identify the value attributed by the Irish Bank Resolution Corporation on its balance sheet in its report and accounts for the six months ending 30 June 2012, to subordinate bonds received from the National Assets Management Agency.

 

Minister for Finance, Michael Noonan: At end June 2012 IBRC’s nominal holding of NAMA subordinated bonds stood at €843m with a carrying value of €124m. This information is contained in p11 of IBRC’s Interim Accounts which can be found at:

http://www.ibrc.ie/About_us/Financial_information/Latest_interim_report/

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NAMA sues developer who fled country (and his wife)

A pattern is beginning to emerge of NAMA suing developers and their wives personally with the latest application in Dublin’s High Court yesterday against Howard Holdings founder Greg Coughlan and his wife Ann Coughlan. Cork-based Howard Holdings has been in severe financial difficulties since 2010, the UK arm of the operation was wound up, and banks including Anglo pursued the directors of the group Greg Coughlan, Brendan Murtagh and Brian Madden. Greg Coughlan reportedly fled the country after the courts ordered his arrest for failing to supply a statement of assets to investors pursuing him for €28m. At its peak Howard Holdings was reputed to have €4bn of projects on the go in Ireland, the UK, Portugal and Poland. In July 2012, the couple’s self-built mansion in Kinsale came onto the market with a price tag of €3.75m, it is understood the property is in the name of Ann Coughlan only.

The High Court case reference is 2012/3671 S. The applicant is National Asset Loan Management Limited represented by Cork-headquartered solicitors Ronan Daly Jermyn. The respondents are Gregory Coughlan and Ann Coughlan, and as is usual with recently-filed application, there is no solicitor on record for the respondents.

Yesterday, we learned that NAMA was suing Liam Carroll and his wife Roisin. Earlier this month, NAMA sued John McCabe Senior and family including his wife Mary . Earlier this year NAMA sued Limerick developer Ger O’Rourke and his wife Majella.

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 individual legal cases.

So far this year, NAMA has launched 30 separate actions in Dublin’s High Court and has been on the receiving end of six.

UPDATE: 24th April, 2013. NAMA has confirmed in its Q4,2012 report that it is pursuing Greg and Ann Coughlan for €376,161.03

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