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Archive for October 11th, 2012

The betting is that the Treasury Holdings’ appeal of NAMA’s victory in the judicial review case, will now be abandoned now that KBC has had liquidators appointed to the group. A pity really, because Messrs Ronan and Barrett with their unsurpassed barrister Michael Cush SC might really have gotten stuck into the NAMA Act which received a body blow in the Paddy McKillen appeal at the Supreme Court in 2011. Today at the High Court in what is otherwise a seemingly common-or-garden case, the judge referred a section of the NAMA Act to the Attorney General, Maire Whelan

The case today involves a judgment order obtained by NAMA against a Limerick businessman, John Hegarty and borrowings he had with AIB for property in Clonmel and Maynooth. John Hegarty says that he is only responsible for 50% of the borrowings on the property, a shopping centre, in Clonmel as a result of representations he claims were made to him by AIB. In the High Court today, Mr Justice Peter Charleton, decided that John has an arguable case, and it seems that NAMA is potentially not going to be able to rely on section 101 of the NAMA Act which says that if NAMA wasn’t aware of assurances and the like given by the bank, in this case AIB, when the loan was acquired by NAMA, then NAMA is not bound by such assurance.

Judge Charleton seemingly disagrees and has referred section 101 to the Attorney General. We will now wait to see if she agrees that there is an issue with this section, and if she is, presumably the section will get referred to the Supreme Court to rule whether or not it is constitutional.

Looking at section 101 in the cold light of day in 2012, it is hard to accept that we drafted such draconian legislation in the depths of the crisis in 2009, that would deny a legitimate claim by a borrower that a bank had given him an assurance or representation which NAMA could then repudiate if NAMA was not made aware of the representation by the bank, when NAMA was acquiring the loan.

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This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for September 2012. The monthly headline Consumer Price Index (CPI) fell in September by 0.1% compared to August 2012, and is up 1.6% year-on-year (which continues a subdued trend seen in recent months compared with the 2%+ that pertained before January 2011). Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 17.3% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for nearly 6% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for 5% of the total basket examined by the CSO, have risen by 10.4% in the past 12 months, mostly driven by the 22.5% price hike in October 2011 at Bord Gais. The Commission for Energy Regulation has recently approved an 8.5% hike in prices at Bord Gais Energy to take effect in October 2012.

Elsewhere, private rents rose by 0.9% in the month of September 2012 – this after flat month in August and three months of declines in April-June followed by a small increase in July – and over the past year, such rents are up by 2.1% according to the CSO – there is some small rounding in the figures above which show 2.3%.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 4.8% increase (mostly recorded in February and October 2011 and February and September 2012).

At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households.  The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board, but the Department seems to have conceded recently that the figure may be lower in the order of 30%.

The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. The prospect of further cuts to rent assistance in the forthcoming Budget 2013 to be announced in December 2012, is very real.

In the past, private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The September 2012 increase is surprising against pressures from socially assisted reductions. Property commentators including those in NAMA have pointed to a buoyant rental market as one of the bright spots in an otherwise dismal property market, but that buoyancy may deflate in coming months as the artificial supports of State-aided rent assistance dissipates.

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“Deputy Joe Higgins should note that the site is under the control of NAMA and that, as a consequence, Mr. Murphy does not gain. NAMA gains if there is any gain. NAMA represents the people in trying to get back the moneys that were lost.” Minister for Heath James Reilly in Dail debate on 3rd October, 2012

One of the remaining dangling threads in the James Reilly/Balbriggan site affair is the NAMA angle. Minister for Health James Reilly stated on at least two occasions – the RTE radio Pat Kenny show and whilst delivering a statement in the Dail – that his constituency associate, Seamus Murphy, who owns the controversial site in Balbriggan on which a primary health care centre is to be built, did not stand to benefit from the development of the medical facility. Minister Reilly stated “Mr Murphy does not gain” from the development, because apparently Mr Murphy has loans which are in NAMA. The Minister also stated in the Dail debate last week “I have no business connection with Mr. Murphy. I had no discussions with him about the primary care centre and I have absolutely no role in the selection of a site”

Hmmm, now how would Minister Reilly know that Seamus Murphy wouldn’t gain from the development of the site? After all, what is now contemplated is that a company called Rhonellen Limited would buy the site from Seamus Murphy and develop the facility in a public private partnership with the Health Services Executive. So Seamus Murphy will receive the sale price from Rhonellen Limited, a totally unconnected company controlled by AJ Noonan. In order for Seamus Murphy NOT to benefit, the loan outstanding on the site would need to be more than the sale price. Now how would Minister Reilly know that.

And was there any contact between Minister Reilly or his representatives with NAMA. After all, Minister Reilly’s parliamentary assistant Councillor Tom O’Leary told the local newspaper, the Fingal Independent in May 2012 “The HSE are positively supportive of the plan. I have made representations to the appropriate authorities to move the plan forward. I understand the local doctors and the developer are anxious to submit their planning application as soon as possible” Were there representations to NAMA? Could those representations have constituted “lobbying” which NAMA would be duty-bound to report to the Gardai?

In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan for clarity on the relations between Minister Reilly and NAMA and also if NAMA might have disclosed the details of loans to Minister Reilly as Minister Reilly says he never discussed the primary care centre with Seamus Murphy. The responses from Minister Noonan show why we need the Freedom of Information legislation to apply to NAMA – Minister Noonan tells Deputy Doherty to get lost and that NAMA’s operations are confidential though the Minister does helpfully say at least that NAMA would not disclose loan details to a minister. So again, how would Minister Reilly be able to say – on more than one occasion – that Seamus Murphy would not benefit from the development of the primary care centre in Balbriggan.

The full parliamentary questions and responses are shown below. There is a feature blogpost on the Balbriggan site here.

Deputy Pearse Doherty: To ask the Minister for Finance in respect of a site at 66, 68 and 70 Dublin street, Balbriggan, North County Dublin if the National Asset Management Agency has been contacted by the Minister for Health or his Department or his representatives or the Health Service Executive, and if there has been such contact on the subject of this site, the date of the contract or contacts; the identity of the person or persons making the contact or contacts and the nature of the contact or contacts..

Minister for Finance, Michael Noonan: I am advised by the National Asset Management Agency (NAMA) that information relating to its debtors and properties within their control is, within the meaning of Sections 99 and 202 of the NAMA Act 2009, confidential and that it is therefore precluded from discussing such matters.

Deputy Pearse Doherty: To ask the Minister for Finance if, pursuant to the anti-lobbying rules set out in Section 221 of the National Asset Management Agency Act 2009, NAMA would be duty-bound to report to An Garda Siochana contact from a Minister or his Department or his representatives, which sought to promote a property subject to a loan from NAMA or contact which sought to influence a decision by NAMA..

Minister for Finance, Michael Noonan: Under Section 221 of the National Asset Management Act (NAMA), it is an offence to communicate with NAMA with the intention of influencing the making of a decision in relation to the performance of its functions.  If such an attempt were to be made, the Act imposes an obligation on an officer or Board member of NAMA to report it to a member of the Garda Síochána.   I am satisfied that NAMA officers and Board members would fulfill their legal obligations in the event that they were subject to representations which were in breach of Section 221.

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm that details of loans managed by the National Asset Management Agency and its debtors are confidential, and that in relation to any specific NAMA debtor, details of the sums outstanding on loans and the value of collateral and specifically if the sums outstanding on loans are greater than the value of collateral, are not details that are publicly available, or which would be provided by NAMA to a Minister.

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Minister for Finance, Michael Noonan: I am advised by the National Asset Management Agency (NAMA) that information relating to its debtors and to properties within their control is, within the meaning of Sections 99 and 202 of the NAMA Act 2009, confidential and that it is therefore precluded from disclosing such information to third parties.

In the case of property under the control of debtors, NAMA is precluded, under Section 202 of the NAMA Act, from disclosing confidential information.  Confidential information is specifically defined to include information relating to debtors.  Furthermore, Section 99 of the Act provides that, on acquisition of a loan, NAMA takes over the obligations of the participating institutions under the loan, one of which is the contractual duty of confidentiality which the debtor enjoyed while still a customer of the participating institution.  Information about debtors or their properties is also protected against disclosure by the Data Protection Act, which NAMA must comply with as data controller.

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It’s a strange country this. NAMA is supposedly an agency independent of the government – after all, we had that rigmarole in 2009 to get the NAMA debt off the nation’s balance sheet by swearing blind to Eurostat that NAMA was independent of government. And the Central Bank of Ireland (CBI) is also independent of government, though government ministers have done a good job of stuffing the Central Bank board with their preferred nominees.

At the end of last year the Government wrote to the independent agency known as NAMA, asking that any member of staff earning in excess of €200,000 per annum take a 15% pay-cut or reduce their salary to €200,000 whichever was less. And all staff in NAMA eventually complied with the request, though NAMA’s former Head of Lending, Englishman Graham Emmett decided it was too great a sacrifice and he baled.

And what about the CBI? This week in the Oireachtas, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan to confirm the number of CBI employees earning more than €200,000 per annum – straight answer: five – and whether, like with NAMA, there had been a request to reduce those salaries – straight answer: no. Min Noonan says that the CBI will provide “disclosure” on staff earning more than €200,000 though the latest 2011 Annual Report – see extract above – identifies just three, Governor Honohan, Deputy Governor and Financial Regulator Mathew Elderfield and new economist Stefan Gerlach. Who are the other two? We don’t know. But what we do know is that the Government is not seeking reductions. Having said that Governor Honohan has stepped up and waived a large portion of his salary, such that he know earns 40% less than his deputy, Mathew Elderfield.

The full parliamentary questions and response are shown below.

Deputy Pearse Doherty: To ask the Minister for Finance if he will quantify as of 31 December 2011 and as at 30 September 2012 the number of employees at the Central Bank of Ireland whose annual salary including non-discretionary payments in cash, is in excess of €200,000 per annum..

Deputy Pearse Doherty: To ask the Minister for Finance if a request has been made by him or his ministerial colleagues to the Central Bank of Ireland that any staff member earning in excess of €200,000 per annum inclusive of non-discretionary cash payments waive 15% of their salary or a sum to reduce their salary inclusive of non-discretionary cash payments to €200,000 whichever reduction is lesser; and if such a request was made, the date of the request; the number of employees whose annual salary including non-discretionary payments in cash was in excess of €200,000 per annum at that date; the number of employees who acceded to the waiver request and the number of employees who rejected the waiver request..

Minister for Finance, Michael Noonan: I propose to answer questions 143 and 144 together.

I have been informed by the Central Bank that as at both 31st December 2011 and 30th September 2012, the Central Bank of Ireland had five employees whose annual salary, including non-discretionary payments in cash, was in excess of €200,000 per annum.

Under the Central Bank Act 1942 and the Statute of the European System of Central Banks (ESCB), the Government has no role in the setting of terms and conditions of employment in the Central Bank. The Act and the Statute guarantee the independence of the Governor in carrying out his ESCB related functions and control over pay and conditions is seen as a necessary part of that independence.

Salary reductions and pension-related reductions were applied in the Central Bank under the provisions of the Financial Measures in the Public Interest Acts as was the case in the wider public service. Furthermore, my Department wrote to the Governor of the Central Bank in 2011 outlining the Government’s approach to pay levels to senior public servants, in particular those whose remuneration exceeds €200,000 per annum. It was suggested that the Central Bank would provide for disclosure where employees are in receipt of remuneration exceeding the €200,000 per annum threshold. The Governor responded positively saying that the Central Bank have greatly increased the amount of information regarding senior staff remuneration in recent years  and sees advantage in continuing this trend and making disclosures in respect of all employees where total remuneration exceeds €200,000 per annum.

In that respect the Central Bank publishes information related to remuneration of executive and non executive directors in its annual report. In 2011 the Governor of the Central Bank waived €41,740 of his total remuneration for that year and has indicated that he will waive €63,324 of his total remuneration in 2012.

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