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Archive for October 12th, 2012

Figures released by the Central Bank of Ireland (CBI) today show that in the month of September 2012, the reliance by Irish banks on central bank funding was flat. Lending by central banks to Irish banks comprises lending directly from the ECB and lending from the CBI and stood at €119.7bn at the end of September 2012, the same as August 2012. Lending directly from the ECB remains at €79.1bn and lending from the CBI to Irish banks, which is mostly known as “Emergency Liquidity Assistance” or ELA remains at €40.6bn.

What does this mean for Irish banking and the wider economy? If our banks are to return to some degree of normality, they will rely more on deposits from customers and also lending from other banks, and less on central bank funding. There has been a downward trend in central bank funding since December 2011, when the ECB decided to make up to €1tn available to EuroZone banks for three year lending. Overall the trend in Irish banks has been positive since the start of 2011 but we are still back at August/September 2011 levels of ECB funding.

It is worth pointing out that ECB direct lending to Irish banks today stands at €79.1bn. This compares with a €3tn ECB balance sheet, and indicates that Irish financing arrangements are now proportional to our economy, and that the ECB is no longer providing “unprecedented” support to Irish banks. Last month, the Irish Department of Finance said that Irish banks now account for 5% of Eurozone lending.

We will get deposit information on Irish banks for September 2012, at the end of October. Deposit analysis for Irish banks for August 2012 is available here.

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NAMA’s foreclosure action continues apace and today we learn from Iris Oifigiuil that it has had receivers appointed to two companies in the same group – Dwyer Nolan Developments Limited and Parkzone Developments Limited (formerly Dwyer Nolan Homes Limited). On 8th October, 2012 NAMA had Liam Dowdall of Smith & Williamson Freaney appointed as statutory receiver to both companies. This is the first time that this company has featured in a NAMA receivership.

Dwyer Nolan Developments Limited is owned by Edward O’Dwyer (68) and his wife, Ann O’Dwyer (68) and a company Bairnsdale Securities which is in turn owned by Dwyer Nolan Developments Limited. The two directors of Dwyer Nolan Developments are Ann and Edward O’Dwyer.

Parkzone Developments Limited is owned by Aidan O’Dwyer, Edwin O’Dwyer and Keith O’Dwyer. Its directors are the four sons of Edward O’Dwyer senior –  Edwin O’Dwyer (41) Keith O’Dwyer (40), William O’Dwyer (36) and Aidan O’Dwyer (36).

Dwyer Nolan was a major Dublin housebuilder and its developments include Hampton Wood in Dublin 11.

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

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There is a veritable maelstrom of speculation in Dublin property circles about the extent of the fall-out in the Enda Farrell affair. The former NAMA employee’s allegedly unauthorised removal and dissemination of confidential Agency information justifiably continues to generate headlines in its own right and questions remain unanswered – precisely what was disclosed and to whom and was any advantage secured on the back of confidential information.

But the speculation is that Enda Farrell was not the only NAMA employee who forwarded confidential information beyond the easily penetrated walls of the Agency. This week in the Dail, the Fianna Fail finance spokesperson Michael McGrath tried to probe at this general area when he asked for the number of disciplinary cases initiated at NAMA – answer: no answer – and the details of such disciplinary action – answer: get lost.

With 220 employees and an army of third party service providers including 400-500 staff at the participating banks, it is a surprise that we haven’t previously had such a scandal as is now unfolding. But if NAMA had uncovered wrongdoing and responded with disciplinary action, then it is keeping it all secret.

The full parliamentary question and response is shown below:

Deputy Michael McGrath: asked the Minister for Finance the number of cases, if any, in which the National Assets Management Agency has undertaken any form of disciplinary action in respect of any of its employees; and, in each case, if he will provide details of the reasons such disciplinary action was undertaken and the outcome of same.

Minister for Finance, Michael Noonan:  I am advised that staff of the National Asset Management Agency (NAMA) are employees of the National Treasury Management Agency (NTMA) who are assigned as officers of NAMA under the NAMA Act. In keeping with their obligations to their staff, including obligations under the Data Protection Acts, NTMA has been legally advised not to comment publicly on disciplinary matters.

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“Job creation is not a factor in the profiling exercise” Minister Brendan Howlin on why the government back-loaded the 2012 capital spend to the end of 2012

 “There has been no Exchequer spend to date” Minister Brendan Howlin on the €2.25bn stimulus plan announced in July 2012

On the one hand, we have 309,000 unemployed people in this country which are included in the 430,000 of all recipients of unemployment related benefits on the Live Register. On the other hand, we have a backlog of reforms to government spending including consultants pay and working practices and the use of non-generic medicine in the health sector. Calculations by the Department of Finance suggest that €1bn spent on capital projects creates 10,000 jobs. NAMA says its €2bn planned expenditure will result in 25,000 new construction jobs and 10,000 associated jobs.

So it came as some surprise that this Government, at least the Fine Gael element of it,  which had made job creation and protection “Point One” of its election camapaign “Five Point Plan” has arranged capital spending in 2012 so that a large part of it happens in the last three months of the year – 45% of the €3.6bn total annual budget is scheduled to be spent in Oct-Dec 2012. It was a related concern that the September 2012 Exchequer return revealed that we were only sticking to budget as a result of the deferral of €268m of capital spending – this at the same time as much-needed relatively cost-free reform is needed in our public sector eg 80% of the medicine used in this State is expensive non-generic compared to just 20% in our neighbouring jurisdiction, the UK. And it is a curiosity that three months after the announcement of a €2.25bn stimulus programme, nothing has been spent. What does this say about the priority of employment creation and protection?

Earlier this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Public Expenditure and Reform Brendan Howlin about the surprise, the concern and the curiosity of the capital programme. Apparently no thought was given to employment creation when the 2012 capital programme was being planned and to the end of September 2012, there has been no spend whatsoever from the €2.25bn stimulus programme announced on 17th July 2012, and indeed there may not be any for some time as funding is dependent on action not yet taken or completed. The Minister does say that Departments are expected to make up the capital spend in the next three months

The full parliamentary questions and responses are here:

Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform further to Parliamentary Question No. 210 of 2 October 2012, if he will estimate the number of new jobs that would have been created if the 2012 infrastructure and capital spend budget, which to the end of August 2012 was underspent by €120m compared with profile, and to the end of September 2012 was underspent by €268m compared with profile, had in fact been spent according to profile..

Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform the consideration given to the creation of employment when the 2012 infrastructure and capital spend budget was profiled at the start of 2012 so that 45% of the total annual budget, amounting to €1.65bn out of an annual budget of €3.6bn, was to be spent in the last 25% of the year..

Minister for Public Expenditure and Reform, Brendan Howlin:  I propose to take questions 110 and 113 together.

The profiling of capital expenditure is carried out by individual Departments on the basis of the likely timing of payments related to capital projects and programmes which they deliver. Job creation is not a factor in the profiling exercise. Queries in relation to the profiling of capital allocations are a matter for individual Ministers and their Departments.

In responding to the Deputy’s question however, I feel it is important to point out that a variance of around 12% in capital expenditure is not unusual. Despite such variances, over the last five years capital expenditure at end December has generally been back on profile with a variance of less than 2%.

While my Department is not responsible for the profiling of capital expenditure it does set the overall expenditure allocations of Departments which includes setting the five year multi-annual capital envelopes. The present five year envelope was outlined in the “Infrastructure and Capital Investment 2012-2016: Medium Term Exchequer Framework” which was published last November following a Government-wide review of the public capital programme.

There will, of course, be direct employment benefits in the delivery of the infrastructure proposed in the Investment Framework; however, it is important to note that the most important contribution capital investment can now make is in providing the capacity for the economy to grow, which will in turn create employment. In this context, the review made a point of protecting supports to the enterprise sector primarily through agencies such as Enterprise Ireland and the IDA. The unprecedented level of investment over the past few years and in 2012 delivered through the Enterprise Development Agencies can foster sustainable and valuable employment in the exporting sectors of the economy which will be critical to recovery.

Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform further to Parliamentary Question No. 210 on 2 October 2012, if he has produced plans with the objective of cutting the actual amount spent under the 2012 infrastructure and capital spend budget..

Minister for Public Expenditure and Reform, Brendan Howlin: The five year capital Exchequer framework was published in “Infrastructure and Capital Investment 2012-2016: Medium Term Exchequer Framework” last November. There are presently no plans to revise the capital Framework further.

The actual roll-out of capital expenditure is a matter for line Departments, operating within the delegated sanction arrangements issued by my Department that cover not only capital investment this year but contractual commitments for the next three years.

While capital expenditure was 13.6% behind profile at the end of September this is not unusual as, unlike current, capital expenditure tends to occur in large tranches at fixed milestones. Departments have not indicated any significant savings by year end and so I expect capital expenditure to fall generally within profile by that time.

Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform if he will quantify the amount from the €2.25bn stimulus package announced on 17 July 2012, that has been spent and accounted for in the Exchequer statement at the end of September 2012..

Minister for Public Expenditure and Reform, Brendan Howlin: On the 17th of July 2012, the Government announced its plans for an additional 2.25 billion euro investment in public infrastructure projects in Ireland. The stimulus package comprises a new Public Private Partnership (PPP) programme which includes projects from the education, health, transport and justice sectors, and also additional Exchequer capital projects and other commercial and publicly needed projects.

As the Deputy will be aware 850 million euro of this funding is predicated on the receipts of the sale of State assets and the new licensing arrangements for the National Lottery. These funds are likely to be available in 2013 and 2014 onwards.

My Department and the NDFA are closely engaged with the relevant line Departments and their agencies to ensure that PPP projects are progressed promptly. It is expected that tenders will issue across the sectors in 2013 and 2014. There has been no Exchequer spend to date. Spend will occur as projects are rolled out with some project preparation spend expected in 2013. The bulk of funding for the PPP Programme will come from the private sector as private financing is a key component of the PPP procurement model.

Further information about the stimulus package and about the PPP projects is available on the website http://www.ppp.gov.ie.

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One of the alleged recipients of emails sent by former NAMA employee, Enda Farrell is Tony Waters, identified by the Irish Times today as the managing director of chartered surveyors firm HWBC on Harcourt Street in Dublin. HWBC has a venture with star UK auction company Allsop – of Allsop Space fame – whereby it provides property receivership services. And NAMA has appointed the venture HWBC Allsop to a panel of receivers which it uses in its widespread foreclosure action against its debtors. To date the venture has seemingly been used in one case only – Michael Whelan’s Moritz group.

There is no suggestion whatsoever that the other part of the HWBC Allsop venture, Allsop has been identified as a recipient of allegedly misappropriated NAMA information.

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Whilst NAMA will wish to downplay the significance of the alleged unauthorised removal of information by ex-employee Enda Farrell, the ever-widening web of people and companies affected by the affair is likely to keep what might now be properly called a full-blown scandal in the spotlight for some time to come.

Today we learn that one of the alleged recipients of Enda Farrell’s emails, the Partner Group, recently joined up with another company to buy loans under management by AIB in Poland. The transaction was reported in April 2012 and concluded in August 2012 and saw the Partner Group take over the management of €600m of loans. It is alleged that Enda Farrell sent an email to an employee of the Partners Group, an employee named as Fabian Neuenschwander, apparently based in Switzerland, in October 2011.

Of course 99.8% state-owned AIB is different to NAMA, but it would certainly have been useful to the Partner Group to know how NAMA had valued Polish loans in its portfolio, or to have known the status of certain loans to certain developers.

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When the ex-NAMA employee Enda Farrell hearing at the High Court was reported earlier this week, there was a broad description of the recipients of emails named by Enda Farrell in his affidavit but neither individuals nor companies were identified. Today that changes with reporting by Mary Carolan and Simon Carswell in the Irish Times. Their report is here, this blogpost just puts format and order on the information contained in the report.

This is the list of recipients named by the Irish Times which also reports “the identities of a small number of other recipients cannot be disclosed by court order”. If at least 25 emails were sent as reported earlier this week, then that outstanding list mightn’t be that small though it is unclear if multiple recipients constitute one or more emails.

(1) October 2011, Fabian Neuenschwander, an employee of a Swiss investment manager, The Partners Group

(2) October 2011, Borge Tangeraas, a consultant to property investor FREO Group in Amsterdam

(3) January 2012, Jos Short, owner of real-estate investment manager Internos in London

(4) January 2012, Denis Morel, a fund manager at Axa Real Estate Investment Managers in Paris

(5) Janauary 2012, David Jackson and Peter Riley of PRUPIM Real Estate Investment Managers in London

(6) US company Fidelity International

(7) January 2012, Jean Michel Rossi, Laurent Vouin, and Harry Badham at AXA in London

(8) Between March 30th to April 17th to Neil Cable, head of European real estate investments at Fidelity in London

(9) Between March 30th to April 17th to Darren Ehlert, managing director of IN-West Immobilien in Berlin, which was affiliated to Forum

(10) April 2012, Andrew Walker at the European branch of Forum

(11) April 2012, Bobby Geraghty of estate agents King Associates in Dublin

(12) May 2012,  Ken Rouse and Stewart Doyle of QED Equity Solutions, an investment company based at the IFSC (also June and July 2012)

(13) June 2012, Ray McMahon, who ran the Irish business of Canadian asset manager Canaccord Genuity in Dublin

(14) Tony Waters, managing director of a chartered surveyors firm, HWBC, on Harcourt Street in Dublin

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