Feeds:
Posts
Comments

Archive for November 28th, 2012

The usually reliable Cindy Adams in the New York Post on Sunday last suggested that one of Ireland’s greatest friends, former US president Bill Clinton is rumoured to be lined up as the replacement for the  current US ambassador to Ireland, the 80-year old Dan Rooney who retires in 2013.

President Clinton has spent time in and around Ireland in the past year, being guest of honour at the Global Irish Forum in October 2011, and subsequently guiding An Taoiseach around US investors in February 2012 when President Clinton told anyone who’d listen that they’d be nuts not to invest in Ireland.  And last week, the president was in Limerick – pictured here -to present bursaries to third level students, courtesy of JP McManus’s philanthropy.  Of course the greatest debt of gratitude due from this country might be in respect of the president’s great efforts to bring peace, and then cement peace, in Northern Ireland.

The 66-year old president might miss the lucrative rewards he enjoys today – last week’s few hours in Limerick is said to have cost JP over €200,000 – but he would certainly be a popular choice with the natives. Except perhaps for An Taoiseach Enda Kenny who has still done sweet-fanny-adams to deal with the mortgage crisis despite his promises in front of President Clinton in October 2011 (pictured above).

Advertisements

Read Full Post »

The regular audience on here might recall that a fortnight ago, the Sinn Fein finance spokesperson Pearse Doherty tried to find out if the €1.1bn pension deficit at AIB was examined and forecast when we spent €30m at the start of 2011 stress-testing the banks.  Remember the revelation of this deficit and the annual pension payment of €529,000 to former AIB chief executive, Eugene Sheehy, ignited the whole outcry recently about bankers’ pay.

The initial 534-word response to Deputy Doherty would make Sir Humphrey blush as it went off on wonderful tangents and encompassed the moon, stars and kitchen sink, but ultimately had buried in it a statement that said that “the capital base and capital requirements of the PCAR banks were assessed under PCAR and included in this assessment was forecast deductions for defined benefit pension deficits” So YES, the pension deficit had been examined. But how much did the geniuses who undertook the stress-testing – and who, afterwards, sent us a bill for €30m for their services – how much did they forecast for the pension deficit under their base-case and adverse-case scenarios.

The question a fortnight ago asked where the €1.1bn deficit was examined in the stress testing and no response was forthcoming, so last week, Sinn Fein had a second go, and specifically asked how much had been forecast for the AIB pension deficit in the base-case and adverse-case scenario.  You might recall that the base-case was what the Central Bank thought the most likely future scenario in which AIB would operate, the adverse case was the scenario if the economy got a lot worse than was expected.

And the response to the second question was – ” that information was confidential”l. Not just that, but Minister Noonan cited an archaic 1942 law to justify the confidentiality. Minister Noonan wasn’t very specific though, and he merely referred to a 2,000-plus word section of the law.

This week, Sinn Fein had a third go, and asked Minister Noonan to identify the specific clause in section 33 of the Central Bank Act 1942 which prevented Minister Noonan from telling us how much the €30m geniuses had forecast for the AIB pension deficit in the base-case and adverse-case. Who knows, maybe the geniuses from BlackRock, Barclays Capital and the Boston Consulting Group got their sums wrong and maybe they might hand back a refund from the €30m fees, as recompense for their error. On the other hand, maybe they were spot-on in their forecasting. Either way, you wouldn’t have thought that in AIB, a bank which we 99.8% own, there would be any issue of confidentiality about its finances – after all, we are all on the hook for those finances.

So what specific clause in section 33 of the Central Bank Act 1942 stops the Minister giving us the facts.

Apparent it’s Section 33 (AK) (1) (a) which prohibits disclosure by the Bank, its officers, employees, and agents, of confidential information concerning-

(a)    the business of any person or body whether corporate or incorporate that has come to the person’s knowledge through the person’s office or employment with the Bank, or

(b)    any matter arising in connection with the performance of the functions of the Bank or the exercise of its powers,

where the disclosure considered would be prohibited by the Rome Treaty, the ESCB Statute or the “Supervisory Directives”

and the Minister goes on to say in his response this week,

“The most relevant supervisory directive in this instance is Directive 2006/48/EC.

Title V, Chapter 1, Article 44 of Directive 2006/48/EC, for example, imposes an obligation, on “competent authorities” (of which the Central Bank is one) for the purposes of that Directive to operate on the basis of professional secrecy. While a number of pathways for release of information are provided in the Directive (for example, a competent authority may release information where necessary to “bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures” (see Article 44)), none of these facilitate release of information in this case.””

This is of course the most wonderful bunkum ever. In March 2011, the Central Bank published the results of its stress testing which set out in detail the provisioning for losses against loans for example, so an overall estimate of the pension deficit as examined and included in the stress testing is not confidential at all. And yet, we are all paying for this deficit and a forthcoming blogpost will demonstrate that the deficit appears to have little to do with the 2,500 soon-to-be-retiring AIB employees, but is mostly about addressing an existing deficit in a scheme which is paying out annual pensions of €100s of thousand to individual former employees.

The full parliamentary question and response are shown below. The PQ is not yet online, but should soon be available on the Oireachtas website.

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 207 of 13 November 2012, and 224 of 20 November 2012, if he will indicate the part or parts of Section 33AK of the Central Bank Act 1942 as inserted into that Act by Section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003, which prevent him from indicating what forecasts were produced for the cost of addressing the pension deficit at Allied Irish Banks in the stress testing exercise at the start of 2011..

Minister for Finance, Michael Noonan: I have been informed by the Central Bank that section 33AK(1A) prohibits disclosure by the Bank, its officers, employees, and agents, of confidential information concerning-

(a)    the business of any person or body whether corporate or incorporate that has come to the person’s knowledge through the person’s office or employment with the Bank, or

(b)    any matter arising in connection with the performance of the functions of the Bank or the exercise of its powers,

where the disclosure considered would be prohibited by the Rome Treaty, the ESCB Statute or the “Supervisory Directives”, as defined in section 33AK(10).

The most relevant supervisory directive in this instance is Directive 2006/48/EC.

Title V, Chapter 1, Article 44 of Directive 2006/48/EC, for example, imposes an obligation, on “competent authorities” (of which the Central Bank is one) for the purposes of that Directive to operate on the basis of professional secrecy. While a number of pathways for release of information are provided in the Directive (for example, a competent authority may release information where necessary to “bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures” (see Article 44)), none of these facilitate release of information in this case.”

Read Full Post »

NAMA sues Paul Browne

On Monday 26th November 2012, NAMA made an application in Dublin’s High Court – application reference 2012/4426 S – where the respondent is named as Paul Browne. No further details are given of the respondent and as is usual with recently-filed applications, there is no solicitor on record for the respondent. The applicant is National Asset Loan Management Limited represented by Hayes solicitors.

NAMA doesn’t comment on individual court cases, not even to confirm the precise identity of the respondent. And in this case, I can count at least eight Irish individuals named “Paul Browne” who are directors of companies, and it might be that the “Paul Browne” that NAMA is suing isn’t even a director. The Central Office at the High Court also will not provide information on individual court cases, even to barristers acting in the cases. So much for open justice!

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.

So far this year, NAMA has launched 36 separate actions in Dublin’s High Court and has been on the receiving end of six.

UDATE: 22nd March 2013. The current issue of The Phoenix magazine reports that the “Paul Browne” above is the Kildare businessman behind the Killerig Hotel in county Carlow, and the case apparently involves €4m of personal guarantees relating to the hotel. NAMA of course put the company owning the Killerig Hotel – Killerig Hotel Limited – into receivership in 2011 and sources say that the sale of the hotel is at a critical point.

Read Full Post »

There was a review on here last weekend of the Government’s fetish with expert reports. Yesterday, we finally saw the expert report on implementing a Supreme Court ruling which touches on abortion. Next week, at the same time as we hear Minister for Finance Michael Noonan’s budget statement, we should get the expert report on the new property tax. An Taoiseach Enda Kenny indicated the expert report on bankers’ pay would be published before the budget announcements on 5th December 2012 – remember this is the report commissioned by Minister Noonan in June 2012 and they have been “experting” now for at least four months. Yesterday in the Dail, Minister Noonan gave us a little more information about the report and remarkably confirmed that although the report will look at the so-called “covered banks” – AIB/EBS, Bank of Ireland, Permanent TSB and IBRC – it will not look at salaries in NAMA or the Central Bank.

Minister Noonan was responding to a question in the Dail on the Mercer report, Mercer being the organization engaged at a cost estimated at €120,000 to …, well this was one of the questions, what were the terms of reference. The Minister was asked about timescales and if the timescales form part of the contract. The Minister was asked for a copy of the tender document – after all, this is going to cost us over €100,000 but the Minister ignored this request.

The response to the request for the terms of reference was the experts were going to “thoroughly review all remuneration practices at the covered institutions with the object of simplifying remuneration and compensation structures, discouraging excessive risk-taking and to better align pay and reward to long term value creation.” So, given the similarity between IBRC and NAMA, both run-off vehicles, both handling the same ballpark of loans – NAMA about €25bn, IBRC about €17bn – both scheduled to run down by 2020 and both dealing with mostly property-related loans, you might have expected NAMA to be part of the review. But no, Minister Noonan said neither NAMA nor the Central Bank formed part of the review.

At the Central Bank, we know that the Governor, Professor Patrick Honohan will this year be paid about €240,000 after he unilaterally waived what appears to be 40% of his salary. This means Professor Honohan gets paid less than his deputy, Matthew Elderfield who retains a salary of about €360,000.

Minister Noonan previously confirmed that he has not even asked for reductions in €200,000-plus per annum salaries at the Central Bank.

As for NAMA, by the standards of Irish banking, NAMA is a lean machine and its employees have waived salaries, and as an organization, there is no evidence of NAMA being inferior to the banks with which it competes when disposing of loans and underlying securities. So excluding NAMA from the review  arguably removes a solid benchmark which would force cost savings on the banks.

As for timescales, the Minister indicates the report will be finalized by the end of this year, this is at odds with An Taoiseach telling the Dail recently that he expected it before the Budget 2013 announcements. The Minister was asked if there were timescales in the contract with Mercer but he ignored that question, something which fortifies the suspicion that the report was commissioned merely to deflect criticism of bankers’ pay and to kick the issue into the long grass.

Minister Noonan was responding to parliamentary questions from the Sinn Fein finance spokesperson Pearse Doherty. The full exchange is here and it should shortly be online at the Oireachtas website.

Deputy Pearse Doherty: To ask the Minister for Finance in respect of the appointment of Mercer in June 2012 to examine pay levels across banking institutions, if he will provide the terms of reference attaching to the appointment; the timescales for the production of research or reports; if such timescales form part of the contract with Mercer, the estimated fees payable to Mercer and a copy of any associated tender document, and an overview of the cost and description of any additional resources provided by the him or his Department to Mercer to facilitate the completion of the work..

Deputy Pearse Doherty: To ask the Minister for Finance in respect of the appointment of Mercer in June 2012 to examine pay levels across banking institutions, if salaries at the Central Bank of Ireland and National Asset Management Agency were included in the scope of the Mercer work when that company was appointed in June 2012.

Minister for Finance, Michael Noonan: I propose to answer questions 225 and 226 together.

The Deputy should note that I have already provided the information he seeks when responding to his parliamentary questions of 15th November 2012 (Ref No. 50509/12) & 20th November 2012 (Ref No. 51025/12).

For his convenience I am including the information below.

“The Deputies will be aware that my Department is presently engaged in a Review of Remuneration Practices and Frameworks at the covered institutions.   I have recently engaged, as I informed the Opposition Spokespersons on Finance, the services of Mercer (Ireland) Limited following a limited competitive tender competition to assist my Department in bringing this exercise to a conclusion.  The estimated cost of the review, at this stage, is approximately €120,000.

The object of the review is to thoroughly review all remuneration practices at the covered institutions with the object of simplifying remuneration and compensation structures, discouraging excessive risk-taking and to better align pay and reward to long term value creation.  Present Government policy on remuneration dictates that no employee, at the covered institutions may receive more than €500,000 (excluding pension contributions) per annum and remains in force.

Numerous engagements by my officials and Mercer have taken place since the awarding of the contract.  I am expecting the consultant’s report to be delivered by year end whereupon consultations with the various stakeholders will commence.

As I have said previously, I fully recognise that there is a real public interest in the levels of remuneration at the covered institutions and have committed to placing the details underpinning the review into the public domain”.

In relation to his further question on additional resources, no such resources have been provided by me or my Department to Mercer to facilitate the completion of the work.

As the review involves the Covered Institutions the Central Bank of Ireland & the National Asset Management Agency are not included in its remit.

Read Full Post »

Minister for Finance Michael Noonan has abandoned control over the former Anglo Irish Bank, now known as IBRC. IBRC has to date cost this country €35bn, though its management claims we will get some of this back. These claims might be treated with extreme caution.

We learned recently that Minister Noonan had sought salary reductions at IBRC in April 2012, but he was rebuked.

We have also learned that there is no monitoring of salaries at borrowers by IBRC, in stark contrast to NAMA where they can seemingly account for every euro paid to developers.

We have learned that unlike NAMA, where there is quite a structured policy for dealing with commercial tenants facing distress in their business as a result of rent levels, in IBRC it is all very ad hoc, and it was only last week that Minister Noonan claimed to have asked IBRC to consult with NAMA to see if it might adopt its policy on rent reductions for commercial tenants.

But today we learn in responses to a series of parliamentary questions that IBRC has gone feral and Minister Noonan is no longer even trying to keep control of its affairs.

Consider this-

Earlier this year, we learned that IBRC had written off approximately €100m in Irish service company Siteserv as part of a deal to sell the company to interests associated with Denis O’Brien, a controversial deal because the shareholders in Siteserv were reportedly walking away with €5m and Siteserv was a company which seemingly paid its chief executive, Brian Harvey, in excess of €400,000.

More recently, IBRC has reportedly written off €64m in a British fuels company, Blue Ocean Associates in a transaction also involving a sale to interests associated with Denis O’Brien.

In NAMA, we have been referring to such debt write-offs as “debt forgiveness” and NAMA doesn’t do debt forgiveness unless it involves a work-out with developers over a period of years and after before which, NAMA needs reassure itself that the developer has no more assets that can be used to pay down loans.

And how much debt forgiveness has there been at IBRC? Surely, it has to be more than €160m from the two deals with Denis O’Brien’s interests? Yesterday in the Dail, Minister Noonan refused to provide an overall total, claiming the overall total is “commercially sensitive”. “Commercially sensitive”? Imagine the uproar if NAMA said that it was (a) forgiving debt and (b) the overall total was commercially sensitive. The public reaction would involve tumbrils and guillotines, because NAMA is managing OUR money. Yet IBRC which is 100%-owned by Minister Noonan on our behalf refuses to tell us how many hundreds of millions, or even billions of euros of OUR money that it is writing off.

And it doesn’t stop there.

Minister Noonan was also asked yesterday why NAMA has a policy of monitoring salaries of developers whilst IBRC has no such policy. And unbelievably, there was no justification forthcoming for the difference in policy.

And if you wanted any more proof that IBRC has gone feral, consider the comment provided by its CEO Mike Aynsley, he of the €866,000 remuneration package last year, when asked about IBRC’s engagement with a potential Swiss buyer of Sean Quinn’s property – “It is the bank’s policy not to continue relations with organisations that attempt to apply pressure by threatening to make communications public” said Mike to the Irish Times this month. Yesterday Minister Noonan was asked how many organizations had been blacklisted at IBRC under this policy, there was no response forthcoming. But Minister Noonan was asked if NAMA had a similar policy. Of course it doesn’t, and that was confirmed by the Minister.

Now, I know for a fact that Fine Gael’s parliamentary party has sufficient talent in it to recognize what is going on at IBRC and to see that Minister Noonan has relinquished control, and it is incumbent on them to challenge this behavior by their senior party colleague. And in the Labour Party, I cannot imagine Joan Burton providing these responses for an organization under her control. Minister Burton will lose sleep over cuts of €100m to her social protection budget, yet at the stroke of a pen, €100m is written off at a company being sold to interests associated with Denis O’Brien. Maybe, these elements within government might make their voices heard over the inaction and silence of Minister Noonan.

Minister Noonan was responding yesterday to questions from the Sinn Fein finance spokesperson Pearse Doherty and the full parliamentary questions and responses are here. They should be online shortly at the Oireachtas website.

Deputy Pearse Doherty: To ask the Minister for Finance if he will provide a total of debt write-offs, that is, where a portion of an outstanding loan to a borrower including contractually charged or accrued interest is acknowledged by the bank as unrecoverable, at the Irish Bank Resolution Corporation in each of full-year 2011 and half year of 2012 ending 30 June 2012..

Deputy Pearse Doherty: To ask the Minister for Finance if he will provide in a tabular form a schedule of debt write-offs at the Irish Bank Resolution Corporation in each of full-year 2011 and half year of 2012 ending 30 June 2012 showing the name of the borrower, the book value of the loan outstanding including contractually charged or accrued interest, the amount written off and the date on which the write-off was acknowledged..

Minister for Finance, Michael Noonan:  I propose to answer questions 228 and 229 together.

I have been advised that it is not the Bank’s practice to disclose the specific information requested as it is commercially sensitive. It is however the Bank’s clear preference to work constructively with its borrowers on a case by case basis to maximise the recovery of loans. Any proposed restructuring of debt facilities in IBRC is subject to established governance processes and any agreed restructuring of borrowers obligations are designed to ensure the best outcome for the State.

Deputy Pearse Doherty: To ask the Minister for Finance further to a report in a national newspaper that the chief executive officer of the Irish Bank Resolution Corporation (details supplied) has stated in relation to a reported bid for assets under the control of Irish Bank Resolution Corporation, it is the bank’s policy not to continue relations with organisations that attempt to apply pressure by threatening to make communications public; if he will confirm the number of organisations with which IBRC is not continuing relations as a result of this policy..

Minister for Finance, Michael Noonan:  I have been advised that IBRC adheres to a structured procurement process for the appointment of all its advisors. This procurement process is open, objective and transparent and is subject to the Bank’s governance processes including oversight through a regular reporting process by the main Board of the Bank. The Bank have a responsibility to make commercial decisions in the ordinary course of business and will not allow these decisions to be affected by undue influence. I have been informed that IBRC at all times seeks to maximise returns for the Irish taxpayer.

Deputy Pearse Doherty: To ask the Minister for Finance further to a report in a national newspaper that the chief executive officer of the Irish Bank Resolution Corporation (details supplied) has stated in relation to a reported bid for assets under the control of IBRC, it is the bank’s policy not to continue relations with organisations that attempt to apply pressure by threatening to make communications public, if he will confirm if the National Asset Management Agency has a similar policy, and if so, if he will confirm the number of organisations with which NAMA is not continuing relations as a result of any such similar policy.

Minister for Finance, Michael Noonan :  I am advised that NAMA has no such policy in place and deals with all genuine counterparties in a professional manner.

Deputy Pearse Doherty:  To ask the Minister for Finance if he will provide an explanation for the contrast between practice at the National Asset Management Agency where salaries of their borrowers are closely monitored and practice at the Irish Bank Resolution Corporation where there is no such monitoring at all.

Minister for Finance, Michael Noonan : The overriding mandate of IBRC is to maximise the recovery of loans on behalf of the State. I have been advised that the Bank seeks to work constructively and consensually with each borrower to identify the most appropriate approach available to it in order to maximise the repayment of the loan.

The process followed in managing the recovery process is to assess fully all aspects of a borrower’s circumstances to establish the most appropriate repayment strategy. This assessment includes consideration of debt, asset, income/salary and lifestyle considerations.  Agreements that are ultimately reached for agreed repayment plans are judged and enforced to provide the best commercial outcome for the shareholder.

In circumstances where consensual agreements cannot be reached the alternative of receivership, examinership or liquidation is pursued resulting in rigorous enforcement of all recovery options and rights.

Read Full Post »