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Archive for March 4th, 2013

There is no longer monthly tracking on here of deposits in Irish banks. That’s because the deposits felt to be the most important for the long term health and sustainability of our economy are so-called “retail deposits” from ordinary households and businesses and after serious declines in 2009 and 2010, began to stabilize in mid 2011 and have remained stable and increased modestly since then. So, in terms of deposits flowing out of our banks, we are no longer on the critical list, and so there is no longer monitoring on here.

We were reminded last week, however, that deposits in banks go further than just retail deposits. And we found out that in total in 2012, deposits fell at Irish banks in Ireland by 15%.

The information was revealed in a response to a parliamentary question from the Fianna Fail finance spokesperson Michael McGrath who asked Minister for Finance Michael Noonan for statistics on the Central Bank’s deposit guarantee scheme. Remember in Ireland, your deposits are insured for up to €100,000 should a bank fail and this will not be affected by the withdrawal of the Eligible Liabilities Guarantee at the end of March 2013.

Each December, banks in Ireland hand over 0.2% of their deposits to the Central Bank who holds the money in case a bank fails and the Central Bank has to pay out. At the end of 2012, the Central Bank held €379m which represented 0.2% of the €190bn on deposit in Ireland at the end of 2012. This was down 12.9% from the €435m held by the Central Bank at the end of 2011 which represented deposits of €218bn. In 2012, the Central Bank introduced a deposit guarantee scheme for credit unions also.

In practice if a bank goes belly-up then €400m may not go a long way to compensate depositors up to €100,000 but that is the scheme that we have in this State.

But, if you compare the Minister’s response with the monthly publication from the Department of Finance, you will be confused because it shows:

DoFDeposits

The Department of Finance shows retail deposits in Irish banks, including deposits in overseas branches, notably in the UK where Bank of Ireland manages the deposits of the British post office. But the Department of Finance will exclude a range of deposits including some bank-to-bank deposits. Aside from the fact that the Department of Finance includes overseas deposits in Irish banks, the series is probably more meaningful to our economy in the long term.

But the fact remains that deposits dropped 13% or €28bn in 2012, and to the extent that these deposits would otherwise be available for lending in the economy, it is worth noting.

The full parliamentary question and response are below and are online here.

Deputy Michael McGrath :  asked if he will set out in tabular form the balance held at year end for each year from 2007 to 2012 in the deposit protection account at the Central Bank of Ireland which will be used to fund any deposit guarantee scheme pay-out; the number of occasions on which payments have been made from this account since its inception to compensate savers; the amount involved; his plans to review the operation of the account following the liquidation of Irish Bank Resolution Corporation; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan: Table

DGS

The operation of the Deposit Protection Account is governed under European Communities (Deposit Guarantee Scheme) Regulations 1995 (SI No. 168 of 1995).

The table above shows the balance held at year-end in the Deposit Protection Account (DPA) at the Central Bank of Ireland. Each deposit-holding institution is required to maintain a balance on their DPA account of 0.2% of their total deposits (with a minimum amount of €50,000 in the case of all institutions except credit unions). This percentage is calculated annually in December. Interest is paid by the Central Bank on the DPA balances (1). The decline in the DPA balance reflects the drop in deposits in Irish credit institutions.

The IBRC liquidation event is the first occasion on which payment will be made from this account.

IBRC held a balance of €1.3 million in their DPA account at the date of liquidation. This amount will be used in the first instance to fund the DGS pay-out, before the DPA accounts of other institutions are required to provide funds for this event. The cost of the DGS pay-out will be charged against the deposit of each credit institution in proportion to their share of the total balance on the DPA.

The final cost of pay-out will not be known until the Special Liquidators have completed their investigations in the next few weeks.

After the pay-out in respect of the IBRC liquidation event, the Central Bank of Ireland will become an unsecured creditor of IBRC (in liquidation) in respect of the amount paid out under the scheme. If the Central Bank does not secure payment from IBRC (in liquidation) in respect of this unsecured debt, all other contributing institutions will be required to replenish their deposits in the DPA by end 2013, to meet their obligation to hold a DPA balance of 0.2% of total deposits.

1. Section 4 of the Financial Services (Deposit Guarantee Scheme) Act 2009 for credit unions provides that from 30 November 2012, each credit union will be required to maintain in the Deposit Protection Account at the Central Bank of Ireland, an amount equal to 0.2% of the deposits and shares held on behalf of members.

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Here it is

DunnesOrderProtectiveOrder

It seems to put to bed the curiously inaccurate reporting by the (at least) three Irish reporters who were in the court room on 19th February 2013. The protective order preventing the Dunnes deposing NAMA CEO Brendan McDonagh remains in place but it is for NAMA to apply to renew the protective orders, if, after the Dunnes depose John Coleman and obtain further information from NAMA, the Dunnes seek to depose Brendan.

So how did Simon Carswell, Richard Downes and Orlaith Farrell all conclude from the court hearing on 19th February that the Dunnes won the right to depose Brendan? Impossible to say – maybe Gayle’s glamorousness bedazzled them all.

The Order above states that NAMA employee John Coleman is to be deposed on 28th March 2013. “Deposing” involves John making a statement on the matter at issue between NAMA and the Dunnes and allowing himself to be quizzed by Sean and Gayle’s lawyers. There is to be some disclosure of what the Americans call the “privilege log” by tomorrow, Tuesday 5th March 2013, and if there are issues on the disclosure, the Dunnes have until next Tuesday week, 12th March 2013 to bring them to the attention of the court.

It is not clear what “motion to strike” NAMA has made, but the judge said that any reply to it by the Dunnes was required last Friday 1st March 2013.

Stepping back from all of this, NAMA is pursuing the Dunnes, particularly Gayle over allegedly improperly benefitting from transfers from Sean and the full hearing is scheduled for September 2014, yes 19 months hence. There is a lot of questioning and disclosure beforehand, together with the Dunnes’ argument that the US courts don’t have jurisdiction over part of the case. From the almost daily filings in the case, it is clear that it is being fought tooth-and-nail by both sides.

UPDATE: 19th March, 2013. It is reported by the Irish Independent today that the Dunnes are seeking five additional documents relating to their failed business plan submission.The judge told them yesterday to try to resolve their differences, failing which she would rule on the documents today. NAMA is seeking to expand its legal representation in the Connecticut, and it has succeeded in having Tom Curran of McCarter and English appointed in the case. Tom is described as an expert in fraudulent transfer. McCarter and English is the main law firm being used by NAMA in this case.  As is usual in this case, where both sides seem hell-bent on resisting any move by the other, the Dunnes objected to NAMA’s attempt to expand their legal team but on this occasion the Dunnes were unsuccessful.

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CBREYields1Mar13

It is not yet clear what impact the new commercial leases database that will be published by the end of March 2013, will have on the market generally, but the betting would be at the secondary end where there is still vast oversupply and where it is still a buyers’ market, it will push prices down as, who will want to pay a premium on the lowest comparable rent in such a market. At the prime end, the jury is out, and research from property powerhouse and NAMA valuation panel member, CB Richard Ellis suggests that rents in prime central Dublin have begun to edge up.

In its report which it publishes every two months and which was published on Friday last – available here with press release here – CBRE says prime Dublin city centre office space rents have inched up from €27.50 in 2012 to €28.50 per square foot, and this is the first increase in six years, says CBRE. Prime Belfast property rents for €10.70 psf (or GBP 134.50 per sq metre).

CBRE has trimmed prime yields by 0.25% on the back of the “weight of money chasing prime investment opportunities in the Irish market”

At least six new residential developments have commenced in Dublin, and CBRE notes recent planning applications, which together suggest some optimism or confidence for the residential market in and around Dublin, at least.

There were an impressive 24 hotel transactions in Ireland last year which accounted for a total spend of €146m. Given the Burlington hotel sold for €67.5m, the average price for the other transactions looks modest. The report suggests that conditions in the hotel business improved markedly in 2012 with room rates, revenues and occupancy up nearly 10%.

There is some rich information on recent transactions reflecting CBRE’s role in the property market and also the amount of research that goes into these two-monthly reports. In terms of investment sales this year, CBRE reports “notable transactions completed since Christmas include the sale of the Bishop’s Square office building in Dublin 2 to US investor King Street for  €65 million, reflecting an initial yield of 9.8%;  the  sale to  German fund GLL  of two  adjoining buildings on Grafton Street for a reported  €40 million, reflecting an initial yield of 6.9%; the sale of St. Martin’s House in Baggot Street, Dublin 2 to German investors for a reported  €22.5 million, reflecting a yield of 13.26%;  the sale to an overseas investor of the SAP office building in Citywest for  €14 million, reflecting an initial yield of 11.2%;  the sale of an office building on Burlington Road, Dublin 4  for  €13.1 million, reflecting an initial yield of 7.25%; the sale of a 62 apartment development off the North Circular Road in Dublin 7 for  €9.6 million to an Israeli investor”

In the UK, CBRE says that Irish investors sold a staggering €2.4bn of property in 62 separate transactions in 2012 and that sales activity is likely to continue in 2013.

According to Marie Hunt, Executive Director and Head of Research at CBRE, the outlook is positive for transaction activity.

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Thanks to the IMF and the bailout programme, Minister for Justice, Equality and Defence Alan Shatter is being frogmarched into providing transparency in the property market. Last September 2013, we had the launch of the Property Price Register which provides very basic information on residential property sales from the start of 2010. It has transformed the property market with punters now having direct access to prices without relying on the limited and sometimes compromised knowledge of estate agents.

By end of this month, we should have basic information on commercial leases which should provide transparency on rent levels across the State.

Last week, Minister Shatter confirmed in a response to the Sinn Fein finance spokesperson Pearse Doherty that the database should be published by the end of March 2013 and that it will contain the rent payable under commercial leases across the State. The Minister did not confirm in his response the scope of the leases, the hope is that all extant leases will be included.

The effect of the publication of the database should be to reignite the outrage about Upward Only Rent Review leases as commercial tenants will be able to see comparable property where rents are less than 50% of the peak levels that are locked into UORR leases. It will be interesting to see if the outrage is channeled into a better campaign to challenge the continuation of such leases, with there being at least some body of legal opinion suggesting that changes can be made, and indeed campaigners against UORR leases might have received encouragement from the recently published IBRC Act 2013 which suspended certain property rights in the common good.

The full parliamentary question and response are here.

Deputy Pearse Doherty: To ask the Minister for Justice and Equality further to Parliamentary Question No. 823 of 6 November 2012, if he will confirm that the commercial leases database will be published by 31 March 2013; the information that will be available; and if he will make a statement on the matter.

Minister for Justice and Equality, Alan Shatter: Section 87 of the Property Services (Regulation) Act 2011 provides that the Property Services Regulatory Authority (PSRA) shall maintain and establish a database relating to commercial property leases. Section 87 further provides that the database shall, in respect of each relevant commercial lease which is in force, contain the following information: the address and description of the commercial property the subject of the lease; the date of the lease of the property; the term of years of the lease; the rent payable in respect of the property, and certain particulars to be provided to the PSRA in accordance with Section 88 of the 2011 Act.

I am advised by the Authority that work on the preparation of the Database is ongoing with the aim of publishing the Database by the end of March 2013.

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