Archive for March 26th, 2013

Today’s edition of Iris Oifigiuil reveals that NAMA has had receivers appointed to two more companies in the Howard Holdings group, the property company controlled by Greg Coughlan, the Cork man who has reportedly fleed from the state. On 15th March 2013, NAMA had Kieran Wallace of KPMG appointed to assets of Farsha Limited and Alleyquay Investments Limited.

The directors of Farsha Limited are Jason Clerkin (42) and Alan Morris (45) and the company is 100% owned by Howard Property Ireland Limited. The directors of Alleyquay Investments Limited are also Jason Clerkin (42) and Alan Morris (45) and the company is 45% owned by Greg Coughlan, 40% owned by Brendan Murtagh and 15% owned by Brian Madden and 1% owned by Howard Property Ireland Limited. Howard Property Ireland Limited is 25% owned by Brian Madden, 25% owned by Brendan Murtagh, 25% owned by Greg Coughland and 25% owned by Howard Holdings PLC.

Back in September 2012, NAMA sued Greg Coughlan and his wife Ann in Dublin’s High Court, but the case appears not to have progressed in the High Court yet.  In December 2012, NAMA had Kieran Wallace appointed receiver at Fuschia Investments Limited, a Greg Coughlan company. 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.

Remember you can see the list of NAMA’s enforcement actions here and in this regularly updated spreadsheet.


Read Full Post »

Permanent TSB has this afternoon published its annual report and accounts for 2012. There is also a press release here. We own 99.8% of PTSB so these results directly impact on us. After a near €600m loss in H1, 2012, PTSB has turned in a smaller loss for H2, 2012 and the results presented might be considered better than expected. Given the expiry of the Eligible Liabilities Guarantee at midnight this coming Thursday and the ongoing fiasco in Cyprus, the accounts of what is Ireland’s weakest bank were always going to be carefully scrutinized but a quick perusal provides some confidence. Here is the P&L, Statement of Comprehensive Income and the Balance Sheet, there will be commentary and analysis on here later.

PTSBBS2012 PTSBCompIncome PTSBPL2012


Read Full Post »

33AKAgain 33AKAgainAgain

Last November 2012, Minister for Finance Michael Noonan made an important discovery: he, or rather one of them mandarins in his Department of Finance discovered that section 33AK of the Central Bank Act 1942 provided the Central Bank of Ireland with a confidentiality defence to requests for information about the operations of banks in Ireland. Section 33AK is in fact a vast 2,500-word section inserted into the Central Bank and Financial Services Authority of Ireland Act 2003 and it allows the Minister to blame the Central Bank when declining to provide information on bank operations. Last November 2012, in a response to a parliamentary question, Minister Noonan said

“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.” [concludes]

As far as I can see, Section 33AK had never been mentioned by Minister Noonan before November 2012, but 33AK is now routinely used by Minister Noonan to tell pesky TDs to “get lost” when they try to ask important questions about the banking sector which has to date cost us €70bn including the €6bn of state aid premiums that NAMA has paid to the banks when it acquired their loans.

A fortnight ago, Deputy Mattie McGrath – see top of this blogpost – asked seven separate parliamentary questions which boiled down to “were Bank of Ireland, Allied Irish Banks, Permanent TSB, Ulster Bank, Danske Bank, ACC Bank and KBC Bank in breach of their banking licences”. The “get lost” response from Minister Noonan was Section 33AK restricts the Central Bank in its ability “to detail specific elements of the licensing and supervision requirements of individual credit institutions”

Last Thursday in the Dail, it was used against Deputy Michael Moynihan who was asking about the pace of progress into investigations at what was Irish Nationwide Building Society. Topical stuff from the Cork Fianna Fail TD, given the recent High Court applications against five former INBS officers including Michael Fingleton and former chairman Michael Walsh, and also following the recent publication of the Tom Lyons/Richard Curran book on “Fingers” or Michael Fingleton and the manner in which INBS had been managed up to point where it ended up costing us a €5.4bn bailout.  On Thursday last, the “get lost” to Deputy Moynihan was “I have been advised that an investigation is being conducted under the Central Bank’s Administrative Sanctions Procedure into historic lending practices at INBS. I am advised that for legal reasons, including the Central Bank’s confidentiality obligations pursuant to section 33AK of the Central Bank Act 1942, no further details can presently be disclosed.”

So, let’s get this straight: we now live in a Republic where the State has significant control and ownership of the banking sector which has cost us €70bn in bailouts, and yet we permit a piece of legislation to exist which prevents the finance minister being held to account on the practices of those banks. No doubt the mandarin discoverer of Section 33AK in the Department of Finance is regularly patted on the back, but for the sake of our Republic, shouldn’t this legislation be repealed?

Remember, we found out last year that Irish Bank Resolution Corporation was in breach of its banking licence but Section 33AK was used to obstruct us finding out any more with Minister Noonan saying in February 2013 “the Central Bank of Ireland has informed me that under Section 33AK of the Central Bank Act 1942, the Bank is restricted in its ability to disclose details of the supervision of individual credit institutions, and cannot therefore provide details of any breaches of the its licensing and supervision requirements”. It is now being used to obstruct our politicians in holding this Government to account in its oversight and management of the banking sector. What shenanigans are being hidden from citizens? And from potential investors including banks thinking of setting up shop in Ireland?

Read Full Post »

We’ve seen over the past fortnight how the Cypriots are a deeply stupid people that have allowed their economy to collapse, and consigned their society to immiseration and decline for a long period ahead. Well, too bad for Cyprus, how can Ireland benefit from their self-inflicted fiasco?

(1) Cyprus’s corporate tax brand is destroyed. The original Cyprus bailout plan included a term compelling Cyprus to raise its headline corporate tax rate from 10% to 12.5%, there is no mention of that term being dropped in the latest version of the bailout, so it seems the change still stands. Now a 25% increase is still just an additional 2.5% but it has destroyed the Cypriot brand. Businesses now considering basing themselves in Cyprus might appreciate the 12.5% corporate tax rate as relatively low, but they know that it has been changed, and apparently without much resistance from the Cypriots. On the other hand, businesses know that Ireland fought tooth and nail to protect our 12.5% corporate tax rate. We endured the humiliation of a Gallic spat with the French president, quietly supported by the Germans, and we saw Greece get a reduction in its bailout interest rate in March 2011, but because we would not yield on our tax rate, we had to wait until July 2011, and even then we had to give a commitment to constructively engage in discussions on the Common Consolidated Corporate Tax Base. But in July 2011, domestic politicians wrote that commitment off as fundamentally meaningless, and the message is loud and clear – Ireland has a 12.5% corporate tax rate and it will stay at 12.5%. So, even though Cyprus and Ireland might have the same corporate tax rate, businesses know that ours is more likely to remain at 12.5%.

(2) Tourism. With the cold and wintry Irish weather at present, the 15 degree March climes of Cyprus might look tempting, but who wants to book a holiday to somewhere that is so unstable. What happens if they stop accepting credit and debt cards? What happens if they introduce capital controls on tourists? What happens if they revert to the Cypriot pound and force tourists to exchange their hard currency at an unattractive interest rate? And what about civil disturbances? They had a civil war in 1974, they will shortly have spiraling unemployment, who wants to go on holidays to a potential war zone? On the other hand, come to Ireland, you’ll get a great welcome, we have great scenery and this year, we have a special Gathering campaign when the families of Ireland are coming together from across the globe. Actor Gabriel Byrne might have originally written it off as a shake-down designed to relieve our Yankee cousins of their dollars, but it’s happening anyway, and you are guaranteed a better experience than that potentially on offer in Cyprus, regardless of the weather. Maybe we should get Tourism Ireland to run a negative campaign.

(3) Banking and financial services. Former Taoiseach John Bruton is the ambassador for our International Financial Services Centre in Dublin, and he will be only too happy to explain to you the tax and regulatory advantages of basing your bank or financial services operation in Ireland. Already we have over 400 of the world’s banks operating from a small spot in Dublin city. In previous years, we might have been written off as “Liechtenstein by the Liffey” or the “Wild West of Banking” but we have bolstered our financial regulation, we’ve even appointed a surly Brit to the post of Financial Regulator. But don’t fret, there is an influential industry group that meets with the Department of Finance and An Taoiseach on a regular basis, and the evidence points to the tail of international banks and financial services operations still wagging the dog of democratic politics.

(4) Foreign direct investment. The IDA’s job has become far easier. In addition to maintaining our gold-standard 12.5% corporate tax rate when those about us are losing theirs, Ireland can really stick the boot in during our investor road-shows to deter businesses who might have been considering Cyprus as a base. Does Google really want to open a base in a country with unstable currency, banking system, bailout when Ireland is brimming over with talent, technology and tax incentives.

(5) Hot Russian money more likely to come to Ireland. Let’s face it, do we really care all that much where deposits come from? All deposits support the banks in making more loans available to the economy, and more credit in the economy will drive economic growth and enable us to get a lead on our partners across Europe. So, maybe we should consider a few more Russian-language welcome signs in Dublin. Justice minister Alan Shatter will give them visas if they make some vague commitment to invest €75,000 in Ireland or maybe promise to buy an apartment from NAMA.

(6) Weaker euro helping exports to key US, UK and non-EU markets. The exchange rate between the euro and sterling has fallen from €0.88 to just over €0.84. That’s good news for Ireland given that the UK is our main practical export partner. In fact a weaker euro is altogether better for the exporting marvel that is Ireland. And we can thank the development of the fiasco for the recent decline in the value of the euro. Until a few weeks ago, sterling’s weakness as the UK struggles to generate growth together with the “mission accomplished” tenor from EuroZone leaders that the crisis was over, all pointed to the euro becoming stronger which is the last thing our exporting-economy-on-steroids needs. Thanks to the bungling over Cyprus, the euro is on a weaker trajectory which gives our economy a boost.

(7) No Irish exposure to recapitalizing Cypriot banks. The ESM, the fund that was set up last year, and to which Ireland has already contributed €509m will not be used to bailout insolvent Cypriot banks. And furthermore, it is understand that the exposure of Irish banks including the Central Bank of Ireland to Cypriot bank debt is minimal. So, Ireland faces practically no financial consequence in respect of Cypriot meltdown. If we were exposed to losses, then we might consider bilateral loans from Ireland to Cyprus. Like the British chancellor George Osborne in 2011, we might even be patronizing enough to say “Cyprus is a friend in need, and we are there to help” before providing a loan at market interest rates so that our  banks, businesses and citizens might be repaid.

(8) Although we’re still the dumbest people in Europe, the Cypriots make us look a lot better. In Cyprus, they actually have finally landed on a good design to solve their financial mess. But the problem for Cyprus is firstly, they originally came up with a plan which would undermine their deposit guarantee and secondly, their implementation has been horrible with banks closed for 12 days and capital flight now guaranteed. Of course the agreement to change the corporate tax rate was also not bright, but in principle, forcing the debtors of banks to shoulder losses in specific banks ring-fenced the problem to badly run banks, keeps smaller depositors safe and imposes losses on those best able to pay for them. Contrast that with Ireland where we have repaid €11bn to junior bondholders, 10s of billions to senior bondholders and all depositors, even those with millions have walked away with 100% of their deposits, whilst the burden for the banking collapse has been placed on the shoulders of citizens who have seen PRSI increases, public service cutbacks, cuts to childrens allowance, VAT hikes, pension levies and other assorted measures which have hit the most vulnerable in society. So, we were the dumbest in Europe by a country mile for our own bailout, but the implementation of the Cypriot bailout makes us look just a little smarter.

(9) If PTSB or AIB go bust, the additional impact on the taxpayer will be limited. We now seem to have a model for dealing with insolvent banks, and keeping in mind that both PTSB, AIB and even venerable Bank of Ireland are facing extreme challenges with their mortgage books, should the banks need more capital, we don’t have to stump any more in a national bailout. Depositors with more than €100,000 and bondholders will face losses, and the problem will be contained. Well done to Cyprus for path-finding this model for us.

(10) Scales are falling from our eyes. By studying developments in Cyprus and keeping the theme of this blogpost in mind, perhaps we can now place ourselves in the shoes of the French, Germans and British in November 2010 when Ireland was frog-marched into a bailout. Perhaps now, we can step in George Osborne’s shoes and understand why he advanced a €4bn bilateral loan to Ireland. Perhaps we can now understand why Nicolas Sarkozy sought to take advantage of our woes to press for an increase in our corporate tax rates to help the French economy. Perhaps we can now understand that EU politicians can behave like a bunch of bozos and that ultimately, we must rely on our own abilities  to defend our interests, because no-one else will.

[The above is a deliberately provocative commentary on the Cypriot bailout, and apologies for any offence caused. But think on, in November 2010 when Ireland was frog-marched into a bailout, do you think it beyond the bounds of possibility for other nations to have viewed our woes in the same manner illustrated above?]

Read Full Post »

This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for February 2013. Here’s the summary showing the indices

  • at their peak (various months in 2007 depending on type of property and location)
  • the NAMA valuation date (November 2009)
  • 12 months ago (January 2012)
  • the start of this year (end December 2012)
  • last month (January 2013)
  • this month (February 2013)


The CSO’s indices are Ireland’s premier indices for mortgage-based residential property transactions. The CSO analyses mortgage transactions at nine financial institutions : Ulster Bank, Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank of Ireland group), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The indices are hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first-time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The indices are averages of three-month rolling transactions.

Cash transactions: Even though the launch of the property price register at the end of September 2012, was six months ago, we still don’t have a monthly index covering all reported transactions.  DAFT.ie has begun the work to produce hedonic indices based on all the transactions made available by the Property Services Regulatory Authority, transactions dating back to January 2010. Daft.ie now produces every three months an index based upon the Property Price Register, and as that Register gets more data, you can expect the Daft.ie to overtake the CSO’s own index.

As for the key questions:

How much does property now cost in Ireland? The CSO deliberately doesn’t produce average prices. The former PTSB/ESRI index did, and claimed the average price of a property nationally hit the peak in February 2007 at €313,998, in Dublin in April 2007 at €431,016 and outside Dublin in January 2007 at €267,987. If, and it is a big “if”, you were to take PTSB/ESRI prices as sound and comparable to prices captured by the CSO series, then these would be the average prices today:

Nationally, €156,855 (last month €158,323, peak €313,998)

In Dublin, €189,396 (last month €190,998, peak €431,016)

Outside Dublin, €141,415 (last month €142,092, peak €267,987)

I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series, as represented by its historical indices, closely correlates with the performance of the CSO indices.

What’s surprising about the latest release? Prices nationally experienced their biggest monthly decline since February 2012. However apartments both nationally and in Dublin bucked the trend with 7.1% and 5.8% increases respectively. It seems the withdrawal of tax relief on mortgages for first time buyers at the end of December 2012 has reduced demand and prices, and although it will still take some months to form a meaningful assessment, the indications are that the withdrawal has generally led to price declines.

 Are prices still falling?After three months of consecutive declines with the declines nationally increasing, you would tend to say “yes” prices are still declining. However the decline in Dublin was 1% and this masked an increase in apartment prices of 5.8% offset by a decline in house prices of 1%.

How far off the peak are we? Nationally 50.7.9% (51.6% in real terms as we have had inflation of just 1.9% between February 2007 and February 2013). Interestingly, as revealed here, Northern Ireland is some 56.3% from peak in nominal terms and 63.2% off peak in real terms. Are forbearance measures by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions distorting the market? Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?

How much further will prices drop? Indeed, will prices continue to drop at all? Who knows, I would say the general consensus is that prices will continue to drop. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property [house price projections in Ireland are contentious for obvious reasons and the following is understood to be a comprehensive list of projections but please drop me a line if you think there are any omissions – note January 2013 Fitch and S&P being inserted shortly].

What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. Residential prices in Ireland are now down 31.4% from November, 2009.  The latest results from the CSO bring the index to 778 (28.5%) meaning that NAMA will need see a blended average increase of 28.5% in its various property markets to break even at a gross profit level.

The CSO index is a monthly residential property price index calculated from mortgage-based transactions. The main other index is that produced by Daft.ie based on the Property Price Register. There are four other residential price surveys, based on advertised asking prices or agent valuations (see below, details here). In addition Phil Hogan’s Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end to which the transactions relate, and which is not hedonically analysed – it is next to useless, and as some might say is a reflection of Minister Hogan, the Department will continue to produce these indices at a “marginal cost”.

Read Full Post »


Poor old Brendan McDonagh, the NAMA CEO. When he signed up to the role of boss at the Agency in 2009, he was given a salary of €430,000 plus a bonus scheme which allowed him to earn a further 60% or €258,000 per annum if he met objectives. Since then, Brendan has worked his backside off for the Agency and taken on one of the most difficult commercial and public sector roles anywhere in the world. But material rewards appear not to be on the cards for Brendan. He has never received a bonus and in 2012 (and presumably 2013) he is waiving 15% of his basic salary which means the €430,000 has reduced to €365,500.

Last week in the Dail, the Minister for Finance, Michael Noonan stated that NTMA and NAMA staff would be affected by Croke Park 2, which provides for a range of salary reduction to those whose gross salary is more than €65,000. As the 24/7 Frontline Alliance will tell you, those earning less than €65,000 also face reductions in allowances and suchlike which will take between 3-11.4% off an average worker.

For those earning over €65,000 Croke Park 2 provides for a 5.5% reduction on salaries €0-€80,000, 8% on the next €70,000, 9% on the next €35,000 and 10% on the remainder. So a €365,500 salary will fall by €31,200 to €334,300.

For someone who had good reason to believe they would be earning €688,000 a year back in 2009, it must be a disappointment to be making do with €334,300 in 2013. As an aside, the NAMA chairman Frank Daly will also see his salary fall. The 2011 NAMA annual report showed his annual fees at €153,778 and those should drop by €10,320 to €143,238.

The Minister was responding to a parliamentary question from the Sinn Fein foreign affairs spokesperson Deputy Pádraig Mac Lochlainn and the full parliamentary question and response is here.

Deputy Pádraig Mac Lochlainn: asked the Minister for Finance his views on plans to extend pay cuts to the National Treasury Management Agency and the National Assets Management Agency; if he will detail the way these cuts will affect senior staff in both agencies by outlining their current pay levels and their expected pay levels following the cuts.

Minister for Finance, Michael Noonan:It is envisaged that any legislation introduced by the Government to reduce public service salaries will apply to NTMA employees, including employees assigned to NAMA.

Read Full Post »

They’ve changed the story again. Late last week, when capital controls on banks were mooted, they were to be introduced ONLY if there was failure to agree a bailout funding arrangement with the Troika, but Cypriot politicians have now decided to introduce such controls on what they claim is a “very limited basis” even though there is now supposed to be a €10bn bailout in place. We can clearly see that they’re making it up as the go along, but it might take another few days to confirm that the Cypriot banking system is dead.

We have confirmation that Cypriot banks are to remain closed until at least Thursday; officials are referring to Thursday 28th March 2013, but the betting on here is that banks will remain closed until the Tuesday after Easter, 2nd April 2013, at which point Cypriots will not have had access to their bank counters for 16 days. Cypriots mark Good Friday 29th and Easter Monday 1st April as bank holidays.

There is now an information vacuum in Cyprus, and we don’t know how much cash has flowed out of the system already. Bank Laiki says that it has 1.35m customers and that will include corporate customers and individuals and businesses in the various countries across Europe where it operates. Limits on daily ATM withdrawals have ranged from €400 to €100. So you might have had over €500m per day withdrawn from that one bank. There is now also talk of funds being “bleeded” from foreign branches of Cypriot banks; it remains unclear if this means that Cypriot banks didn’t impose daily ATM limits on foreign withdrawals or if electronic transfers or counter withdrawals were available at foreign branches. If you were a responsible Cypriot politician then you would now be asking questions of your finance minister and governor of the central bank of Cyprus. Bad enough that your banking system is dead, in part because of actions by the EU, but worse if you have allowed the hot Russian money bleed out of the system, thereby increasing the burden on domestic depositors. Can’t Cypriot politicians do anything right? And how many Cypriot politicians have taken advantage of foreign transactions in the past 10 days?

We still don’t have details of the capital controls – you’ll find a rough English translation of the capital controls bill that went before the Cypriot parliament here – that will be imposed for what the Cypriot president and head of state has described as a “very temporary period”. We can assume that the ECB is still providing emergency liquidity assistance to Cyprus after the deadline of midnight on Monday expired for Cyprus to have a bailout funding programme in place. Last week, reports suggested the ECB had €9bn of ELA advanced to Cypriot banks, that’s likely to have increased, but how high can it go? In the case of Ireland, the ECB had advanced €190bn or 120% of GDP at the peak. 120% of Cypriot GDP of €18bn would be €22bn but with deposits flooding out at a rate of €500m per day, that limit will be quickly reached.

So, when will matters come to a head? Will the ECB balk at providing ELA beyond €22bn, which could be required some time next week? Will Cypriots kick their government out if banks don’t re-open or if unacceptable capital controls are introduced? If there is capital flight and runs on banks, how long will they last and will they break the banking system?

One thing is for sure, with the Cypriot economy heading for a nose dive, with the destruction of its offshore banking and insurance, with the damage inflicted on its banking system and on its society, little Cyprus with its 1.1m citizens and its €18bn GDP economy has been treated atrociously by its partners in Europe.

Read Full Post »