Long & Co Accountants

Central Bank’s hopes of recovering IBRC debts hinge on legal cost ruling

admin — Thu, 23 May 2013 08:12:07 +0000

The special liquidators of IBRC believe that if the bank is beaten in a court case the legal costs awarded to its opponent will go to the top of the queue to be paid from proceeds of its winding up, even moving ahead of the Central Bank that the liquidation was set up to repay.In court papers seen by the Irish Independent, joint special liquidator Kieran Wallace of KMPG argues that the bank does not need to set aside cash to cover the potential adverse legal cost of the award that it might suffer if it loses a legal action that it has taken.

Historic claims against the bank rank as unsecured creditors in the liquidation, he said.

As a result, they are unlikely to be paid.

However, Mr Wallace said any order for costs made against the bank in cases that it has pursued since the liquidation would rank as “priority claims”.

It means that in cases where the joint liquidators have authorised legal action, any resulting costs order against the bank go straight to the top of the queue for repayment, he said.

He was responding to a legal move by Johnny Moran, the former owner of the Holiday Inn hotel in Dublin, who is involved in a series of disputes with IBRC over the bank’s decision to put his business into receivership.

Mr Moran had demanded that the bank should be made to put up cash that would cover his legal costs, in the event it loses its legal action against him, in a move known as “security of costs”.

“I say that I cannot conceive of any circumstances in which IBRC would not be in a position to meet in full any costs award that might be made in favour of the defendant,” Mr Wallace said in his court filing.

He said that there is no reason for the bank to put up cash as security for costs in advance, but said IBRC is willing to retain €50m in assets until after legal action with Mr Moran.

Mr Wallace is one of two special liquidators charged with shutting down the former Anglo Irish Bank in order to pay off its debts to the Central Bank of Ireland.

The unusual nature of the liquidation, including the fact that emergency legislation was used to put the bank into liquidation, has created huge confusion, especially for anyone who is involved in legal action with the bank.

Donal O’Donovan – Irish Independent

Ireland’s EU-IMF bailout has been a success – thinktank report

admin — Tue, 21 May 2013 08:13:32 +0000

Ireland’s EU-IMF bailout has been broadly successful, according to a new reports by a leading European thinktank, but risks remain that a second bailout will be required down the line.

In an analysis of the manner in which three euro area countries have been bailed out, the report concludes that Ireland’s bailout has been a success, Portugal’s a “potential” success and Greece’s a failure.

The report by the Brussels-based Bruegal thinktank argues that in hindsight Greek sovereign debt should have been written down at the outset and “in the Irish case, the bail-in of senior bank bondholders might have been desirable from the Irish point of view”.

“But it would have improved the programme’s sustainability far less than in Greece, and it could have had significant negative implications for the funding of Irish banks”.

It says the two issues on which troika members have disagreed most were the risk of financial spillovers from imposing losses on senior bondholders of Irish banks, and the restructuring of Greek debt .

Regarding the initial guarantee of bank liabilities in September 2008, the report states that it was “given by the government unilaterally and without outside interference”.

Bruegal’s position on whether senior unsecured and unguaranteed bank bonds should have been repaid after the initial guarantee expired in September 2010 is ambivalent. The report states “it is difficult to say whether the bailout of senior bond-holders was a mistake or not”.

The authors of the report – Jean Pisani-Ferry, André Sapir and Guntram Wolff – say the IMF was involved in the bailouts by the EU because it had insufficient “trust its own institutions to act alone”. The report notes the unprecedented nature of the bailouts, saying they “stand out compared to typical IMF programmes because of their exceptionally long durations and the exceptionally large size of the financial assistance packages”.

The authors say they did not have access to any documents other than those that are available publicly, but they did have discussions with senior members of each troika institution and others in national capitals.

http://www.irishtimes.com

IBRC gets a stay of execution as liquidation drags on

admin — Mon, 20 May 2013 09:26:35 +0000

Reprieve for staff as Noonan’s plan for quick wind-down left in tatters.

BANK staff facing the axe because of the liquidation of IBRC have been given a reprieve that will see many kept on much longer than expected to manage up to €16bn of state-owned loans.

The prospect of some staff keeping their jobs for an extra five months was raised after the Minister for Finance was forced to tear up the timetable for the liquidation of Irish Bank Resolution Corp (IBRC), the former Anglo Irish Bank.

IBRC has around 800 staff who have been working on rolling short-term contracts since the bank went into liquidation in February.

When IBRC was put into liquidation in February, special liquidators Kieran Wallace and Eamonn Richardson of KPMG were charged with completing the valuation of around €16bn of former Anglo assets by June, and selling them or shifting them to NAMA by the end of July.

That timetable has now been scrapped as unrealistic. The liquidators are understood to be planning to contact individual staff over the coming days to tell them how they are affected by the changes.

Yesterday, the special liquidators said in a statement that the minister has now given them have until the end of November to complete the valuation of IBRC’s loans, and have until the end of the year to sell off as much of the bank’s assets as possible.

More time is need to maximise the liquidators’ chances of recovering value from the bust bank, a spokesman said.

UBS and PwC have been hired to complete independent valuations on all assets that make up the remaining €12bn to €16bn of former Anglo assets.

Liquidators can only sell assets once those individual valuations have been done, because their instructions are to only sell where offers are received that are equal to or in excess of the valuation price.

However, the extension will be seen by many as confirmation that the IBRC liquidation plans were rushed when emergency legislation was pushed through the Oireachtas in a single night in February.

A statement setting out the new timetable also provided fresh clarity on the liquidation process.

Article Source http://tinyurl.com/khq9qo6

NTMA unsure of future help from ECB when Ireland exits bailout

admin — Mon, 20 May 2013 09:22:43 +0000

The Government’s debt agency said it still does not know what is needed to ensure the country gets financial support in the bond markets from the European Central Bank (ECB) at the end of the bailout.

That’s despite Michael Noonan giving his strongest hint yet that he wants to avail of the ECB’s so-called “outright monetary transactions” (OMT) support scheme when the Irish bailout ends in December.

At an event in Brussels on Monday, the Finance Minister said he thought Ireland would be eligible for the OMT scheme after one more bond deal. But the minister’s own authorities have told bond investors they are still in the dark about how the scheme would actually work.

Under the OMT proposals the ECB can potentially buy unlimited amounts of the bonds of a qualifying member state.

The idea is that such action would keep down borrowing costs and make it easier for governments such as ours to finance themselves on the markets.

However, the scheme has never been tried, and it is still not clear what a government has to do to secure the support.

CRITERIA

In the latest of its regular updates to bond investors, John Corrigan’s NTMA admits it is not so clear on the eligibility criteria.

“Clarity on Ireland’s eligibility for so called Outright Monetary Transactions (OMT) would be helpful,” the National Treasury Management Agency (NTMA) said in a note to investors .

The NTMA hinted that its next bond deal is likely to be either a dollar-denominated bond or an inflation-linked deal.

Dollar bonds are regarded as an attractive investment for investors in the US, but also in Asian and the Middle East. Inflation-linked debt provides holds with an extra degree of investment protection.

The NTMA said Ireland’s financial standing could be improved if the EU acts on last year’s apparent commitment to break the “vicious circle between banks and sovereigns”, which means a deal from Europe on sharing the cost of the bank bailouts.

Clarity on eligibility for OMT would be “helpful”, as would progress toward a full banking union, which would be supportive of wider stability, the NTMA update said.

Article Source http://tinyurl.com/k63musj

Irish growth dependent on European recovery – ESRI

admin — Thu, 16 May 2013 08:32:09 +0000

The Economic and Social Research Institute has said it is likely that growth in output and employment will continue this year and next.In its latest Quarterly Economic Commentary, the ESRI forecasts growth of 1.8% this year and 2.7% next year.
If these rates are achieved, the ESRI says unemployment should fall just below 14% next year.However, it says the growth forecast is crucially dependent on the European economy returning to growth in 2014. Without this, the Irish economy will not grow at the forecast rate.Because of the uncertainty surrounding the international economy, the ESRI says there should be no easing up on the Government’s drive to correct the public finances.

All the planned consolidation measures should be implemented as planned over the next few budgets, the institute added.By doing so it said that “the deficit will be eliminated and the public finance contraction will not be weighing on the domestic economy”.Although the outlook is for an upturn in growth, the ESRI continues to have concerns about the weakness in the domestic Irish economy.In particular it fears that the banks may not be able to lend enough money into the SME sector if the economy grows as forecast.Research by the institute finds that access to credit is not the main problem for SMEs now, which is now finding customers for their products or services. But if there is a growth in credit demand by SMEs on the back of a growing economy, the institute questions the capacity of the Irish banking system to meet that rising demand.

Concern over impact of “re-domiciling” on GNP figures

Another research paper looks in detail at the impact of a small number of UK companies that have relocated their registered office to Ireland over concerns at the direction of the UK tax regime.

The CSO has warned for the past year that the relocation or “re-domiciling” of a small number of companies gas been distorting the Irish Gross National Product (GNP) numbers, which has previously been seen as a better guide to the health of the Irish economy than GDP.

The money held by these re-domiciled companies – around €7.4 billion last year, or 5.5% of GNP – is enough to distort the figures. Analysis by Professor John Fitzgerald indicates that these inflows had the effect of reducing the recorded amount of profit outflows by multinationals based in Ireland, which had the effect of raising both the GNP figure and the balance of payments current account surplus.

Taking this into account, Professor Fitzgerald’s analysis finds the economic contraction in 2009 was deeper than officially recorded, and that GNP contracted in 2010, rather than the 1% expansion recorded in the official statistics.

It also impacted last year’s figures, which officially show GNP expanded by 3.5%, but the ESRI analysis says the real expansion was just over 2%.

The impact on the balance of payments surplus is more dramatic. A surplus on the balance of payments indicates that a country is saving more than it is spending or investing. Usually large surpluses are not sustained, and eventually lead to increased domestic demand as these savings are reduced and spent in the domestic economy.

However Professor Fitzgerald’s research suggests that rather than running a current account surplus of 6% of GNP, the real number is closer to 1%. This implies there will be less of a bounce for the domestic economy, as there is not as high a level of savings to be released as previously thought.

RTE News

Bank of Ireland says lending to SMEs is up by 25pc

admin — Tue, 14 May 2013 08:09:19 +0000

BANK of Ireland said it has increased lending to small and medium enterprises by a quarter so far this year, and expects to comfortably beat its government-imposed lending targets.Launching its ‘National Enterprise Week’, the country’s largest bank claimed it had handed out €1bn in new funds to small firms since the beginning of the year, and was on track to hit its target of €4bn by the end of 2013. That is up from €3.5bn last year.The bank says its approval rate is up at about 85pc so far this year. While there has been some uptick in lending requests this year, Bank of Ireland’s head of small business lending said demand for credit was still low.”We can’t get the money out, the demand is not there,” said Mark Cunningham. “Businesses have been deleveraging. We have seen an increase in working capital utilisation in the first quarter and that is the first we have seen of some momentum.”About 37pc of credit for working capital was taken up at year-end, that rate is now up at 42 or 43pc and commercial finance are also showing high levels of utilisation but businesses aren’t looking to spend on capital expenditure, M&A, or property acquisitions. There is a bit of momentum which we are hoping will carry through and the numbers are much better but it is off a low base.

“We did €3.6bn in new and increased SME lending last year, but only €1.8bn was drawn down and €2bn repaid, so our book actually fell by €200m last year. We can approve it but it then has to be drawn down,” he added.

Both AIB and Bank of Ireland have a government target of lending €4bn to SMEs this year.

AIB said it “expects to meet its lending target of €4bn this year and the pipeline of credit across our business centres is growing.

“This growth is across a number of sectors including services, retail, agriculture, manufacturing, medical and tourism.

“Last year, AIB sanctioned €4.8bn in SME credit and is confident it will achieve its lending target for 2013,” the bank added.

The figures came as research from think-tank the ESRI found that only one in nine SMEs is struggling because of “credit constraints”.

Despite that conclusion, the institute warns that the proportion of businesses complaining of a lack of access to credit has surged to nearly a quarter of all SMEs since 2009.

Peter Flanagan – Irish Independent

Central Bank figures show €400m in household debt written down over fourth quarter of 2012

admin — Thu, 09 May 2013 08:16:57 +0000

The level of Irish household debt fell over the final three months of 2012 due, in part, to €400m worth of loans being written down by financial institutions.

The Central Bank’s latest financial accounts, for the final quarter of last year, show household debt fell by €2.9 billion during the period to €173.9 billion.

The 1.7% fall in debt levels was the biggest quarterly decline since the second quarter of 2010. Repayments of €1.8 billion were made between October and December 2012 by Irish households.

The reduction in household indebtedness means the ratio of debt to disposable income, which is considered a key measure of how sustainable the debt burden is, fell to 201.6%.

The debt sustainability ratio peaked at just over 221% in 2010.

Household debt in Ireland is still high by international standards. The total figure of €173.9 billion equates to €37,928 on a per capita basis.

RTE.ie

Central Bank figures show €400m in household debt written down over fourth quarter of 2012

admin — Wed, 08 May 2013 12:56:33 +0000

The level of Irish household debt fell over the final three months of 2012 due, in part, to €400m worth of loans being written down by financial institutions. The Central Bank’s latest financial accounts, for the final quarter of last year, show household debt fell by €2.9 billion during the period to €173.9 billion.

The 1.7% fall in debt levels was the biggest quarterly decline since the second quarter of 2010. Repayments of €1.8 billion were made between October and December 2012 by Irish households.

The reduction in household indebtedness means the ratio of debt to disposable income, which is considered a key measure of how sustainable the debt burden is, fell to 201.6%.

The debt sustainability ratio peaked at just over 221% in 2010.

Household debt in Ireland is still high by international standards. The total figure of €173.9 billion equates to €37,928 on a per capita basis.

Article Source http://tinyurl.com/bm55vqr

ECB cuts interest rate to new low of 0.5pc

admin — Thu, 02 May 2013 15:02:59 +0000

The European Central Bank has bowed to pressure and delivered a 0.25pc interest rate cut. The move comes following a fall in inflation in the eurozone to a three-year low while record unemployment had increased pressure on the ECB to deliver a cut in interest rates.Each 0.25pc reduction eases monthly repayments by €15 on every €100,000 of debt on a tracker mortgage.

Annual inflation in the 17 countries that use the euro dipped to 1.2pc in April. This was the lowest since February 2010 and compares with 1.7pc a month earlier, according to the European Union’s statistics office in Luxembourg.

The rate has been below the ECB’s 2pc ceiling since February. March’s jobless rate in the eurozone rose to 12.1pc, the highest since the data series began in 1995.

The Frankfurt-based ECB sees inflation being subdued this year and next.

Over the course of a year, the savings amount to €444 for someone on a €300,000 tracker.

A reduction in rates piles pressure on banks to resist another hike in variable rates. Experts said that is why AIB, EBS and Haven pre-empted the likely ECB rate cut by hiking variable rates from June by up to 0.4pc.

ECB president Mario Draghi last month signalled that the ECB stood ready to cut interest rates, warning that the economic downturn had now spread into parts of the 17-member eurozone that had not been impacted up to now.

And there was no risk of inflation in the euro area, he said. Any threat of inflation would rule out a rate cut.

The move is a boost for the 375,000 homeowners with tracker mortgage rates.

The interest charged on these mortgages has to come down whenever the ECB rate reduces.

A cut would come at a time when property tax bills are popping through letterboxes.

The Independent – Charlie Weston

Danske Bank Ireland reports pre-tax loss of €8.8m for first quarter of 2013

admin — Thu, 02 May 2013 08:17:12 +0000

Danske Bank Ireland has reported a loss before tax of €8.8m for the three months to the end of March, as it said its overall performance was in line with expectations.

The figure of €8.8m compares with a loss before tax of €184.3m the same time last year and pre-tax losses of €15m in the last quarter of 2012.

The big yearly drop in pre-tax losses is due to the fact that Danske Bank Ireland is now reporting only ”core business” which encompasses personal and business banking.

It said it expects its ”non-core business”, which includes commercial property loans – where the bulk of its losses are – to result in impairments of €335m between this year and next year.

In its results statement today, Danske Bank Ireland said that charges for impaired loans fell to €5.5m from €195.2m in the first quarter of 2012. Bad debt charges amounted to €15.7m in the last quarter of 2012.

The bank said that market conditions for the Irish commercial property market are beginning to show signs of stabilisation as property trading is picking up in prime Dublin locations.

”At the national level, however, activity remain subdued and vacancy rates remain high. More than half of non-core Ireland commercial property exposure relates to properties in the Dublin area,” it added.

The bank said that income increased to €14.6m, while the bank’s total loan book stood at €3.2 billion. Customer deposits at the bank rose by 12% to €3.4 billion in the first quarter of 2013 compared to the previous quarter.

Costs increased to €17.9m but Danske Bank Ireland said that when exceptional items associated with its recent rebranding and reorganisation, its underlying costs were down 5% quarter on quarter.

”While costs remain elevated, the underlying costs trend is moving in the right direction as is the case with impairments which continue their downward trajectory as previously guided,” Danske Bank Ireland’s country manager Terry Browne said.

He said the bank’s overall performance was in line with expectations given the continuing low growth and low interest rate environment.

Meanwhile, Danske Bank today kept its 2013 outlook unchanged after first quarter pretax profits rose 38% on the back of a drop in loan impairments.

Denmark’s biggest financial institution said that pre-tax profit for the quarter rose to 2.22 billion Danish crowns.

It kept to its 2013 outlook given in February for net profit in a range of €7.5-10 billion Danish crowns.

RTE News