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Wednesday Newspaper Review - Irish Business News and International Stories - - May 15, 2013
By Finfacts Team
May 15, 2013 - 6:54 AM
The Irish Independent reports
that the savings rates paid by banks has been slashed in the past year, a new
report seen by the newspaper shows.
The interest rate paid by banks has been chopped
by 40pc since this time last year as banks cut what they pay for funds from
New figures from price comparison site Bonkers.ie show that the best rate for
savings put away for 12 months was 4.75pc this time last year.
Now the best rate for a saver in the market is 2.8pc, a fall of 40pc in a year.
This is for money left in a savings account for a year.
And this comes on top of a higher tax rate on savings this year.
Households have some €92.5bn in savings with the banks.
David Kerr of Bonkers.ie said: "In the past year we have seen savings interest
rates reducing by over 40pc.
"Last year it was possible to get a 12-month term account at a rate of 4.75pc.
"The best rate on the market for personal savers over 12 months now stands at
2.8pc with KBC Bank and 2.75pc with Danske Bank or Nationwide UK (Ireland)."
Mr Kerr predicted that this year would not be a great one for savers as the rate
of interest is being steadily eroded.
A recent Central Bank report found that banks have been cutting the interest
they pay savers every month since April last year.
Mr Kerr said this month's move by the European Central Bank to cut its key
lending rate was bad news for savers.
Meanwhile, the Irish Banking Federation admitted yesterday that its members have
been lobbying to have the interest rates paid on state savings schemes cut.
Felix O'Regan of the banking body said it was necessary to cut the rates paid by
the An Post/National Treasury Management Agency to "level the playing field with
The state savings schemes pay up to 3.79pc a year, putting the banks at a
The three domestic banks have been lobbying the Department of Finance to
introduce interest rate reductions on An Post savings accounts.
They have argued that the higher interest rates offered by schemes sold through
An Post distort competition and create an uneven playing field in attracting
The cost and availability of deposits has caused huge problems for the domestic
Profitability at banks has been hit because they have had to pay high interest
rates to attract deposits. This has squeezed profitability.
Independent also reports that liquidators of the former Anglo Irish Bank can
cross the Border to seize property from fugitive businessman Peter Darragh Quinn
if he fails to pay $188m (€145m) to the bank as ordered by the High Court.
Mr Justice Peter Kelly yesterday ordered the nephew of former tycoon Sean Quinn
to pay the money for damages the judge said were caused by Mr Quinn's "pivotal"
role in stripping assets from the Quinn family's international property group
The former Anglo Irish Bank, now called the Irish Bank Resolution Corporation
(IBRC), is in liquidation.
A source close to the liquidators said the court order means they are now free
to recover the debt in the Republic or across the Border where Peter Darragh
He fled to his home in Fermanagh last year to avoid being ordered to jail for
contempt of court by Judge Kelly.
He cannot be extradited back to the Republic because the sentence was over a
civil rather than a criminal matter.
However, the Border is no protection when it comes to collecting a debt,
according to sources close to the IBRC liquidators. If Mr Quinn does not pay the
money ordered by the court the authorities in Northern Ireland can be called in
to seize property including personal items such as cars.
The order also means that charges can be taken over bigger assets such as land
and buildings, and ultimately receivers can take control if the liquidators can
establish assets are owned by Mr Quinn.
Failure to pay the money ordered by the court could ultimately result in Mr
Quinn being declared bankrupt.
The $188m Peter Darragh Quinn must pay the bank is the "lost value" of the
Kutuzoff Tower in Moscow, previously described as the family's most valuable
asset, Mr Justice Peter Kelly was told in court.
Peter Darragh Quinn's own admissions as well as evidence provided to the court
showed he was a "key initiator" of the scheme to unlawfully place a Russian
company called Finansstroy, that owns the tower and other assets, into
bankruptcy and beyond IBRC's reach, the judge said.
Three Russian companies – CJSC Vneshkonsla, OOO Stroitelnye Tekhnologhi and OOO
RLC-Development – were ordered to pay €252m, $239m and $201m damages
respectively over their involvement in the scheme.
Those sums reflect the value of assets owned by other Russian companies in the
IPG which the bank said were unlawfully assigned to the three defendant
Mr Justice Kelly made the damages orders yesterday after entering judgment last
February against Mr Quinn and four companies when they failed to enter defences
or even make an appearance in court to answer the bank's case.
The bank has made similar claims of asset stripping against other Quinn family
members and others who have entered defences to the case, the full hearing of
which has been parked pending the completion of criminal proceedings against
former senior executives of Anglo Irish Bank.
Mr Quinn was not in court yesterday. However, in a letter from him read by the
judge yesterday, he sought an adjournment of the case pending appeals by him to
the European Court of Human Rights and Supreme Court over the contempt of court
Refusing the adjournment, the judge said Mr Quinn remained in "flagrant"
contempt and the adjournment application was without merit.
The Irish Times
reports that Minister for Energy Pat Rabbitte is initiating a formal review of
the fiscal terms for oil and gas exploration but he has rejected demands from an
Oireachtas committee for a Norwegian-style regime with very heavy taxation.
In the Dáil last night, Mr Rabbitte also said a €400 million tunnel in the
Corrib gas project will result in a loss of €100 million to the State in taxes
Although he said the Corrib field promoters made mistakes at the outset, he said
the project now incorporates all known safety procedures.
He was speaking about a report last year on offshore exploration from the Joint
Committee on Communications, Natural Resources and Agriculture, whose membership
has since changed.
“What is proposed is a fundamental repositioning
that would raise our tax to a similar level as that of the UK and, in the case
of very profitable fields, would impose a higher tax here than would apply in
Norway, ” the Minister said.
“I struggle to understand how anyone could expect Ireland to have
Norwegian-style tax rates without first having Norwegian levels of commercial
He said the review of terms will conclude by the end of the year, to provide
clarity for the next exploration licensing round. “It is my intention following
the conclusion of this debate to seek further independent expert advice on the
‘fitness-for-purpose’ of Ireland’s fiscal terms,” he said.
“Such expert advice would focus on what level of fiscal gain is achievable for
the State and its citizens and, equally important, on the mechanisms best-suited
to produce such a gain.”
The current terms, which apply to all licences issued since 2007, provide for a
profit-resource rent tax of up to 15 per cent on top of a 25 per cent corporate
tax rate, meaning the State’s return would increase to a maximum of 40 per cent
on the most profitable fields.
In the same debate, Fianna Fáil spokesman Éamon Ó Cuív said the Government
should accept all the committee’s recommendations. “In relation to taxation
rates, I fully support a recommendation that, in the case of future licences,
the overall tax take should be increased to a minimum of 40 per cent and for
very large discoveries this tax would increase on a scale up to 80 per cent,” he
‘Eye off the ball’
Referring to the “earlier development” of the
Corrib field, Mr Rabbitte said the promoters “took their eye off the ball and
that there were genuine local community interests” which should have been
addressed. “Uniquely, we are engaged in constructing a tunnel under Sruwaddacon
Bay, at a cost of €400 million. That €400 million cost will be written down
against the costs of developing the field, which means the exchequer must forgo
€100 million in taxation.”
The Irish Times
also reports that Minister for Finance Michael Noonan yesterday defended
Ireland’s corporate tax regime, following a meeting of EU finance ministers at
which ministers agreed to begin negotiations with neighbouring countries on new
rules on tax disclosure.
Speaking in Brussels yesterday evening, Mr Noonan said Ireland does not
“aggressively tax plan” and has a “fully transparent tax system”.
“Setting rates of tax is a matter for sovereign countries. We have decided to
have a low nominal rate of corporation tax at 12.5 per cent, other countries
have higher nominal rates,” he said, pointing out that other European countries
had higher nominal but lower effective tax rates in place.
‘No problems with rate’
“We have no problems with our corporation
tax rate, and none of our colleagues are putting us under any pressure
whatsoever,” he said. “If you look at what’s happening across Europe, the rate
of corporate tax is moving down.”
The issue of tax evasion has crept up the European political agenda in recent
months, sparked by high-profile tax evasion scandals involving former French
budget minister Jérôme Cahuzac and president of Bayern Munich football club, Uli
Hoeness. Following discussions yesterday on a common approach to tax evasion,
Austria and Luxembourg backed an EU proposal to commence discussions with
Switzerland, Liechtenstein, Andorra, Monaco and San Marino on the sharing of tax
However, the two countries failed to
support a proposal to update the existing EU Savings Tax Directive, which
obliges countries within the EU to disclose information on savings on income.
Austria and Luxembourg opted out of the directive in 2003. In a joint press
conference following yesterday’s meeting both finance ministers said they wanted
greater clarity about which products would be covered under the amended
directive. They also stressed the need for a “level playing field
internationally” in terms of tax disclosure. The issue of tax evasion is
expected to dominate next week’s summit of EU leaders in Brussels.
EU finance ministers also agreed to disburse €7.3 billion towards the 2013 draft
amending budget, which will allow discussions between the Irish presidency of
the European Council and the European Parliament on the seven-year budget to
proceed. Sanctioning extra spending for this year had been resisted by several
countries, including Britain. The decision may cause domestic political
difficulties for British prime minister David Cameron as he faces pressure over
Separately, significant divergences emerged between finance ministers in the
first political discussion at ministerial level on the bloc’s proposed rules on
winding down banks. New rules on banking resolution are a central strand of the
EU’s policy of banking union.
Under a compromise proposal put forward by Irish officials ahead of yesterday’s
meeting, a deposit preference scheme would operate which would set out a
hierarchy of creditors to be bailed-in in the event of bank resolution, with
deposits of over €100,000 last in line.
However, a number of countries said bondholders
and uninsured depositors should be treated equally in any bail-in. British
chancellor George Osborne called for greater flexibility, raising concerns about
the possible impact of the rules on financial markets and the pricing of debt,
echoing calls by Dutch finance minister Jeroen Dijsselbloem for a “bail- inable
buffer” for systemic banks .
The Irish Examiner
reports that the NTMA has made a series of successful issuances since July — the
first time it tapped the markets since the IMF/EU bailout of Nov 2010.
The Government set a fundraising target of €10bn this year as part of a strategy
to have enough cash buffers in place to cover borrowing requirements for 18
The agency raised €5bn through the sale of a 10-year bond in March and a further
€2.5bn through a syndicated tap in January.
The yield on the 10-year bond at the time of issue was 4.15%, although it is now
trading at 3.46% compared with the benchmark German bund, which is better than
Spanish and Italian debt of the same maturity.
However, the prospects of the country making a sustainable exit from the bailout
programme over the medium term hinge on the complexion of the banks following
the next round of stress tests.
The date of the next Prudential Capital assessment review by the Central Bank
still has to be determined, although it looks like it will be the end of this
year. The troika want the stress tests done prior to exiting the programme,
whereas the Government wanted them to coincide with the European Banking
Authority stress tests next March.
The banks are working their way through mortgage arrears and SME-impaired loans.
If they need capital after the stress tests, it could put huge pressure on the
Government. Under the terms of the proposed EU banking union, the ESM or a
common resolution fund will be used to recapitalise banks.
However, if this option is not available to the Irish banks, it will put huge
pressure on the Government and could force up yields to unsustainable levels
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