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News : Irish Last Updated: Mar 28, 2013 - 1:45 PM

Thursday Newspaper Review - Irish Business News and International Stories - - March 28, 2013
Mar 28, 2013 - 10:19 AM

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The Irish Independent reports that the government guarantee on bank deposits above €100,000 finally comes to an end today, despite the nervousness over the Cyprus crisis.

The date had been announced last month by Finance Minister Michael Noonan and a spokeswoman said there had been no change in the plans.

Under the Cyprus deal, deposits of more than €100,000 are expected to face large losses. Deposits below that level will continue to be protected by government guarantee.

The hugely controversial guarantee announced to stave off a Cyprus-style banking collapse four years ago meant most lenders to Irish banks, including the failed Anglo, were repaid in full, but it never had to be used for deposits.

There have been no reports of withdrawals of deposits from Irish banks since the Cyprus deal, although it is too early for any specific statistics.

Figures from the Central Bank yesterday showed that deposits from companies rose by 4pc last year to almost €80bn. The rise in personal deposits compared with a 3pc fall in 2011.

The financial position of the guaranteed banks has improved slowly in the past two years.

Private deposits totalled €104bn , while loans fell 2pc to €153bn. At the time of the guarantee the deposits covered were estimated at €180bn.

Targets for improving the ratio of loan to deposits have been relaxed, but the squeeze on credit remains significant. Many of the large deposits that left at the time of the crisis did not return to the Irish banks

The ending of the guarantee, while a sign of improved conditions, is a loss to the Exchequer. The banks paid a fee for the benefit of being guaranteed by the State and this amounted to €1bn last year.

The guarantee failed in its fundamental objective of restoring stability to the banking system. After an initial positive response, investors and lenders quickly realised that the Irish State could not cover the total €440bn liability.

Deposits flooded out of the system and the European Central Bank insisted on a bailout to allay fears of imminent bankruptcy, while it pumped in emergency loans to the banks.

Those loans have also declined sharply in recent years but remain at around €50bn. AIB at least is still unable to fully finance its operations in the market and the confusion over Cyprus will not help the restoration of normality.

The Government's main liability now is the €20bn invested in AIB, and possible losses on the operations of NAMA. Some €30bn has been lost in Anglo.

The Irish Independent also reports that lending by Irish banks to small business fell 5pc last year, despite lenders' repeated claims they are "open for business".

New statistics from the Central Bank paint a bleak picture of credit in the SME sector.

During 2012 the banks doled out credit worth €25.7bn to non-financial, non-property related small and medium enterprises. That was down 5pc year on year, and the rate of decline continued through the end of last year.

During the fourth quarter alone lending fell €431m compared to the same period in 2011, a slide of 1.6pc.

Overall, gross new lending to non-financial small firms topped €677m during the final three months of 2012 – the highest level since 2010. There was just over €59bn in credit outstanding in the non-financial SME sector at the end of last year.

In a sign of the long-term issues in the SME sector though, the majority of that €59bn is locked into the property related areas of construction and real estate. During the boom, many firms indulged in property plays which are now blighting businesses that are otherwise in healthy condition.

The banking lobby expressed dismay at the results and highlighted the fact that overall lending was now at its highest level in more than two years.

"The report appears to be a bit more negative than we expected, and we are flummoxed by that," said a spokesman for the Irish Banking Federation.

"The overall lending figure is the highest it's been in a number of years since 2010.

"The reason the overall stock is down is businesses are still repaying more than they're borrowing and the economic environment is still very challenging – that's the bottom line.

"There are positive signs and that has been seen with the new lending figure being up, and that has been bolstered by various business sentiment surveys which have been on the up in recent weeks. There remains, however, a lot of problems both in the SME sector and the wider economy," he added.

But the acting head of the Small Firms Association said the declines were indicative of the problems facing the sector.

"This reflects what is happening on the ground regarding SME lending. The banks are still repairing their balance sheets and while this is happening lending will suffer," said Avine McNally.

Meanwhile, AIB has been accused of hiking up fees on business current accounts by as much as 165pc.

According to the retail trade group RGDATA, AIB has informed many of its business customers that from June 1 the bank intends to scrap 17c and 25c transaction rates for lodging cash and charge a standard fee of 45c per €100 lodged.

This is a 165pc increase in fees for many RGDATA members who bank with AIB, the group claim.

"Our members are extremely angry at this news. It is incomprehensible that AIB is taking this action at a time when family owned shops are fighting for survival with turnover in 2012 down on 2011," said the group's director general Tara Buckley.

"Independent shops have taken every step to reduce their costs and manage their businesses more efficiently. Margins in the trade have been squeezed and many shops are barely breaking even."

AIB said the change came "following a review of negotiated fee arrangements on certain business current accounts".

The Irish Times reports that a significant reduction in degree programmes and an end to “problematic predictability” in the Leaving Certificate have been announced as part of a major overhaul of the final State exam at second level and the third-level admissions system.

Minister for Education and Skills Ruairí Quinn also announced a review of grading bands at Leaving Cert level.

The strategy, Supporting a Better Transition from Second Level to Higher Education , was outlined yesterday by a joint body representing the Irish Universities Association, the National Council for Curriculum and Assessment, Institutes of Technology Ireland, the State Examinations Commission and the Higher Education Authority.

The plan was formulated in response to “collective concern” over the pressure placed on students by the points race, the Minister said.

He outlined three key “directions for action” – a reduction in the number of Level 8 programmes at third level (honours degree courses), a review of Leaving Cert grading bands and an external analysis of the predictability of content on Leaving Certificate exam papers.

The number of Level 8 programmes on offer in the universities and institutes of technology has tripled in the last 15 years, to 946.

Points instability
Philip Nolan of the Irish Universities Association said the proliferation of courses was artificially inflating points requirements and creating points instability from year to year.

“Many of these courses are simply variants of the main discipline. Students face very complex choices and early specialisation. The number of Level 8 courses must be radically reduced,” he said.

Mr Nolan confirmed he had the commitment of the seven university presidents to move together to recommend to their academic councils a significant reduction in entry routes.

An expert group has reported a reduction in Leaving Cert grading bands could also reduce pressure on students. In 1992 the old ABC system was broken down into 14 smaller bands such as A1 and A2.

‘Sole focus’

“Our current granular grades system is becoming the sole focus for some students and teachers,” said Anne Looney, chief executive of the National Council for Curriculum and Assessment.

“The feedback we received from teachers is that in order to optimise student performance, learning in the real sense of the word is being ‘driven out’.”

The group will now work on finding an approach to grading that reduces the bands.

The third element of the joint initiative involves the first external examination of the Leaving Certificate.

The review, to be carried out by the Oxford University Centre for Educational Assessment, is set to establish areas of “problematic predictability” in the Irish terminal State exam system and make recommendations.

The Minister stressed that commitments made yesterday would not affect students currently in the Leaving Cert cycle. “I expect to see a full implementation plan before the end of the year, with clear plans for phased implementation beginning for students entering the fifth year in 2014,” he said.

“Major changes will not occur without due notice being given to schools, parents and students.”

Employers group Ibec has welcomed the decision to broaden the entry routes into the arts, science, business and engineering faculties.

“In a fast-changing business environment, it is difficult to predict future skills needs precisely, so it is more important for students to have a thorough grounding in a core discipline,” said Ibec’s Tony O’Donohoe.

The Irish Times also reports that Google plans to make digital eyeglasses in the US with Foxconn Technology Group according to a person familiar with the plans.

The eyeware, designed by Google and featuring software and cameras, will be made by the Taiwanese company at its factory in California, the person said, asking not to be identified because the plans are not public.

Google co-founder Sergey Brin is touting the device, dubbed Project Glass, as the future of mobile computing after describing smartphones as "emasculating".

Fashion designers, skydivers, acrobats and pilots have been used by Google to demonstrate the eyeglass computers, according to posts on the project's website.

The Taiwanese company is the world's largest contract manufacturer of electronics. The Financial Times reported earlier today Foxconn's flagship, Hon Hai Precision Industry, will make the device.

Google plans to invite a limited number of users to test the interactive glasses in the next few days after conducting an online competition, the California-based search engine provider said yesterday.

The Irish Examiner reports that Paddy Power is betting on success in Cork after spending just short of €1m on five outlets from betting chain Jameson Racing.

Four of the outlets are located in Cork — in Blackpool, Popham’s Avenue, Ballintemple and Ballincollig. The fifth is located in north Dublin.

Paddy Power bought the shops looking to even the odds with its main competitor, Ladbrokes, which had a larger presence in Cork. Industry sources suggest between €900,000 and €1m was paid for the businesses.

As a result of the purchase, there will be five jobs and the 14 current employees in the chain will retain their jobs.

Paddy Power will take possession of the locations at close of business on March 28, and they will reopen with a full Paddy Power makeover on Monday, April 1, well in time for the Irish Grand National from Fairyhouse.

A spokesperson for Paddy Power said: “We’re delighted to be doing the deal with Jameson Racing. It will be a tough weekend for our property team to get all the shops ready and they will definitely miss their Easter Sunday lunch, but we are confident when the outlets rise as Paddy Power on Easter Monday, it will all be worth it.”

Each location will have new 47” TVs installed to show live racing, soccer, and other sports action on Sky Sports and Setanta.

Paddy Power’s outlets in the Republic now total 219. Jameson Racing will continue to operate two outlets, one in Togher, Cork, and the other in Templemore, Co Tipperary.

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