The Irish Independent reports that Ireland and Portugal should get seven more years to repay loans from the EU
to facilitate their return to full market financing, a recommendation from
international lenders to EU policy-makers says.
Such a move, if accepted, would mark a significant concession to Ireland,
helping to seal its return to normal borrowing on markets as well as offering a
significant boost to Portugal as it struggles to push through spending cuts.
Ireland and Portugal received emergency loans from the EU in 2010 and 2011
respectively after investors refused to lend to them at sustainable prices.
The average maturity on Ireland's EU loans stands at about 12 years. By
extending the maturity, the payments are spread over a longer time, reducing the
burden on the countries.
But Ireland will need to roll-over around €20bn a year in 2016-2020 while
Portugal will need the same amount per year between 2015 and 2021, a paper
prepared for junior EU finance ministers and central bankers said.
The paper was drafted by representatives of the European Central Bank, the
European Commission, the International Monetary Fund – the troika – and the
European Financial Stability Facility (EFSF).
It will be presented to EU ministers who meet in Dublin on Friday and
Saturday to discuss the extensions.
Finance Minister Michael Noonan said in Limerick last weekend that no
decision will be taken this weekend at the finance ministers' meeting.
Because the meeting is described as informal, the ministers are likely to
give only political support for the extensions for both countries, with a formal
decision to follow only later next month.
But while Ireland is likely to get full support, the backing for more time
for Portugal is likely to be made conditional on Lisbon finding new measures to
fill a €1.3bn gap in the 2013 budget following a ruling by Portugal's
constitutional court that some of the earlier planned steps were illegal.
"That is the maximum one can expect," said one senior Eurozone official
involved in the preparations for the meeting.
While much of the debt that falls due between 2015 and 2022 for
Portugal and Ireland is privately owned, it also includes IMF and EU loans.
Data on websites of the EFSF and the EU bailout fund, ESFM, shows
that redemptions of EU loans account for €8.6bn in 2016 for Ireland, and
almost €7bn in 2016 and €8.7bn in 2021 for Portugal.
Dublin and Lisbon have therefore asked EU ministers to extend the
average maturity of the loans by 15 years since the EU redemptions would
have to be financed by market borrowing.
The paper considered extensions of two-and-a-half, five, seven and
10 years and more, rejecting the shorter extensions as not beneficial enough
for the two countries.
The Irish Independent also reports that plans to
solve the mortgage crisis won't work, a new report warns.
It comes as the Government's attempts to deal with the mess received a
separate blow with the announcement that financial regulator and Central Bank
deputy governor Matthew Elderfield is to step down in six months' time.
The report from the Money Advice and Budgeting Service (MABS) finds the
typical struggling homeowner in arrears is older than many experts previously
thought, casting doubt on the official split mortgage plan to tackle the crisis.
It finds that the majority of people in mortgage distress are aged between 41
Experts said this was a new and explosive revelation and contradicted
perceived wisdom that most of those in arrears are in their 30s.
Regulators and the Department of Finance are hoping that most of the almost
100,000 distressed borrowers will be offered split mortgages.
This is where the mortgage is divided, with repayments made on the main part
of the mortgage and the other part "parked" and dealt with later.
But the report on
mortgage arrears, a copy of which has been seen by the
Irish Independent, casts serious doubts on whether this will work.
The report, commissioned by the Department of Social Protection, examines
almost 6,000 mortgage arrears cases dealt with by MABS offices.
Most of those who go to MABS because of mortgage difficulties are at an age
when they should be nearing the end of their mortgage. However, they topped up
their home loans during the boom, which has left them deep in debt.
According to the report, solutions "such as debt warehousing/split mortgages
will not provide relief to many MABS clients in mortgage difficulty".
Instead, banks would be better off taking the mortgage and other debt
together and writing down a portion of it to a level the borrower can afford to
The report also finds it is taking banks two months to reply to
distressed borrowers with offers to deal with their situation. It calls for
the Central Bank to take action to deal with the delays.
Lenders are also criticised for offering arrangements to borrowers
that they have no hope of meeting. This is because the repayments are set
The banks are accused of offering solutions to those in arrears
which focus on the mortgage debt only and ignore other borrowings.
Finance Minister Michael Noonan and Mr Elderfield last month told
six banks to meet targets for the number of mortgages that are more than 90
days in arrears, forcing them to make offers that last more than a few
At least half of those with residential and buy-to-let mortgages at
AIB/EBS, Bank of Ireland/ICS, Ulster Bank, Permanent TSB, KBC Bank and ACC
will have an offer of a long-term restructuring.
The report finds that 16pc of its clients in mortgage trouble owe
between €20,000 and €30,000 in secondary debts.
And 19pc owe more than €50,000 on credit cards, personal loans and
credit union loans, according to the state-funded MABS which operates
through 63 offices around the country.
'MABS Clients and Mortgage Arrears', by Collette Bennett, is
due to be published in a few days.
The Irish Times reports that just over three years into a five-year contract, Matthew Elderfield (47)
surprised everyone in the financial sector yesterday by declaring his intention
to leave the Central Bank in October and return to the UK.
While nobody thought that the Englishman would spend the rest of his career
here, there was genuine surprise at the timing of his announcement.
It was only four weeks ago that Elderfield shared a platform with Minister for
Finance Michael Noonan to announce performance targets for lenders designed to
deal once and for all with mortgage arrears.
There was no detail provided on what “other interests” he might be pursuing but
the speculation suggested a move into the private sector rather than another
role in financial regulation or supervision.
The clue is in the line that says he will “step away with immediate effect from
involvement in supervisory and other issues if and where a conflict could be
There’s no doubt that Elderfield has worked hard during his relatively short
spell here and greatly enhanced his CV from his time on Dame Street.
But how should we rate his contribution to resolving the financial crisis in
Ireland over the past three years and restoring the credibility of the
Elderfield came to Ireland at a time when the reputation of the country’s
financial sector was in tatters after years of lax regulation. He made no secret
of the fact that he felt the Central Bank was under-resourced and lacked
sufficient skills in certain key areas to tackle the crisis that was unfolding.
He also argued for greater powers of enforcement.
Elderfield made his mark early on by appointing administrators to Quinn
Insurance Ltd at the end of March 2010 over concerns about its solvency ratios.
This set in train a series of events that ultimately led to the collapse of Sean
Quinn’s business empire.
It was a gutsy move and Elderfield remained resolute in the face of enormous
pressure from various quarters.
His “show me the money and we will take a different approach” quote in response
to claims by Sean Quinn that he could sort out the issues around the insurer was
particularly memorable. Nothing that has happened since with the Quinns suggests
that Elderfield’s move was unjustified.
Elderfield is also credited with implementing rigorous stress tests on the banks
a couple of years ago.
On the flip side, some would argue that the Central Bank has been a tad
heavy-handed in the raft of fines it has issued to various investment advisers
for what are perceived as relatively minor breaches of rules.
Those involved in the IFSC also claim they are over-burdened by regulations that
are more suitable to high street banks rather than the specialist work they
In response, Elderfield might point to the collapse of Depfa Bank in the IFSC as
justification for imposing rigorous regulation. It might also be argued that the
regulator dropped the ball in relation to the collapses of Custom House Capital
and Bloxham Stockbrokers.
And there are many who feel that it has taken too long to get to grips with the
mortgage arrears issue. We’re five years into the financial crisis and our banks
still haven’t faced up to this major problem.
At the end of December, 94,488 private residential mortgage accounts were in
arrears of 90 days or more. That’s 11.9 per cent of the total. Another 28,421
buy-to-let properties are in arrears of three months or more.
To date, the banks have been content to kick the can down the road.
The regulator said the new targets will be backed by “rigorous new provisioning
standards” and the “possible” imposition of higher capital requirements.
Having finally set the ball in motion to deal with the arrears crisis,
Elderfield’s departure is hardly helpful to its implementation and it will pass
to his successor to get it over the line.
Noonan said Elderfield was leaving at a time when “normality” is returning to
the financial system. He might have added that the Englishman has helped to
restore the reputation of the regulator.
These might ultimately prove to be Elderfield’s legacy here.
The Irish Times also reports that
Sir James Crosby must be given some credit for volunteering to forgo a
chunk of his lucrative HBOS pension and, in an unprecedented move yesterday,
surrendering his knighthood. His actions are in stark contrast to those of “Fred
the Shred”, the former RBS banker who was stripped of his knighthood in 2012 and
gave up part of his even more lucrative pension only after public and political
But that’s about as far as Crosby’s credit goes. His decision comes just a week
after an excoriating report into HBOS branded him one of the primary architects
of the doomed bank’s downfall, along with former chairman Lord Stevenson and
another former chief executive, Andy Hornby.
Publication of the damning report – An Accident Waiting to Happen – came five
years after the collapse of the bank but the parliamentary commission on banking
standards made it clear that, even without the global financial crisis, HBOS
would have gone bankrupt, a victim of its high-risk strategy and incompetent,
reckless, delusional management.
Using some of the hardest-hitting language ever seen in a parliamentary report,
the commission talked of the “colossal failure” of the bank, created in 2001
through the over-ambitious merger of Halifax and Bank of Scotland. At the time,
the combined company was worth £30 billion but, said conservative MP Andrew
Tyrie, who heads the commission: “The sums would never have added up.” In 2008,
the bank was bailed out with more than £20 billion of taxpayers’ money,
necessary to prevent its complete collapse.
Knighted for “services to the financial sector” in 2006, shortly after he left
HBOS, Crosby said yesterday he was “deeply sorry. His knighthood had been “an
enormous honour” but he believed it was right he ask the authorities “to take
the necessary steps for its removal”.
Also being removed – again, voluntarily – is a near one-third chunk of Crosby’s
£580,000-a-year pension entitlement, taking it down to £403,000 per annum. The
former HBOS boss indicated that it had yet to be decided whether the amount
waived should go to support good causes or benefit shareholders.
That will still leave Crosby, who sold the bulk of his shares in the bank before
the financial crisis struck, with an index-linked pension of £406,000, rather
more than Fred Goodwin, who is rubbing by on £342,500. That is slightly less
than half Goodwin’s original £700,000, following his reluctant decision to
surrender £200,000 of it after he took out a lump sum of £2.8 million, which
reduced the £700,000 to £555,000 a year).
Crosby has quit his position as an advisor to the private equity firm
Bridgepoint, stepping aside last Friday, and has also given up his voluntary
role as a trustee of Cancer Research UK, as well as his place on the board of
the catering firm Compass. Following the report last week, the board of the FTSE
100 company had notably failed to give him any public backing - unlike his
fellow architect of failure, Andy Hornby, who received a glowing statement of
support from his current employers, the casinos company Gala Coral. Their chief
executive was “doing a great job” and has the complete backing of the business,
the company said.
Former HBOS chairman Lord Stevenson, meanwhile, remains a peer of the realm and
has yet to break his silence in the wake of the report. He enraged MPs on the
banking commission by claiming during hearings that he was not at fault because
his role at the bank was only part-time. Stevenson remains on the board of books
retailer Waterstones, and is a director of private equity firm Manocap.
The business secretary, Vince Cable, is looking at whether Crosby, Stevenson and
Hornby can be banned as company directors for life. So far, only one HBOS
executive, Bank of Scotland’s former head of commercial lending, Peter Cummings,
has faced sanctions in the wake of the affair. He was fined £500,000 last year
and banned for life from working in the City but complained of being
Crosby’s request to surrender his knighthood will now be considered by what’s
known as the honours forfeiture committee, led by the head of the civil service
and made up of Whitehall mandarins. It is unlikely to take them long to decide.
The Irish Examiner reports that
one of the least optimistic economic forecasters has become slightly less
pessimistic about the Irish economy’s prospects, upping its outlook for 2013 GDP
growth by nearly half a percent.In the spring edition of its quarterly economic observer, the Nevin Economic
Research Institute has predicted Irish GDP growth of 1% for 2013, to be followed
by 1.2% in 2014 and 2% in 2015.
Previously, the independent economic think-tank had given a gloomier outlook of
just 0.6% growth for this year and 0.8% in 2014, with the economy not likely to
see growth of over 1% until 2015.
However, NERI has remained firm on its other headline previous prediction — of
the Government failing to achieve its current budget deficit reduction target,
to 3% of GDP, by 2015.
The institute’s current forecast is for the deficit to be 3.8% of GDP by then.
However, it is still too early — and quite unlikely — that Ireland will require
a second bail-out, said Tom Healy, the director of the institute.
However, Dr Healy did add that, “without growth, the Government’s borrowing
targets look ambitious and call into question the feasibility of the adjustment
path currently being pursued”.
The institute’s latest bulletin also sees Ireland’s unemployment rate remaining
at 14.7% this year, before marginally increasing to 15% over the next two years.
It added that the country’s gross debt levels should peak at 121.1% of GDP this
year, before marginally reducing in 2014 and 2015.
Summing up the institute’s latest outlook, Dr Healy said: “The story behind
these figures is one of continued stagnation, with sluggish growth and ongoing
high levels of unemployment.”
Last week, the Central Bank marginally downgraded its GDP growth outlook for
2013, from 1.3% to 1.2%.
In March, professional services giant Ernst & Young slashed its growth forecast
for the Irish economy in 2013 from 1% to 0.1%.
It concluded that it will be 2015 before GDP growth tops 2%.
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