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News : International Last Updated: Dec 13, 2013 - 4:15 PM


Markets: Central Bank fines Citibank Europe Dublin for breach of Irish regulations
By Finfacts Team
Dec 13, 2013 - 2:57 PM

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Citibank headquarters at Customs House Quay, Dublin 1, in the International Financual Services Centre (IFSC)

The Central Bank said today the it has entered into a settlement agreement with effect from December 11, 2013 with Citibank Europe plc, a regulated financial services provider, in relation to contraventions of the Central Bank’s Requirements for the Management of Liquidity Risk  and the European Communities (Licensing and Supervision of Credit Institutions) Regulations 1992 (S.I. 395 of 1992).

The Central Bank reprimanded the Irish unit of the US financial services giant and required it to pay a monetary penalty of €550,000.

Five contraventions relating to regulatory liquidity reporting, and occurring during the period from January 02 2009 to July 31, 2012, were identified. During the Relevant Period:

1. the firm failed to ensure the accuracy of its liquidity reporting to the Central Bank in accordance with sound administrative principles, in breach of Regulation 16(1) of the Regulations;
2. the firm failed to have adequate internal controls in place to ensure the accuracy of its regulatory liquidity reporting in breach of Regulation 16(3)(c) of the Regulations;
3. the firm failed to comply with each of (a) Section 4.1 Table (i) and (b) Section 4.1 Table (ii), of the Requirements by failing to apply haircuts (discounts on cash-flows) to retail and corporate deposits to reflect the perceived risk associated with holding such deposits, before including these deposits in liquidity returns; and
4. the firm failed to comply with Section 5.4 of the Requirements by including encumbered assets (security repurchase agreements) as part of its portfolio of readily marketable assets reported as liquid assets in returns.

FBD Holdings: RSA adds further to Irish reserving and capital, CEO resigns; Eamonn Hughes comments - - "RSA announced this morning that it has completed its review of Irish reserves, first announced on November 5. The Irish reserves will need to be strengthened by £130m, the majority of which relates to bodily injury strengthening in motor and liability lines. This is in addition to the £70m previously announced on November 8 relating to claims and finance issues in Ireland. In the earlier statement, RSA indicated it was injecting €100m of capital into its Irish operation though has now raised this to c.€160m (£135m) to ensure the solvency ratio is maintained above 200%.

RSA in Ireland has premium income of c.€400m. Strong growth and acquisitions (€83m purchase of 123.ie in 2010) has seen it jump from No 5 to No 1 player in the market, with a 16% market share (and c.20% in the motor market). Over the past 4 years, RSAs premiums in Ireland have been £294m, £305m, £353m and £348m in 2009-12 respectively. So the additional reserving represents a significant portion of its recent premium income.

The events at RSA, compounded by today’s announcement, are likely to lead to significant turmoil at the country's largest general insurer. This should signal a pause for breath for some time in its relentless advances in market share. The capital injection by RSA and additional reserving is also likely to require a return through higher premiums as well, so the business case for higher premiums in the market next year, particularly as domestic demand stabilises (-1.4% this year, +1.1% in 2014), is building. This should be positive for the other larger players in the market, like FBD."

Economic View: Rental growth continues to accelerate; Dermot O'Leary, chief economist at Goodbody, comments  - - "Rental growth continued to accelerate in November, as tightening supply continues to impact. According to the private rents index of the CPI data, rents grew by 8.1% yoy in November, up from 7.6% yoy, and the fastest rate of growth since early 2008.

Although the CSO data do not provide a regional breakdown of the data, it is likely that Dublin continues to lead the way. Recent data from the property website Daft.ie shows that the stock of rental properties continues to fall across the country, but in Dublin, the available stock is now more than 30% below 2007 levels, and is 50% higher than 2007 levels in the country as a whole.

We estimate that the rental yield stands at 5.6% nationally. This is relatively unchanged over the year, with house price increases offsetting the increase in rents. However, as we showed in our property report (Foundations of recovery, 27 September 2013), there are significant variations across property types and regions."

Banks: Department of Finance mortgage restructure data for October; Eamonn Hughes and Colm Foley of Goodbody comment - - "The Department of Finance released its monthly data set for October on residential mortgage arrears and restructures. The data covers the 6 main banks (AIB/EBS, BOI, PTSB, Ulster Bank and KBC), which are part of the Central Banks Mortgage Arrears Resolution Targets. There has been an increase of 3,855 permanent mortgage restructures in October to bring the total to 49,032, total mortgage accounts in arrears of greater than 90 days past due has fallen by 302 accounts this month and the number of temporary restructures continues to fall, indicating a greater utilisation of permanent restructures.

Total PDH (Principle Dwelling Houses) mortgage accounts in arrears greater than 90 days fell in each of the last two months. Total restructures are picking up and in particular long term solutions (16%) are increasing versus temporary options (8%). The most common form of permanent restructure opted for is term extension, followed by arrears capitalisation and interest modification, while 54% of temporary restructures are through interest only payments. In the BTL segment of the market, the number of accounts in arrears greater than 90 days, which accounts for c. 25% of total mortgages in arrears, continues to increase modestly, by 129 accounts to 26,489, although early stage arrears has fallen slightly. Similar options are being utilised for BTL as PDH accounts.

While we acknowledge the data is focussed on volumes rather than value, we note the stabilisation in the arrears figures, which tallies with recent commentary from AIB and BOI indicating a slowdown in the pace of arrears. In fact, BOI recently highlighted that its own arrears figures declined in October."

Banks: IBRC sale process going well, provides refinancing opportunity for domestic banks; Eamonn Hughes and Colm Foley ad - - "The Department of Finance yesterday indicated that binding bids on the €2.5bn Evergreen portfolio, part of the IBRC liquidation, have been received for 84% of the portfolio (by par value) at prices in excess of the independent valuations.

IBRC is being wound down and the €22bn par value of the loan book is for sale, though provisions against this loan book number about €10bn. There is a large UK commercial property portfolio, an Irish and European commercial property portfolio and an Irish residential mortgage portfolio for sale in addition to the Evergreen (Irish corporate loans) portfolio. Loans not sold to third parties will be taken over by NAMA at the independent valuations.

From the State’s perspective, the more loans sold to third parties the less loans that will transfer into NAMA. The Minister last night commented that further calls on the Exchequer over those already budgeted are not expected as a result of this process. For the banks, the more loans sold will imply less of a potential impact on their NAMA subordinated bonds (where AIB marks at 10c in the euro and BOI at 44c). In addition, and more importantly in the short term, the IBRC loan sale process is likely to provide refinancing opportunities for the main domestic banks for loans currently funded by banks withdrawing from Ireland."

US Markets

In New York Thursday the Dow fell 104 points or 0.66% to 15,739.

The S&P 500 slid 0.38% and the Nasdaq slipped 0.14%.

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index dropped 0.3% on Friday.

Japan's Nikkei 225 rose 0.40%; China's Shanghai Composite slid 0.31%; South Korea's KOSPI declined 0.26%; Australia's S&P/ASX 200 lost 0.71% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index dipped 1.00%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.07% in early afternoon trade Friday.

In Dublin, the ISEQ  is down 0.11%

FBD is up 2.89%.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3719 and at £0.8425.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Thursday the BDI rose 38 points or 1.65% to 2,337.

Global rebalancing — the tanker scrapyard index?

Crude oil for January 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $98.36 down 15 cents from Tuesday's close. In London, Brent for January 2014 delivery is trading on the International Commodities Exchange at $108.89. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013: US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,224.40 down $1.60 from Thursday's closing.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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