Inside the world of business
Will banks lend an ear to O'Keeffe?
AND SO it continues. The debate about whether viable businesses are gaining access to credit shows no signs of abating.
Minister for Enterprise Batt O’Keeffe’s announcement yesterday that he is to “summon” the State’s top bankers to discuss lending practices may have been designed to show that he is taking a hard line with bankers. Instead, it served to highlight the inadequacy of the Government’s response to the issue.
As part-owner of the two main banks, the Government has consistently adopted a hands-off approach to the issue, refusing to directly order the banks to improve their lending practices.
Even John Trethowan’s Credit Review Office, which, despite its merits, has received a paltry 10 applications so far, has no statutory authority.
O’Keeffe may have felt he was striking a chord yesterday in his statement.
“It is not acceptable that lip service be paid to Government demands of banks to lend to viable businesses,” his statement reads.
“Now is the time to show gratitude to Irish taxpayers for the massive sacrifices they have made in putting Ireland on the road to economic recovery after the arrogance, greed and reckless irresponsibility of our bankers that brought the country to her knees.”
His indignant tone is all well and good, but O’Keeffe is not a bystander or outside commentator. He is a Cabinet member who is directly responsible for the public interest in the banks that are partly owned by the taxpayer, and as such he should have the power to demand action.
His statement gives no indication that his meeting with bankers will be anything more than a robust exchange of views – at the very most. The only commitment made by O’Keeffe is that, if banks are found not to be lending, he “wants to know why” – a threat that is hardly going to keep bankers awake at night.
It will take a lot more than talk to open up credit channels. As long as the financial institutions continue to call the shots in terms of lending commitments, the present situation will continue.
Irish Life & Permanent flexes its muscles
YOU COULD be forgiven for thinking Irish Life & Permanent (IL&P) has suddenly begun flexing a few muscles.
The banking, pensions and life assurance group said yesterday that the “restructuring” of the Irish banking industry would create opportunities for its businesses. It said it was working with advisers and rating agencies to determine how best to exploit them.
The opportunities will result from the fact that the five banks which the State is bailing out of their bad property loans will have to sell assets to qualify for this support.
The EU has already told Bank of Ireland it must sell Bank of Ireland Asset Management, life and pensions company New Ireland and mortgage lender ICS.
IL&P has so far thrown its hat into the New Ireland ring. It is also likely to consider ICS and, going by its statement, anything else that comes up.
Along with this, IL&P is contemplating moving its banking arm, Permanent TSB, into the proposed “third force” in banking, in which it would then be a major shareholder.
Once the State has used the National Asset Management Agency to take over the bad bits of AIB, Anglo Irish Bank, Bank of Ireland, EBS and Irish Nationwide, the remaining viable bits will be juggled around to make a “new” Irish banking industry.
The proposed third force, possibly made up of Permanent TSB, EBS and Irish Nationwide, will supposedly be an important part of that.
But Irish Nationwide chairman Danny Kitchen is not sure Brussels, which has the final call on all this, will ratify marrying his institution with EBS, and there are plenty of other complications besides this.
This may be why IL&P is flexing those muscles. As it expands, which seems likely, and the third force remains in gestation, which also seems likely, IL&P will become the de-facto third force in Irish banking.
Which of course means the “new” banking industry will look a lot like the old one, but with less competition.
Nama chairman reveals softer side
DIFFERENT STROKES for different folks. The clear unease in Northern Ireland over the impact of the National Asset Management Agency (Nama) seems to have brought out the softer side of its chairman, Frank Daly.
His remarks at the first Northern Ireland briefing organised by the agency were in contrast to the “string-’em-up” rhetoric he has indulged in when briefing business leaders from the Republic on how the agency proposes to deal with large property developers.
In Belfast yesterday Daly was more measured, promising that Nama would deal with its “clients”, as it likes to call them, “on the basis of informed, commercial and objective criteria”.
One explanation may be that Nama faces a somewhat different challenge in the North. Although it is acquiring a fairly substantial loan book – about €5 billion – it is pretty fragmented, with only a handful of Northern developers owing about €100 million and some 150 companies owing closer to €20 million.
Smaller loans might imply smaller egos and perhaps a greater sense of realism among Nama’s prospective Northern clients.
For regular commentary on business and economic issues visit our blog, Current Account, at irishtimes.com/blogs/business
Twitter users can receive links to the latest business news and blog posts by following us at twitter.com/IrishTimesBiz
You can listen to our weekly business podcast at www.irishtimes.com/business/podcast
