Inside the world of business
Thankfully, no sign of any rate-rigging at Irish banks
The Government and regulatory authorities must be breathing a sigh of a relief that there is at least one scandal into which the Irish banks have not been drawn – the rate-rigging scam that has beset the UK bank Barclays and will drag in other major financial institutions.
Being a smaller fish in a bigger pond – and tighter controls – protected the Irish banks from the temptations of the markets.
Barclays was one of 18 banks that contributes daily rates that sets the “Libor” or London inter-bank borrowing rate which sets the pricing on everything from mortgages and student loans to interest rate derivatives around the financial world. This was rigged to benefit the positions of traders elsewhere in the bank. Many of the global institutions in the International Financial Services Centre in Dublin have loans and counterparty deals priced off the Libor rate so they may well be affected by the scandal.
Bank of Ireland and AIB are among more than 40 banks across Europe that set the equivalent rate for the euro area. Both issue a range of inter-bank rates every day covering various maturities from one week up to one year. This is managed within Bank of Ireland global markets division, the bank said, while AIB said the rates are set in its treasury division by a unit that has “a prudential liquidity management mandate, does not have a profit/loss line nor is it responsible for managing interest rate risk on derivative or other interest rate products”.
In other words, the bank’s systems means there is no potential to massage rates for the benefit of others within the bank, as happened at Barclays.
The Central Bank is watching developments in the scandal in the UK but neither its counterpart in Britain or regulators in the US have contacted the Irish authorities about similar rate massaging by any banks in Ireland. That’s one less thing the Irish banking sector has to worry about.
Questions need to be answered over payment of race suppliers
Festivals are as much a part of the Irish summer as rain. Everyone has one, or wants one, because of their perceived benefit to the local and national economies. They bring in visitors, boost hotels, guest houses, restaurants, pubs, etc.
Galway is a past master at them. It has just finished the Volvo Ocean Race, a nine-day shindig. It is gearing up for its arts festival followed by the daddy of them all, race week, which is often a massive boost to the bookmakers, a key part of the economy, and a group which, apparently, could do with a few quid.
However, the ocean race was marred by suppliers’ complaints that they were not paid as promised. A few of those who took part this year said that they had arrears dating back to the first ocean race in 2009.
The organising company, Let’s Do It Galway, pledged that everyone would be paid, and, on Friday, saved itself some embarrassment by paying suppliers, ensuring that at least some did not pull out. The money turned up and the festival was a success, but there are still questions to be asked.
The first is of State tourist body Fáilte Ireland, which provided €4 million in funding. Asked about the difficulties faced by suppliers at the weekend, the agency said it had received no reports of the problems. That was not a satisfactory answer.
One stipulation that it should make ahead of backing anything is that the organisers ensure they can meet their liabilities, irrespective of how successful or otherwise the event turns out to be. And if there is a problem. the body has to be pro-active and establish what the organisers are, or are not, doing.
One of the tangible benefits of these events is the spin-off for suppliers, if they are not paid, or have to wait an excessive period for payment, that benefit is considerably lessened, or negated altogether.
Given Fáilte Ireland’s ambitious plans for the Gathering next year and the spin-off the agency would expect to generate from that, one thing it needs to do is to ensure everyone who contributes should benefit, and benefit without needless delays.
Patent system vote is postponed
Hopes that a European-wide patent system might finally be on the way received a set-back last week when MEP’s meeting in Strasbourg decided to postpone a vote.
The idea of a common EU patent – rather than the current system whereby businesses and inventors who wish to protect their intellectual property have to apply for patents in each EU country separately – has been floating about for almost 30 years. At last month’s EU summit in Brussels, the idea looked like it had finally got the go-ahead from the European Commission, with 25 out of 27 member states, backing the agreement.
Herman Von Rompuy, the European Council president, called it a “truly historic agreement”. However, at the last minute the European Council removed three articles in the legislation which had previously been agreed in conjunction with parliament.
MEP’s weren’t happy, and decided to postpone the vote.
While on one level the episode serves to illustrate the arcane nature of European processes and decision-making, it has also delayed a system that could make a real difference to small businesses. According to the European Commission, the new EU-wide system would mean patents would cost around €680 compared to an average of €1,850 for an American one.
It is also hoped to favour SMEs, in particular, by encouraging them to patent innovations at a much cheaper cost as businesses will no longer have to register their ideas in a range of countries and through a range of languages.
Any legislation that reduces red-tape and costs for small businesses should be welcomed.
As it winds its way through the European parliamentary system, it is hoped that is a decision on a common patent system, is made sooner rather than later.
Quote of the day
I can't be confident about anything after learning about this, this cesspit - Bank of England deputy governor Paul Tucker, appearing before MPs yesterday
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EU finance ministers meet in Brussels to try to unravel complicaitons in efforts to support the Spanish economy after last week’s EU summit
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