Inside the world of business
Goodbody case unlikely to benefit either side
FINANCIAL SERVICES businesses rarely choose to go to court, even less so when they are battling a peer.
Which makes it all the more surprising that Goodbody Stockbrokers have found themselves engaged in a very public dispute with Tilman Brewin Dolphin following the defection last month of three senior staff to the British group, who are expanding their business here.
Goodbody is claiming in the High Court that two former portfolio managers and a pensions manager were induced to move companies with the offer of up to €700,000 in “hello” money. They further claim that some or all of the three took with them confidential information.
For its part, Tilman Brewin Dolphin denies impropriety and separately is seeking to restrain the Irish broker tearing up a contract to provide it with certain services.
The court will decide in its own time on the merit of the allegations but it is difficult to see how either side has let it get this far. Goodbody is clearly smarting. These are not the first departures it has suffered but it appears to have taken exception to the manner of the approach.
Naturally, the issue of confidential information is delicate but neither side could consider having the issue laid out in court and in the media as positive for its reputation. And the staff have clearly decided to move on.
Terminating an agreement to provide financial services seems equally short-sighted. The value of the deal has not been disclosed, although it is understood to be a high six-figure sum. Losing the service could disrupt Tilman greatly; losing the revenue will hardly improve the position of Goodbody.
ECB bond-buying a great backstop
SO THE Central Bank governor Patrick Honohan has given the thumbs-up to the European Central Bank’s new bond-buying plan in the latest attempt by Frankfurt to save the euro from meltdown.
And why wouldn’t he? It could at the very least be useful to Ireland’s efforts to make a return to the markets at a sensible interest rate (unlike recent bond sales).
Honohan said yesterday the bond-buying programme would be “an underpinning and important backstop for Ireland and the Irish financial sector as well”.
Moody’s, the only credit ratings agency to rank Irish sovereign debt in the junk yard, told The Irish Times last month that “the availability of a backstop” would help Ireland avoid a second bailout at the end of the EU- International Monetary Fund programme in December 2013.
The agency was referring to the possibility of the Government seeking a follow-up programme “more in a precautionary sense” to ease the country’s market return.
ECB president Mario Draghi said on Thursday the bank may buy the debt of bailout countries such as Ireland as they go back into the markets, so Frankfurt’s latest plan could in a sense be that backstop. While it is clear that the State is eligible for the programme, the question is whether the country would need the ECB as it makes a full return to borrowing in the open financial markets?
The €5.2 billion, including €4.2 billion of new money, raised in July and the €1 billion raised last month on amortising bonds, shows that the country can borrow but at a heavy cost – about 6 per cent.
The bond yield on the Government’s benchmark nine-year debt fell again yesterday to 5.7 per cent, so if the ECB programme smooths out what Draghi called the “bad equilibrium”, then the Frankfurt backstop may not be needed for Ireland if yields continue falling.
But there’s still a lot to borrow to cover the remaining €10.6 billion that must be raised for 2014 and €17.5 billion in 2015, so Irish bond purchases in the secondary markets by the ECB, each time the National Treasury Management Agency tries to prise more money from debt investors, could help the downward trajectory on yields.
Every little helps.
Custom House Capital subject of new ebook
HAD THE country’s banks not blown up so spectacularly, the failure of Dublin investment firm Custom House Capital may have taken up more columns on the financial pages, and indeed front pages as well as broadcast news bulletins.
The misuse of €54 million of investors’ funds, and possibly as much as €90 million, to cover losses on property investments led by the firm’s managing director Harry Cassidy is one of the most shocking stories to have emerged in Ireland’s economic bust.
House of Cards: The Inside Story of the Fall of the Custom House Capital, the new ebook written by financial journalist Niall Brady which was published last week, helps fill in plenty of gaps in the Cassidy back story and shows how many failed to ask crucial questions of the firm’s operations.
When concerns were first raised, insufficient action was taken. The company was swan-like in its final years, appearing graceful above the surface while paddling frantically underneath to stay afloat.
All this took place while the Central Bank was heavily scrutinising the business amid concerns about practices surrounding the management of client funds.
The Central Bank has argued that it didn’t have the tools to deal with the problems at the firm.
It has since asked the Department of Finance for better tools – namely the power to appoint administrators to investment companies.
The Central Bank (Supervision and Enforcement) Bill 2011 is still being drafted but it should afford the Government the opportunity to slip these powers in to prevent a repeat of Custom House Capital happening to other investors.
The Department of Finance has said no final decisions have been taken on whether to introduce these powers in this legislation.
Given the plethora of legislation required to change financial regulation in this country, perhaps the department should take the opportunity to consolidate all the Central Bank’s powers into one overarching piece of legislation.
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