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I've heard that a lot but I'm skeptical of it. From what we discussed earlier, the regulator's job was to ensure that, amongst other things, the banks didn't lend more than 100/6.5% of their tier 1 capital and he seems to have done that. He refereed the banks to the appropriate international standards. The problem seems to be that those standards weren't good enough, not that this man didn't do his job.Quote:
Originally Posted by pete
In terms of prudential supervision, the role of the regulator is not just ensuring that banks are well capitalised on a point in time basis but also for the forseeable future. I would argue that they completely ignored the latter part.Quote:
Originally Posted by Student Mullet
Prudential supervision also covers liquidity and concentration risk and the Financial Regulator completely dropped the ball.
I would totally agree that the international standards failed, but I'm not sure that is enough to let the Irish regulator off the hook.
Consumer protection is the other key area of responsibility of the Financial Regulator (along with financial crime) and they really performed absymally here. There wasn't even a regime of consumer protection until last year, despite the Financial Regulator being formed 5 years (iirc) ago. The whole area of mortgage lending was ripe for enhanced scrutiny with house prices (and mortgage lending) rocketing and the Regulator did absolutely nothing (apart from a too-little-too-late change on high LTV lending last year).
At the end of the day, a lot of people were loaned amounts that were not in their best interests, and whilst these individuals need to take responsibility for this (caveat emptor must apply), consumer protection means that the Financial Regulator should be there to protect the consumers interests.
It plainly didn't.
Does that translate into saying that he is at fault for not anticipating the housing crash? That he didn't stop people from buying houses which were due to drop in price and he let the banks become excessively exposed to the building industry?
Agree entirely with ORA.
Student Mullet, in my opinion the regulator should have done more to avoid the "this time it's different" thinking that prevailed among both borrowers and lenders. High LTV mortgage lending and high levels of development lending is never a good idea.
In one sense the national regulator can't really be blamed: the international capital adequacy regime was clearly at fault: it was was conceptually misperceived, lent itself far too much to "regulatory arbitrage" (i.e., rule bending but not rule breaking) and was too dependent on the pereceived quality of credit ratings.
You're saying that it was his job to shout stop but he didn't?Quote:
Originally Posted by Stuttgart88
1) Failure to anticipate the housing crashQuote:
Originally Posted by Student Mullet
Banks at any point-in-time are supposed to be adequately capitalised to sustain them through a full economic cycle (which by its nature includes a crash). The fact the Irish economic cycle was so long is of limited excuse, as there are plenty of international crashes we could have used data for (UK 91-94, Japan 90's, US 80's, Scandinavia 90's etc.) but the Financial Regulator chose not to use this data themselves or force the banks to stress test on it.
2) Stopping people buying houses which were due to drop in price
Price drops are irrelevant up and until you can't pay your mortgage. Its clear some brokers and banks repeatedly broke their own rules in encouraging people to provide less than full information to maximise their borrowings. This is absolutely the Financial Regulators remit. This has led to people not being able to repay their mortgages.
3)Over-exposure to the property development industry
Large Exposures and concentration risk. FinReg was absolutely awol in allowing huge concentrations both at an individual institution level and systemically to a relatively small number of developers.
http://www.irishexaminer.ie/irishexa...933-qqqx=1.asp
It's even worse than we thought - LoI club owner comes to rescue of bank!
Disagree on this point. How do you define "best interests"? Consumer protection is to stop the consumer being ripped off. I dont see these instances as ripping off the consumer. Everyone went into these with their eyes open. The one guarantee is that house prices are going to go back up anyways.Quote:
Originally Posted by OneRedArmy
Isn't one of the big problems with Anglo Irish that they don't have an adequate deposit base so they have to borrow on money markets? Surely the Regulator has rules for minimum deposits?
:confused:
Yep, one failure of the Anglo model was its dependence on "wholesale funding" - borrowing both short & medium to long term from banks and other financial instutions. When Northern Rock went down in Sept '07 I immediately thought Anglo would struggle. There were subtle differences - N Rock depended on one type of wholesale funding, securitisation, almost exclusively, whereas Anglo mainly borrowed on an unsecured basis.
What astonished me in October '07 when Anglo reported interim results was that it had a deposit-to-loan ratio of 72% (if I recall correctly). I just thought that this felt wrong. Banks always engage in "window dressing" i.e., they try and make their key ratios look better at reporting dates than they'd look on non-reporting dates. Sean Fitzpatrick's director loan and temporary arrangement with INBS was an example.
In one sense it was felt that the ultimate regulator was the market. If the debt markets thought Anglo didn't have enough deposits their cost of debt would rise substantially, or even availability of debt would disappear. Likewise the stock market would make its feelings known. This is ultimately what happened. The fact that the market overlooked Anglo's financing model for so long probably lured everyone into a false sense of security.
It's funny in a sense, but all the old established sound banking principles (and other economic matters like growth cycles etc.) always seem to hold true. I'm still relatively young. I hope next time things get out of kilter - which they undoubtedly will - i'll have the sense this time to see it all coming that bit more assertively. I don't day trade or make many financial investments other than my pension, but with one hand I pat myself on the back for having invested every pension contribution I made since January 2007 in cash, but with the other hand I'm livid I didn't reallocate all my existing pension assets. Luckily my dad brought me up to be very cautious of debt.
There are none so blind as those that won't see.Quote:
Originally Posted by Billsthoughts
The FT cited psychological research into why so many experts failed to predict this crisis. Many actually did but the fact is that few people take on board information that doesn't suit them.
I don't think that can be regarded as a failure. At best, it was burying heads in the sand, but it's probably worse than that. I certainly felt that the property market would adjust downward at some point many, many years ago, and the closer it got to 2008, the more it looked like it was going to be a crash than an adjustment. I reckon I converted to "crash" about 2 years ago, and by a year ago most people I talked to agreed. Apart from those that were invested, of course...Quote:
Originally Posted by OneRedArmy
adam
Will post more tomorrow, but Adam it's the Financial Regulator's job to expect the unexpected and ensure banks are up to it (stress testing etc.).Quote:
Originally Posted by dahamsta
We got into a bizarre situation where the FinReg was maintaining all was well and banks were adequately capitalized. Nobody believed them and the Market was proved right.
At the minute FinReg have zero credibility.
My meaning wasn't put across very well there ORA: IMHO "failure" is far too weak a word. "Criminal" would be better, and if there was even the vaguest possibility of a criminal prosecution against the regulators (and everyone else of course: the executives and directors of the banks, the government*, and the people that call themselves economists), I'd be screaming for it.
adam
* And the "opposition" of course, for being criminally incompetent.
Heard a story recently where someone transferred funds to Irish bank when moving back to Ireland but when tried to withdraw later the bank did not have or did not want to pay the cash. The bank tried to offer 3 houses as alternative payment. Might hear back soon which bank it was...
Seems the banks offering the highest deposit rates last year were Anglo & Irish Nationwide. In hindsight probably an indicator of trouble ahead...
I'd be amazed if that was anything other than complete BS. Or is 2 stories mixed up (I've heard more than one of developers offering creditors houses in lieu of unpaid debts).Quote:
Originally Posted by pete
Banks can't stop you from withdrawing your money Pete, unless of course the person had defaulted on another loan.Quote:
Originally Posted by pete
Very usual in the current environment that property developers and investors offer houses rather than repayments.
Story was only second hand as opposed to 5th or 6th which is why I took notice. I think the bank were trying to suggest the person accept houses instead of cash. Sum involved was less than 500k. Even if I did hear which bank it was would be unfair for me to mention given no proof.Quote:
Originally Posted by OneRedArmy
Gotta love Larry Flynt
:D
That story's doing the rounds - heard it in the pub over the wend, but was told as if though it was a friend of a friend, so unless it's been on the radio then it's an urban myth in the making (or a small world I suppose). Version I heard was that it was 4 €100,000 darfts that he wanted to give to his kids, bank begged him not to, and offered him 3 houses, he said he had 4 children, so they gave him 4 houses...Quote:
Originally Posted by pete
Until hes been on Joooooe Duffy its an myth :pQuote:
Originally Posted by Macy
:DQuote:
"With all this economic misery and people losing all that money, sex is the farthest thing from their mind. It's time for congress to rejuvenate the sexual appetite of America. The only way they can do this is by supporting the adult industry and doing it quickly."
A friend of the family sold his farm in Galway to a developer for 6.5 million 2 years ago. He bought the same farm back from the bank for 1 million a few months ago.
<applause>Quote:
Originally Posted by Bald Student
Irish Times
Confirming many views about Estate Agents no doubt. Strange that is just an obligation & not illegal. Interesting that there were 2,100 mortgage intermediaries in Ireland. Easy solution might be to ban estate agents offering mortgages.Quote:
An investigation by the Financial Regulator into allegations of a potential conflict of interest between mortgage brokers and estate agents found an unspecified number of companies were unaware of their obligations.
The inquiry began last July following allegations that some mortgage brokers may have shared information on clients' purchasing power with estate agents seeking to sell them a property.
The practice may have resulted in inflated prices being paid for properties.
Some estate agency firms also sell mortgages while some larger firms operate their own broking business or offer mortgages through an affiliate company.
Publishing its findings today the regulator said it had investigated 91 of the 2,100 mortgage intermediaries in the market to examine how they handled potential conflicts of interest when also providing property services.
If there is one good thing about the recession it's seeing these wretched individuals suffer, I hope to see recruitment consultants burn in hell too.. Employers with sense would see it as a complete waste of money to go about recruiting staff through a very pricey intermediary when it would be cheaper and in the currently climate easier in to do it directly...Quote:
Originally Posted by pete
Irish Times
Financial Regulator jumps before he is pushed? Minister saved from actually making a decision?Quote:
Chief Executive of the Irish Financial Services Regulatory Authority, Patrick Neary, is to step down, it has emerged.
The Financial Regulator announced his decision this evening to retire, effective from January 31st. He will step down as a member of the Irish Financial Services Regulatory Authority's board, and also as a member of the board of the Central Bank and Financial Services Authority of Ireland.
Mr Neary has come under pressure in recent weeks after it was claimed that staff at the regulator's office first learned in January 2008 that the chairman of Anglo Irish Bank Seán FitzPatrick had been transferring loans of up to €87 million off the bank's book to conceal them from shareholders.
This evening, Mr Neary said he had not known of the issue before December 10th.
"I had deferred a decision about my retirement until the Report of the Committee of the Authority examining the internal communication of matters relating to loans to Directors of Anglo Irish Bank Corporation was concluded," Mr Neary said in a statement.
"So far as I am concerned, I was not advised of any such matters in early 2008 and there has been no oral, written or email escalation of these issues to me or to the Authority over the period until the matter was raised with me by the Minister on December 10th, 2008."
I have a small, a very small bit of sympathy for Neary. The Anglo thing was obviously the final straw but If the Board of Anglo and their Auditors couldn't find the 87m worth of loan arrangements, how was he supposed?
Nobody was calling for his resignation last year or any other year (except Shane Ross maybe) when although obviously in trouble at least employment was still holding up and therefor the public opinion is more emotion than anything else.
He is the Financial regulator so taxation policy not part of his remit.Quote:
Originally Posted by Fr Damo
I am sure got paid a good salary & will have nice pension. He failed in his job & if he did not have the powers to do it he should have asked for more.
I think your second point is a valid one and not just relevant to the Financial Regulator (generally people want more protection in bad times, if there's money to be made they are generally more laissez faire, completely hypocritical of course!).Quote:
Originally Posted by Fr Damo
But in my mind anyway (as someone who deals regularly with various regulators here and abroad) he's not going because of the Anglo loan, he's fallen on his sword (by the tried and tested "early retirement" option" because of the wider failure to identify and deal with systemic risks in our financial system that everyone from the OECD to the Economist magazine had pointed out going back years but the Financial Regulator effectively ignored.
That said, my understanding in relation to both Sean Quinn' hand in the cookie jar and Fitzpatricks loan FinReg knew for a period of months and didn't do anything. Thats the final nail in the coffin.
Heard a piece on Morning Ireland that the loans totalled more than 87m! Unbelievable. Some commentator suggested that Fin Reg was simply leaving it to the bankers etc becuase in his naivity he assumed surely the banks will be looking after their balance sheet and not be taking undue risks with the lending. Pete, I take it back, they were sitting on their hands but I am one of the uninformed average joe I mentioned earlier, that is, the ones who will pay for this in the Short, Medium and looks like long run.
The problem with Fitzpatrick wasn't one of default risk, 87m wouldn't be anywhere near the top exposures (although I assume as it was a property loan it may not be in the best shape), the big problem is conflicts of interest and disclosure requirements.
Doesn't make it anymore right though.
I was reading about the Dail Committee yesterday & seems the Fin Reg was getting a hammering from the politicos. While I am sure some of it was an effort to blame them for the entire property mess it seems they also basically said someone in the Fin reg was lying.
Best excuse about the loans was that they were too busy with the financial crash but of course they also said knew about the loans in 2007 so it does not add up.
Slightly off topic but I saw headline yesterday about case against the chemist for the blood transfusion service collapsing which reminded me that there is no accountability in this country. Politicians are the worst especially FF but I can't remember the last time someone resigned or was fired for incompetence. I don't include the Anglo board members as they should have been first/arrested.
Unemployment has been rising for the past couple of years, it didn't start last summer, it has merely increased in speed.Quote:
Originally Posted by Fr Damo
Well it has finally happened as Anglo Irish have been nationalised.
Seems to be the correct decision but why did they not do this last month? The government really are making it up as they go along & if it was possible leads to even less convince they can make the correct decision.
:rolleyes:
Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.
The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism.
— Karl Marx, 1867
According to Lenihan on Morning Ireland, this is "decisive action" :rolleyes: The financial system needs clear leadership and clear decisions. All we've had is bumbling and no full stop since the very start.Quote:
Originally Posted by pete
Or As the T Shirt I just ordered says, along side a painting of Marx - "I warned you this would happen".Quote:
Originally Posted by Stuttgart88
They procrastinated until the very last minute, as they had to do it before todays EGM.
Then they bluffed that the banks funding position had become weaker which forced their hand.
I don't really believe that, nothing has changed in the last few weeks.
[QUOTE=Stuttgart88;1087441]Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.
The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism.
— Karl Marx, 1867[/QUOTE
Ah sure that was easy to say, the dogs on the street could see that :)))
Seems the big problem is that even when they gave the banks bailout loans no one believes that will be the end of it. The banks also cannot be trusted as they told use a few months ago they did not need any cash. The Financial Regulator has also been discredited. Ultimately seems there is no one in power that is trustworthy.
I read that the state now guarantees something like 2billion in preferential shares/loans because of the Nationalisation? Seems bizarre that shareholders would be compensated at all. Would they have a case against the state for lapses in regulation?
I've just heard that the Marx quote is a fake anyway.