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Ireland's political and cultural magazine
— March - April 2012
Whistleblower
Jonathan Sugarman Our man in financial services
news
Blowing Whistles at the Regulator
Whistleblower went to the Central Bank in early
March to pursue its invitation to explain the breach
of liquidity ratios by Unicredit, Italy’s biggest bank,
in Dublin when he worked there as a financial risk
manager. Five years on, the Regulator has not taken
any action over the extraordinary failure – even
though unaddressed liquidity problems led to the
Bank Guarantee. Of course, when liquidity prob-
lems were revealed as insolvency problems the
guarantee was exposed as maiming this country
for a generation.
Despite an offer of ‘confidentiality’ the Central
Bank has not in fact been willing to provide immu-
nity from prosecution for Whistleblower over his
revelations, many of which appeared first in Village
at the end of . Nevertheless, the meeting was
constructive. A whistleblower’s lot is not an easy
one. More to follow.
Blower support
Just when Whistleblower had concluded no sup-
port was available for those who challenge the
official view of Ireland’s financial history, along
come not one but two whistleblower referral serv-
ices. Transparency International provides a free
referral service to a network of lawyers and other
professionals and reports concerns to employers
or the relevant authorities on behalf of workers
or citizens where both parties agree. Meanwhile
Whistleblowers Ireland will operate ‘Ireland’s first
independent whistleblowing site’ – run by journal-
ists. It claims to be getting calls from white-collar
whistleblowers’ not sure how they should treat con-
tractual confidentiality clauses.
Blower legislation
Brendan Howlin’s promised whistleblowers’ legisla-
tion seems a real salvo at dealing with past problems
and would apparently even cover Whistleblower’s
situation – it it was made retroactive.
Optimism
Whistleblower reckons the ECB, having thrown
some shapes about cutting public pay and social
welfare, will improve the terms on Ireland’s prom-
issory notes, currently attracting an interest rate of
. per cent. Now Greece has been resolved, after
the only default by a developed country in years,
they hardly want Ireland to default, do they?
Confusion
Central Bank Governor, Patrick Honohan, is to
ask the ECB to delay the scheduled repayment
on the Anglo Irish promissory note. The Central
Bank was to give €. billion to Anglo so that
Anglo could stop borrowing so much from the
Central Bank. But instead the Central Bank wants
to give the money to Anglo and have Anglo use
that money instead to buy some of Ireland’s sover-
eign debt/bonds. This is being done so that Anglo
can use that sovereign debt as collateral for get-
ting loans from the ECB so that Anglo doesn’t have
to borrow so much from the Central. If it makes
no sense to you then you’veunderstood it.
Bribery
So, An Taoiseach says we can’t be bribed by a
reduction in Ireland’s debt burden before the ref-
erendum on the fiscal treaty. One IFSC old hand
told Whistleblower: ten per cent is a bribe;
per cent is a deal.
Incompetent and Incapable,
Dishonest and Unethical?
The Sunday Business Post recently quoted Mason,
Hayes and Curran, white-shoe solicitors, say-
ing the Central Bank’s new ‘fitness and probity’
regime for senior staff “would lead to legal chal-
lenges where the failure of an employee to meet
the Central bank’s standards results in them los-
ing their job”. Whistleblower thinks this evokes
the essence of Irish regulatory laxity. Surely such
firms should have made implementing Central
Bank (and indeed all other relevant) standards
a condition of employment? The requirement is
that a fit and proper individual must be competent
and capable, honest and ethical, must act with
integrity and be financially sound. How could any-
one ever have had a standard any different?
Predictive gold
The ECB’s LTRO (Long-Term Refinancing
Operation) now stands at above one trillion Euro.
It’s what’s kept the lights on around Europe these
last months. Whistleblower re-poses the question
the FT asked recently: “Is the gold price correct
in predicting that the money-printing will end
in tears?”
Stressed
Meanwhile the CEOs of Bank of Ireland, ILP
and EBS will be the first to undergo the Central
Bank assessment, prepped by the US-based
Promontory Group. Gives a new meaning to
stress test.
Non-Irish sandwiches
Patrick Coveney, CEO of Greencore gave his inau-
gural speech as President of the Dublin Chamber
of Commerce. Upbeat message: businesses are
going to be at the heart of the recovery. Ironic
then that Greencore, having shut Irish Sugar, its
then only product, makes nothing in Ireland,
The Euro crisis explained
The eurozone
crisis explained in
a simple graph
though it is the world’s largest sandwich maker,
and in February moved its stock exchange listing
from Dublin to London. Also isn’t Patrick Coveney
from Cork?
Solicitors escape
Whistleblower will miss RateYourSolicitor.
ie. Judge Peart in the High court granted Sligo
solicitor, Damien Tansey, somewhat illib-
eral injunctions effectively terminating it
– arising from comments posted about him
inaccurately implying corruption. Just as the
answer to RateMyTeacher.ie always seemed to
be RateMyPupil.ie, the proportionate reaction
would have been RateMyClient.ie.
Solicitors escape – again
Meanwhile, conveniently for solicitors, Minister
and solicitor Alan Shatter’s Legal Services
Regulation Bill has failed to clarify solicitors’
fees, despite the Haran report’s recom-
mendation that solicitors should submit a letter
containing (a) details of the work to be done and
(b) the estimated costs thereof or the daily or
hourly charges applicable. Instead under s of
Shatter’s bill they have to disclose the costs OR if
it is not reasonably practicable to set out the basis
on which the costs are to be calculated and they
have to have regard to a litany of old guff listed
in a schedule to the Bill. Someone took an eye off
the fast-moving legal ball.
Keeping those tax incentives
So Minister Noonan has finally provided clar-
ity on how the tax property-based tax incentives
that contributed so much to our implosion will
be run down. The answer? Not very much. For
example to protect hard-pressed landlords the
Finance bill allows their Section relief to be
applied to all properties not just the particular
Section property. And stamp duty on com-
mercial property has been reduced to %. Poor
landlord darlings.
Das Finance Act
Why did the Finance Bill take two days to be
published once it was ready? Answer: The Irish
government needed an extra day to translate it
from German.
Two versus
Christine Lagarde at the IMF is increasing her
fire-power to ONE, or perhaps even TWO, tril-
lion Euro. Ireland’s bailout is of course Billion
Euro. A useful perspective is that the outstand-
ing amount of financial derivatives worldwide
increased % in the first months of
to a record level of above SEVEN HUNDRED
TRILLION Euro. Against this firepower curren-
cies just dangle in the wind.
DEPFA went hyper
In the Governor of the Central Bank was
aggressively questioned by his German peers about
the collapse of DEPFA – the biggest bank in Ireland
in the mid-noughties. Patrick Honohan replied
candidly that under the reign of his predecessor,
the IFSC was treated as Dublin’s OK Corral. As such,
and given the fact that most IFSC banks operated
with ‘Letters of Comfort’ provided by their parent
banks, there was no need to watch the kids for any
messing; nor did the Irish Regulator’s office have
the skills to do so, he said. DEPFA has already cost
the German state more than billion Euro in
cash and guarantees, much more than the cost of
all the defunct Irish banks put together.
Thankfully for the Irish taxpayer, DEPFA had
been acquired by Frankfurt-listed Hypo Real
Estate. Angela Merkel lost a good number of votes
in North Rhein-Westphalia, Germany’s most pop-
ulous state, in subsequent elections where voters
complained that their garbage was not being col-
lected while their tax money had been used to
resuscitate Dublin-based DEPFA.
The biggest banking catastrophe in Germany
since WW had Irish pawmarks on it: Angela has
not forgotten.
Missing litigation
Not that this had anything to do with DEPFA’s
demise, but guess who sat on DEPFA’s board in
Dublin. This is what Derek Scally of the Irish
Times reported from Berlin in January :
“German Lawyers investigating the near-collapse
of the Hypo Real Estate (HRE) group are consid-
ering legal action against former board members
of its Dublin-based subsidiary, DEPFA plc. Former
directors of DEPFA include ex-Central Bank head
Maurice O’Connell and Frances Ruane, director
of the Economic and Social Research Institute”.
Whistleblower has been unable to track how their
deliberations have proceeded.
In the Black
Blackrock solutions, a small division of Wall
Street’s BlackRock group (not to be confused
with the unsuccessful Fyffes’ spin-off Blackrock
International Land) conducted our favourable
bank stress tests in the first quarter of
as demanded by the IMF and EU as part of the
bailout deal. BlackRock group itself is reput-
edly the world’s biggest asset manager and is
believed recently to have hired office space to
accommodate staff in Dublin . The jobs are
regarded as pearls. To complete our tale, DEPFA &
BlackRock are rumoured to be in advanced stages
of courtship.
Just get rid of it
Whistleblower has it on good authority that dur-
ing the last quarter of , a Swiss bank with
a substantial operation in Guernsey just upped
and left. A cavalcade of Range Rovers swept up
every file, laptop and paper clip and rushed them
to the airport, like a soon-forgotten dispensable
mistake. Could they do the same for Ireland Inc,
Whistleblower wondered.
Ireland’s debt problem at a glance
A simple recent graphic (left) from
McKinsey shows most clearly how Ireland’s
debt burden per capita is the worst in the
world – for individuals, banks and other
corporations, as well as combined. In mild
mitigation, Whistleblower’s sources in
banking say that household debts were
typically contracted at low interest rates.
