BANK OF IRELAND PENSION SCHEME HOLE QUADRUPLES TO €1.6 BILLION - Bank of Ireland has launched a major review of its staff defined benefit pension funds to tackle a near €1.6 billion deficit in group schemes. The Irish Times says this follows a quadrupling of the deficit in 2012 due to weak bond yields and technical issues as to how the bank is now required by regulators to account for its pension deficit. In a memo to staff yesterday, Bank of Ireland chief executive Richie Boucher said “difficult choices and decisions” would be required to deal with the deficit in its pension schemes in 2013. “Our first step will be to define what options are open to us,” Mr Boucher told staff. “I know how important your pension is to you, and we will keep you well informed and involved in what is happening.” The crisis comes just three years after a number of significant changes to the pension schemes were introduced. This had the effect of reducing the deficit from €1.5 billion to €400 million by the end of 2011. The pension issue affects about 12,000 staff in the bank. Mr Boucher’s note did not outline the options that might be investigated but other defined benefit (DB) schemes have had to look at increasing staff and/or company contributions, and/or reducing benefits to tackle their deficits. The main scheme within the group is the Bank Staff Pension Fund, which involves employees making a contribution of 2.5% of their salaries. This is some way short of the contributions to DB schemes by most private sector workers.
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CREDIT UNIONS TOLD: DON'T LEND TO STRUGGLING HOMEOWNERS - Credit unions and credit-card companies are to be told by regulators to stop giving out loans to people who are in mortgage arrears, writes the Irish Independent. The move comes as banks have started to ramp up their efforts to get financially distressed households to prioritise paying their home loans. Central Bank officials are concerned that credit unions, in particular, are extending loans to people who are months in arrears on their mortgages. A letter is to be sent out in the coming days telling all lenders not to provide additional lending to customers in mortgage arrears where they do not have a repayment agreement in place with the mortgage bank. Regulators are concerned that credit unions are supporting long-standing customers even though these people have stopped paying their mortgages. Subprime lenders, banks and credit-card providers will also be told to be more prudent in their lending.
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VHI FUTURE SECURE WITH EU RISK SCHEME - A major step to secure the future of the VHI and ensure older people can afford private health insurance has been taken with the approval of the risk equalisation scheme by the European Commission. Under the scheme, companies cannot cherry-pick low-cost customers and cannot charge people based on their age or state of their health. But all will contribute to a central fund that will be used to compensate those with a higher proportion of high- risk members, writes the Irish Examiner. A form of the scheme, including one based on a tax and levy, has been operating for the past 10 years on a temporary basis, but now with the commission’s approval, the new risk-sharing scheme will become permanent. The state-owned Voluntary Health Insurance board, (VHI) is expected to get more than any of the other newer companies because they have a much higher proportion of older members and so higher claims costs. As a result, its competitors Laya, Aviva and GloHealth will end up contributing to the VHI, unless they increase the number of higher risk, higher claims customers they have. VHI chief executive John O’Dwyer, welcoming the decision, said compensation from the fund will be determined on the basis of age, sex and health status of the members insured and that it will be cost-neutral overall.
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RUSSIA'S MISSING BILLIONS REVEALED - Russia’s central bank governor has lifted the lid on $49 billion in illegal capital flight year - more than half of which, he says, was controlled “by one well-organised group of individuals” that he declined to name. The Financial Times says that Sergei Ignatiev, due to step down in June after 11 years in his post, is seldom outspoken about any issue other than interest rates. But he unburdened himself in an interview with the Moscow newspaper Vedomosti about money leaving the country through the back door, which he said equalled 2.5% of gross domestic product last year. “This might be payment for supplies of narcotics . . . illegal imports . . . bribes and kickbacks for bureaucrats . . . and avoiding taxes,” he told the daily, which is part-owned by the FT. Russia’s central bank has access to daily monitoring data on all payments within the commercial banking system, and Mr Ignatiev said the $49 billion figure was mainly drawn from analysing “payments made by Russian organisations to non-residents, the stated aims of which are clearly false”. He added: “Apart from this, our analysis shows that more than half of the total of shady operations is conducted by firms directly or indirectly linked to each other by payments. The impression is created that they are all controlled by one well-organised group of individuals.” Mr Ignatiev also drew attention to the prevalence of what is known in Russian as “one-day firms”, which operate as conduits for money transfers and then vanish before they pay taxes. He estimated that half of the 3.9 millio registered commercial organisations in Russia were inactive and “waiting for their hour to come”.
