The European Central Bank will next month begin buying loans from banks under its asset backed securities programme.
It aims to free up cash on bank balance sheets for fresh lending and the ECB gave details of how it will operate at its monthly governing council meeting in Naples yesterday.
Irish banks could sell some of the €50 billion in tracker mortgages on their books to the European Central Bank but it looks like they would need to be guaranteed by the Government.
Fine Gael MEP Brian Hayes - until recently a minister of state at the Department of Finance - said ECB president Mario Draghi had confirmed in a recent European Parliament gathering that the ECB may be open to buying Irish tracker loans. Mr Hayes is calling on the Government to make a case to the ECB for including the trackers, possibly through a new state guarantee.
John Finn, managing director of Treasury Solutions, says that if banks have certain assets on their balance sheets like mortgages, car loans and credit cards, they can pull them together into a package and sell them to the ECB. The aim of the programme is that the banks will put that money into new lending for small and medium sized businesses.
Mr Finn admits there is a high level of scepticism around the plan as the ECB's first such programme did not really work the way the bank had hoped. Experts suggest the ECB's current ABS programme could be worth €200 billion, half the size of the previous programme. He says that the ECB appears to be doing as much as it can but in a gradual way - it cut euro zone rates to record low, which did not work to boost the economy. Then it announced a €400 billion fund for which the initial take-up has not been great. He says he doubts whether the ECB's next step will be enough either.
Mr Finn says that in theory, the assets that the ECB will buy will have to be investment grade and not junk status, but exceptions have already been made for Greece and Cyprus who are still in bailout programmes. The bank also said it will buy certain types of assets, provided they have a government guarantee - opening up the possibility of some Irish tracker mortgages being sold. The analyst says this could be of benefit to Ireland, as tracker mortgages are loss making for the Irish banks and also tie up a lot of their capital. Any move to offload them may help their profitability. But he says any such move carries the risk that the banks will not use that money to lend back into the market again.
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MORNING BRIEFS - As many as 36,000 pensioners have seen their incomes cut following the introduction of the pension levy and a further 19,000 are facing cuts in the coming year according to the Irish Association of Pension Funds. The levy is applied to all private pension funds. In the case of defined benefit pension schemes, where members of the scheme are guaranteed a pension fixed at a set percentage or multiple of their final salary, the IAPF says benefits to retirees have been cut. It says just over half the 65,000 retired members of DB schemes have been hit so far. It estimates a further 19,000 of them will face cuts next year when the levy, which as originally proposed was due to finish this year, is extended.
*** Oil company BP is seeking either a retrial or a review of a court ruling in the US that exposes it to fines of up to $18 billion. BP said the trial judge used expert evidence which he had said he would exclude during the 2013 trial in arriving at his final judgement. The company said the finding of gross negligence, which means BP could have to pay as much as $18 billion in fines under the US clean water act, was improperly based - at least in part - on that testimony.
*** Global Student Accommodation, a Dubai-based company, is embarking on a joint venture with Irish investment and property management firm the Creedon Group on a €41m student accommodation development in Dublin. The two have submitted a planning application for a 400 bedroom development on a 2.5 acre site in Dublin 8. The planning application comes at a time when rents are rising and in the midst of what the Union of Students in Ireland has said is a student housing crisis.
