CUT HOME LOAN RATES OR LAW WILL FORCE YOU, BANKS TOLD - Banks have been warned the Government will bring in legislation to force them to cut "exploitative" variable mortgage interest rates.
The head of the Central Bank, Patrick Honohan, has flatly told lenders to lower rates for 300,000 homeowners, reports the Irish Independent. "Their boards and management need to recognise that charging spreads that excessively exploit the current weak competitive environment risks being counterproductive if they bring down upon themselves Government policy reactions," Mr Honohan says in a report compiled for Finance Minister Michael Noonan. The report is being used as leverage by Mr Noonan, who is holding a meeting with the bosses of the State's main banks this week. It tells the banks that a failure to cut rates will weaken the recovery; leave the Government with no option but to "interfere" in banking by capping variable rates and diminish banking competition and damage the long-term prospects of the banks. The uncompromising language used by the Central Bank governor leaves little wriggle room for the lenders to avoid reducing rates. Now the expectation is that there will be a series of 0.25% cuts across the six main lenders. Over a number of months, cumulative cuts of around 0.5%, and up to 0.75%, could be delivered.
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EIRCOM REJECTS €3.3 BILLION BID AS US INVESTOR BUILDS STAKE - The ownership of Eircom is back up for grabs after it rejected a “credible” offer of up to €3.3 billion, while its biggest shareholder has also sold a quarter of the group to Anchorage Capital, a US investment house. Anchorage, which has global operations and is headquartered in New York, did not comment when asked if it was the “credible” bidder referred to by Eircom, says the Irish Times. Eircom also declined to comment. Eircom told the stock exchange on Tuesday evening that it rejected the offer as being too low. It is understood that the offer came in the first three months of this year, and the telco said the issue is “not being progressed”. “[It was] a non-binding expression of interest in the group for an aggregate price in the range of €3.2 billion to €3.3 billion,” said Eircom. “While the bidder was very credible, the board believed that, with the business reaching an inflection point, the indicated price range undervalued the group.” Anchorage, which until recently held a stake of about 8% in Eircom, has bought a further 25% of the business from Blackstone’s GSO unit in recent days, according to several sources. GSO has retained about 5% of Eircom, having held about 30% prior to the Anchorage deal.
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FILES REQUESTED UNDER FREEDOM OF INFORMATION HEAVILY BLACKED OUT - NAMA’s fears over the impact of being subject to the Freedom of Information Act appear to be unfounded. This follows the release of one of the first tranche of documents under the Freedom of Information Act that contains page upon page of redacted or blacked out material, writes the Irish Examiner. Three years ago, the chairman of NAMA, Frank Daly told the Oireachtas finance committee that extending FoI legislation to cover the State’s bad bank would cause difficulties for the bank in its commercial objective of maximising its profits for the State. “We are akin to a bank, an asset management company, and we’re out there competing with those other entities,” he said. Mr Daly said the country could not afford to have his body subject to total transparency which competing bodies were not bound by. “We can’t afford to be hamstrung vis-a-vis our competitors.”NAMA has been receiving FoI requests since the middle of last month for the first time. However, the release of minutes of NAMA board meetings between September of last year to March will give comfort to Mr Daly and other senior officials at the agency. The agency’s FoI unit has released 201 pages of board minutes. However, a large percentage of the pages released have at least some portion redacted with quite a number having entire pages blacked out.
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WALL STREET LOOKS TO REVIVE CDS MARKET - Banks and large investors are seeking to revive a derivative market widely blamed for its role in fanning the financial crisis, as they search for ways to forestall volatility when interest rates rise. Wall Street is focusing efforts on building up single name credit default swaps, a derivatives contract that tracks the risk of default by a company that sells bonds. Regulators sought to clamp down on this market after the crisis as it was widely blamed for helping to inflate the credit bubble, says the Financial Times. Firms are looking to move trades from a bilateral market that has seen banks pulling back as capital costs have increased, to a centrally cleared market that will reduce capital constraints, with the intention of making the product easier to trade. The number of customers signing up to clear trades at the largest credit derivatives clearing house has jumped by two-thirds since the beginning of this year. Efforts to limit heightened bond market volatility, characterised by the “taper tantrum” in the summer of 2013, have focused on improving the ease of buying and selling corporate bonds in the market. Investors have piled into bonds in recent years, against the backdrop of aggressive central bank policies that have driven interest rates sharply lower. The rush for bonds has sparked unease among regulators amid concerns that once US interest rates start rising, investors will dump their holdings, sparking a stampede for the exit.
