Tuesday, February 10, 2009

Bruton loses the plot - proposes illegal bank split.

Richard Bruton’s proposal on Morning Ireland is clearly bonkers and almost certainly illegal.

He proposes that AIB & BOI each be split into two parts – a “new” bank with all the deposits and the loans which can be assessed as having value, split off from the “old” bank which would contain all the bad and doubtful lending. The latter would no longer actively operate as a bank, its task would be to manage down its loan book in order to achieve the best possible level of recovery. Almost inevitably, a fairly high proportion of those loans would ultimately have to be written off.

However, part of Bruton’s stated rationale was that there’s c. €25bn in bonds issued by AIB & BOI which are not covered by the existing Govt guarantee and responsibility for repayment of these could be left with the “old” asset-stripped bank.

This idea that the assets of AIB and BOI could be split into “good” & “bad”, with a specific objective of leaving holders of €25bn in bonds, issued by those banks, without recourse to the good assets would undoubtedly be rejected in any court of law in Ireland or Europe.

It’s like Pat Kenny transferring all his assets to Cathy Kenny and then calling his bank manager to say “hey, remember that €2m you lent me to buy a quarry? Well come and sue me for it, but you’ll get nothing ‘cos I’ve no assets. Even the quarry is in the wife’s name.” The transfer of his assets would be deemed illegal by the courts and would be reversed.

Not only would Bruton’s proposal be deemed illegal, the mere act of the Govt even making the proposal would also tell international markets that investing in any Irish company is not for the faint hearted. The message would be that we have a cowboy Govt., no-one would want to do business in/with Ireland.

It might deter US multinationals from establishing, expanding or even maintaining operations in Ireland. Richard Bruton’s proposal would constitute nothing short of corporate fraud perpetrated by a sovereign Govt..

Is that the message he wishes to convey?

Footnote: I've emailed this to Richard Bruton.

Monday, February 09, 2009

Time for Bankers (& politicians) to go.

Media reports at the weekend that negotiations on recapitalisation between the government and the two main banks are ongoing but with a number of issues unresolved. One in particular seems to be the refusal of AIB Chief Executive Eugene Sheehy to step down, and he’s clearly got the support of the AIB board in this stance.

The reality is that it’s past time for Bank of Ireland Governor (chairman) Richard Burrowes to join his Chief Executive Brian Goggin in heading for the exit. AIB Chairman Dermot Gleeson and Chief Executive Eugene Sheehy should also be on their way.

The buck has to stop with them for the devastation of shareholder value in their companies, that’s what they’re paid the big money for. Indeed, the rest of the boards of AIB & BOI should also be actively considering their positions.

The issue is about the competence, or lack of it, displayed in the lending decisions of those banks and the consequences now for shareholders and, perhaps, for the very survival of the banks.

It is not a question of personal or business integrity, as has now arisen at Anglo Irish Bank. However, the longer these senior AIB & BOI bankers refuse to accept that the buck must stop with them and that there are inevitable consequences, the more it does raise the question of integrity.

I do have some sympathy with these bankers for having to endure the public hectoring of Government ministers. The sheer hypocrisy of these politicians, many of whom were directly responsible for the highly reckless fiscal policy which got us here, is particularly galling. For over a decade, every annual budget, presided over by a Fianna Fail minister, poured petrol on an already over-heating construction market.

The public are overdue a contrite apology from our political leaders, in particular Brian Cowen. Senior bankers must console themselves with the thought that they may well be joined in early retirement by senior politicians, when the public finally gets an opportunity to pass judgement at the ballot box.

Friday, February 06, 2009

New Government Structure

The Government has not inspired much confidence in its handling, to date, of the economic crisis.

In addition, there is a clear perception that the whole structure of Government and the supporting civil service is no longer “fit for purpose”.

The Constitution stipulates a minimum of 7 ministers, including the Taoiseach, and a maximum of 15 – which is, naturally, the number we currently have.

The following is a straw-man proposal for an entirely new Government structure, which is based on what a real business structure might look like.

The main objectives of the proposed structure are
(a) to reduce the number of individual ministerial and departmental silos and group them into more logical “business divisions”.
(b) to facilitate the proper prioritisation and allocation of resources – both financial, human and physical. Divisions would have an amalgamated annual budget, with prioritisation and allocation of resources within the division the responsibility of the relevant minister.
(c) to achieve economies and efficiencies through creation of shared interdepartmental support functions at a “head office” level.

For the purposes of simplicity, I’ve taken the existing Departmental titles and redistributed them, sometimes splitting out individual elements, into the new divisional structure.

In my model we go to the minimum number i.e. 7. Each "division" to be headed up by a Minister. Within each divisional portfolio, key elements might be under a Junior Minister where deemed necessary - but they would have a serious and meaty job to do.


1. Taoiseach

2. External Relations (Dept)
- Foreign Affairs
- European Affairs (currently in Office of Taoiseach)

3. Finance (Dept)
- Finance

4. Enterprise (Dept)
- Enterprise Trade & Employment
- Communications, Energy & Natural Resources
- Agriculture, Fisheries & Food
- Tourism
- Transport

5. Environment (Dept)
- Environment, Heritage & Local Govt

6. Social (Dept)
- Health & Children
- Education & Science
- Social & Family Affairs
- Community, Rural & Gaeltacht Affairs
- Arts, Sport

7. Security (Dept)
- Defence
- Justice, Equality & Law reform


- IT
- HR/Training
- Payroll
- Finance/Accounting
- Purchasing/Procurement
- Communications/PR
- Legal
- Operations (planning, co-ordination & implementation)

Cowen wows the Dublin Chamber of Commerce

Taoiseach Brian Cowen is widely reported to have delivered a highly motivational speech as guest speaker at a Chamber dinner last night.

The best since Colonel Tim Collins, I’m told. And we all know how Iraq turned out.

Thursday, February 05, 2009

Taoiseach Cowen calls for IMF to solve problems

One of the biggest problems facing Irish business is that the relative strength of the Euro, particularly with sterling, has made it very difficult to maintain exports and/or profit margins.

If Ireland still had the Punt as our currency, we could devalue to make our exports more competitively priced. As members, and very small ones at that, of the Eurozone, we have little say in the value of the currency and there’s no possibility that the currency will be devalued to suit our particular needs. After all, even in our pomp we were still only 1% of the wider EU economy.

However, a couple of months back something accidentally triggered a fall in the value of the Euro: a claim by a union leader that the Taoiseach had raised the spectre, during Social Partnership talks, of the IMF having to be called in.

So how could we engineer a repeat of this “accident”, without incurring the wrath of our EU and Eurozone partners?

Barack Obama swept into power on the back of a simple but very powerful and populist slogan: “Yes we can”.
Labour’s Eamon Gilmore nicked this at his party’s annual conference with his “is féider linn” call in the leader’s closing speech.
Now, in the Dáil, Taoiseach Brian Cowen has defiantly told the opposition that he’ll “do it my way” or, in the first official language “im modh féin”.

So Taoiseach Cowen should organise a series of open air rallies around the country to mobilise and motivate the populace, with local FF supporters primed to turn up with placards and rehearsed chants in supports of our leaders declared modus operandi.

To make it a bit snappier, any PR guru would advise that “im modh féin” be reduced to its appropriate TLA, that is, IMF.

Picture the sight beamed across the world by 24-hour TV channels - a belligerent Cowen roaring incoherently off a platform or the back of a truck, to a huge crowd chanting “IMF, IMF, IMF” and waving placards bearing those same initials.
That should be enough to send the Euro into freefall and take much of the pressure off our hard-pressed exporters.

Wednesday, February 04, 2009

Mike Soden - enjoying a cold dish!

The resignation of Mike Soden as Bank of Ireland (BOI) Group Chief executive was a surprise announcement on Saturday 29th May 2004. The market gave its judgement on Monday 31st May, the next working day, when BOI shares rose 4%.

Revenge, they say, is a dish best eaten cold and, almost 5 years later, Mike Soden is enjoying that dish and a new lease of life on RTE and other local media, where he is calling for the heads of the current bank CEOs and an amalgamation of AIB & BOI. Now where have I heard that proposal before?

Mike Soden succeeded Maurice Keane as BOI CEO in Feb 2002. Soden was an outsider, brought in from National Australia Bank, where he was Executive General Manager of Global Business and Personal Financial Services based in Melbourne, specifically to do the “transformational deal” which would take BOI from being a big fish in a very small pond in Ireland into a serious player on the European banking stage. It was felt that the internal contenders for the top job were all BOI “lifers” and lacked the experience, and possibly the imagination, to spot and execute such an opportunity.

Soden’s first big idea was to merge BOI and AIB to create a “national champion” with sufficient scale to ward off predators and expand geographically. This champion would have sufficient capacity to stage takeovers of mid-sized local players in other countries.

This “big idea” fell at the first hurdles – AIB weren’t remotely interested and the competition implications of combining the two largest players, by some margin, in a relatively small market like Ireland were overwhelmingly negative. However, Soden persisted with the promulgation of this idea long past the point where it was dead in the water, showing a distinct lack of business and political judgement. This didn’t endear him to the analysts community or, indeed, to his board of directors and senior executive colleagues. His preoccupation with this proposal, and obvious lack of cop on when it was clearly a non-runner, became something of an annoyance and embarrassment to his BOI colleagues.

Soden’s next big idea was to take over the troubled Abbey National in the UK – an October 2002 proposal which was badly received by the markets and the BOI share price fell like a stone. That deal was rejected by Abbey National and, in due course, it fell through, causing the BOI share price to rise.

In 2003 BOI signed a 10-year deal with the British Post Office (BPO) to provide financial services across its network of post offices. This deal was largely sealed on the back of the relationship built up with First Direct, a BOI subsidiary which has provided all the BPOs foreign exchange services since the mid-90s (and had grown to be the largest provider of FX services in UK).

Despite his clear remit to do “the transformational deal”, the BPO was the nearest Soden ever got to it – and, 6 years on, it’s still relatively small beer in the overall scheme of things. Long before the end of 2003, Soden had “lost the dressing-room” of his executive management team and was failing to convince the analyst community that he had any vision for BOI worth listening to.

So when, in May 2004, Mike Soden’s visit to an escort agency web-site was leaked by disgruntled IT staff to a newspaper, the Court (board of directors) was happy enough to have the opportunity to wave him goodbye. The nature of the transgression was embarrassing to be sure, but if they had felt he was worth saving they could have done so. Instead, it was made clear to him that he was going and a generous severance package would grease his exit.

Now he’s back – at least in the media. And what’s he calling for? The amalgamation of AIB & BOI. And the heads of the CEOs of the banks.

I heard him on Pat Kenny today – and he offered the view that the new bank heads should not come from the next tier of management within those banks – anyone who is tainted with the current policy/strategy failures.

Now Soden may well be right on this “firing & succession” point, but it’s hard to imagine that he’s not getting pleasure from shafting some of the people he feels shafted him.

But I will offer one piece of advice – don’t let Mike Soden himself anywhere near the helm of an Irish bank.

Tuesday, February 03, 2009

Breakdown in Social Partnership talks.

It’s unfortunate that agreement could not be reached at the Social Partnership talks, but it hardly comes as a major surprise.

Several days appear to have been largely wasted as the Government’s initial input was so lacking in specifics as to be described as “a blancmange” by union participants.

This seems in line with the standard Govt approach to planning – evidenced by initiatives from the 2003 Decentralisation scam to the October 2008 budget. A “back of the envelope” approach to everything.

The second issue which always seemed likely to derail the talks was “Scope Creep”, where a weak "talks management process" allowed the talks agenda to become an ever lengthening wish list for all participants.

All the above simply raises further questions about the Taoiseach’s (and Govt’s) competence and ability to manage the economy out of its current distressed condition.

Published as a letter in the Irish Times

Monday, February 02, 2009

Predicting Roy Keane's managerial demise.

You read it here first! While looking for an earlier post (on Dublin bus network), I trawled back to the start of this blog and found the following - my first post on 24th November 2005. Considering how things turned out at Sunderland, I don't think I was too far off the mark.

Roy Keane's latest bust-up 24/11/2005

Roy Keane seems to display some of the classic traits of a bully - he can hand it out but he can't take it.

Some media reports of the post-MUTV session with the manager & players say that, when reprimanded in front of the players by Alec Ferguson, Keane threw the "Rock of Gibraltar" affair back in his face.

If true, this clearly had nothing to do with the situation but was the petty, spiteful response to criticism that you might expect from a spoilt child.

It's sad that a footballer of his undisputed class has such an immature personality. It's hard to imagine him succeeding in team management where player motivation would be a key requirement.

Instead of fond memories of his exploits for Manchester United and Ireland, he'll probably be remembered for the sour taste of his departures from both camps.

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