Small becomes more beautiful to State
Cantillon:The action plan for jobs published yesterday contains a number of measures aimed at encouraging Irish companies to eschew trade sales in favour of listing on the stock market and preferably the Irish Stock Exchange.
The SME State Bodies group will now “develop proposals to incentivise dynamic companies to choose to continue to grow and build scale using the IPO route domestically to raise development finance as an alternative to trade sale exits”.
The measure, along with a similarly vague commitment elsewhere in the report to “develop proposals to incentivise dynamic companies who choose to continue to grow and build scale using the IPO route to raise development finance as an alternative to a trade sale”, will hopefully encourage a few Irish entrepreneurs to stay put, raise some money on the market, and turn their high- potential start-up into serious medium-sized enterprises along the lines of Germany’s much vaunted mittlestrand businesses.
This, the theory goes, will create jobs, as EU research shows that mid-market companies generate one-third of all private-sector revenue and employment. Other benefits include greater resilience and stability in down cycles.
What is not to like? Nothing, it seems, and the chief executive of the Irish Stock Exchange, Deirdre Somers (left),
was quickly out of the blocks to welcome the moves, noting that 90 per cent of employment growth in companies takes place post-IPO.
The ISE – which has not seen a decent flotation in years – obviously has a vested interest promoting IPOs, but the argument does seem to stack up.
The same cannot be said of the Government’s conversion to the IPO-jobs argument, and some are grumbling that yesterday’s commitment jars somewhat with other existing measures such as stamp duty on share trading.
And there is no getting around the fact that foreign direct investment remains in centre place when it comes to the action plan.
Dutch lender junior bondholders get zero
This week, some investors of failed Dutch property lender SNS Reaal have been appealing in court the decision of the government there to wipe them out entirely after stepping in to rescue the bank on February 1st after a two-week run saw €2.5 billion in savings withdrawn by customers.
Junior bondholders in the Utrecht-based lender, who interestingly include a local trade union, saw their entire investment disappear in what they have called the government’s “disproportionate” move.
They argue that they are being treated unfairly compared with senior bondholders whom, they allege, gained unfairly from the move.
Lawyers for a number of international bond investors said the Dutch government’s decision infringed the free movement of capital.
But, in an intervention that will be resonate with Irish taxpayers footing the bill for our own bank bailouts, a lawyer representing the Dutch finance minister Jeroen Dijsselbloem noted in court: “The state doesn’t invest in banks to protect their investors. If you invest, you know you are taking risks.”
The approach by Dijsselbloem in burning the junior bondholders fully as he nationalised the lender – saving the Hague about €1 billion in the process – is significant for more than just the Dutch.
It was a new departure for the European Union as member states struggle to restore the bloc’s financial sector to health, the first time since the financial crisis broke that a class of bondholders has lost everything.
And, with Dijsselbloem now heading the euro group of finance ministers, that sends a signal on the likely treatment of investors across the zone’s troubled banks.
Already Spain’s troubled banks are taking an increasingly aggressive approach. A confirmation of the Dutch move will only accelerate that trend.
The Netherlands’ top administrative appeals court is expected to rule on the appeal on Monday.
The outcome will be watched closely well beyond its borders.
Elderfield has depth on the bench
Three years ago, shortly after his appointment to the post of deputy governor, Matthew Elderfield had a football analogy to describe the challenge facing the Central Bank: “You can’t referee a Premier League match with one linesman and no red card in your pocket.”
The regulator had too few resources and powers to do the job it needed to do, was his message then.
Elderfield brought the analogy up again yesterday in a speech made over lunch to the Institute of Directors.
This time though, the Central Bank has enough officials on its bench. Indeed, in a post-crisis future, some of its team may no longer be required to run the line.
Having reached the end of “a phase of significant growth” in the recruitment of frontline supervisors, enforcement professionals and policy staff, the organisation has revised down its target employee numbers from 735 to 685, Elderfield said.
Further reductions are planned in future years as a result of efficiency improvements and the completion of “some key responsibilities”.
Even the Irish banking system can’t stay in fourth-division relegation-zone mode forever.
As for whether these linesmen and women look in the right spots before they make their calls, there was some promises here too. “We also continue to encourage improvement in staff quality, through rigorous hiring and probation procedures, in-house training and various quality assurance mechanisms,” Elderfield said.
And on its pocket of yellow and red cards, Ireland is “making good progress” when it comes to developing “a set of robust powers” for banking supervision and regulation. The Central Bank Supervision and Enforcement Bill is nearing adoption, he noted.
It will, among other things, provide a new best practice standard for whistleblowing.