Cantillon

Inside The World Of Business

Another summit, another plan

THE LATEST iteration of the strategy for resolving the banking crisis seems to be emerging from a very messy summit in Brussels.

The Government appears to be pushing for a number of concessions that will keep the cost of the banking part of the bailout within the €35 billion envelope set out in the programme agreed with the International Monetary Fund and the European Union. The money was to cover both recapitalisation and deleveraging.

The deleveraging or slimming down of the bank’s balance sheets is to be stretched out over a number of years – five seems to be the figure.

To facilitate this, the ECB has to accept that it will be a while getting back the €120 billion-plus it has lent the Irish banking system in short-term liquidity support.

Some of the short-term money will be converted into a medium-term facility.

The delaying of the asset sales in theory means that more of the €35 billion is now available for recapitalisation, if required, post the outcome of the stress test to be announced next week.

What is not clear is what the troika will want in return for this rejigging of the programme, but it will become apparent in time. Also clearer will be whether or not this latest plan is a long-term one or just a sticking plaster to tide Ireland over until the summer when the new European Stability Mechanism is due to be finalised.

Much will have changed by June. Portugal will have had an election and probably a bailout. Finland – currently opposed to many concessions – will also have had an election.

Critically, from an Irish perspective, the Europe-wide bank tests will have been completed, possibly presenting a number of other countries with similar problems to our own. That could bring about a change in sentiment in Europe about the use of the fund to recapitalise the banks.

Green Paper not quite a green light for gambling

CRYPTOLOGIC has hired Deloitte to carry out a strategic review of the business and, while the internet gambling software developer has not been approached by any prospective buyer, it makes it clear that it would be more than willing to listen should this happen.

There’s no great surprise in this at one level. Internet gambling is consolidating – witness the Bwin- Partygaming merger that is now set to go ahead at the end of this month.

That paper-for-paper deal will create a business with about €700 million in revenues and assets of €1.2 billion. Interestingly, Deloitte played a role in advising Partygaming on this transaction.

Dublin-headquartered Cryptologic is at a very different end of the business. Its focus is developing casino and slot- style games and software, which it then licenses to big operators. In fact, it recently added Bwin to the list of its licensees.

In its favour is the fact that its products are well regarded in the industry.

However, the business lost money through 2009 and 2010. Whether it will prove an attractive proposition to another player remains to be seen. While there is a move towards consolidation in the business, there is another development of sorts in the background as well. The European Commission is launching a Green Paper on internet betting, which is subject of a patchwork of conflicting rules across the 27 member states.

The aim is to see if the current mishmash of regulations can continue to coexist. However, nobody in the industry should start cheering just yet. Internal markets commissioner Michel Barnier said this week that the consultation was not about liberalisation.

Liberalisation would mean taking on various member states’ restrictions on gambling, normally imposed under a public policy flag of convenience, designed to protect the states’ own betting monopolies, which largely consist of lotteries and pool systems – lucrative for the states but not for the punters.