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Inside The World Of Business

International backing makes perfect cents as hammer falls

THE PRIMARY dealers in Irish bonds will be expected to step up to the plate this morning when the National Treasury Management Agency (NTMA) holds its much-anticipated September auction.

The decision to press ahead with the auction in the face of record spreads over German bunds seems foolhardy, but the NTMA must have some assurance from its primary dealers that they will take the €1.5 billion on offer.

“The primary dealers bid in competitive auctions of Irish Government bonds and make a two-way market in the bonds at all times. They are also market makers in Irish Government bonds on the major electronic trading platforms,” according to the NTMA.

For the record, they are Barclays Capital, BNP Paribas, Credit Agricole CIB, Citigroup Global Markets, Davy Stockbrokers, Deutsche Bank, Goldman Sachs International, HSBC, ING Bank JP Morgan, London, Merrill Lynch International, Nomura International, Royal Bank of Scotland, Société Générale and UBS Limited.

Not surprising then to see at least a few of these institutions out yesterday making positive noises, most notably ING, which predicted the auction “will be fine”, while Nomura described it as a good buying opportunity. Likewise, Goldman Sachs spoke of a floor under “downside risks”.

No doubt the NTMA will be gratified to see such supportive comments from the banks, to which it has granted the potentially lucrative right to be a primary dealer.

But one suspects it might take time to rebuild relations with Barclays Capital, whose note on Ireland sent yields rocketing last week.

Barclays put forward a cogent case for an Irish default on Anglo Irish senior debt in the face of further unexpected banks losses or a slowdown in the economy. Doing so might stave off a sovereign default, they argued, in what came as close to being a dare to default as the Government is likely to get from the market.

The Barclays report may have done the NTMA no favours – sending a shiver down the markets spine, and sending yields skywards – but no doubt it and the other market makers made hay from the ongoing volatility. This morning it is payback time.

Don’t bank on an apology

IT’S OFFICIAL – sorry really is the hardest word to say . . . at least when it comes to Britain’s bankers.

Researchers at the University of Ulster, who examined the behaviour and testimony of four of the UK’s banking elite, discovered they had declined to “publicly and unreservedly apologise for their actions”.

Communications specialist Owen Hargie analysed the public testimony of the four banking chiefs during the British government’s banking crisis inquiry last year.

Sir Tom McKillop, former chairman of the Royal Bank of Scotland (RBS); Sir Fred Goodwin, former chief executive of RBS; former HBOS chairman Lord Stevenson, and Andy Hornby, former chief executive of HBOS, now part of Lloyds Banking Group, all gave evidence to the House of Commons Treasury Committee as part of its investigation into the banking crisis in the UK.

Together with his academic colleagues, Karyn Stapleton from the University of Ulster and Dennis Tourish at the University of Kent, Prof Hargie discovered that the top bankers employed a range of tactics to avoid directly saying sorry.

Prof Hargie said the bankers used a number of excuses to suggest that forces over which no one had any control had led to the banking crisis.

Prof Hargie said that although public apologies are now very common for senior politicians, bankers realised they stood to lose a lot, both professionally and financially, if they admitted any responsibility for the banking crisis.

“It was imperative that they should not offer a full and direct apology,” he said.

He said his research shows that some of the top former UK bankers wanted to avoid confirming the public’s worst presumptions about their culpability and motivation, so they employed certain tactics.

“Such a pattern can be explained by the association between apology and the acceptance of responsibility, and perhaps more importantly in this case, the expectation that those responsible for a transgression/negative event should offer some form of reparation,” added Prof Hargie.

Markets advice academic

The smallish conference in the Convention Centre, Dublin, where Prof Patrick Honohan spoke yesterday, was chaired by a Paris professor and president of the event’s organising body, SUERF, the European Money and Finance Forum.

Catherine Lubochinsky reflected on the nature of markets, saying they like to be panicked. The panic over Greece, she suggested, was overdone, given that 40 per cent of its economy was “underground”.

Now that Greece was “fixed”, the markets were on the lookout for another country to be fearful about. The important matter, she said, was to avoid your country being the one the markets selected. No doubt it was a thought that was uppermost on Prof Honohan’s mind as he took to the podium.

Today

The National Treasury Management Agency is auctioning up to €1.5 billion in Government bonds as markets continue to push Irish bond yields higher.

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