INSIDE THE WORLD OF BUSINESS:A round-up of business news stories
‘Lucrative’ executive double lives leave AIB red-faced
THE REVELATION that two of its most senior executives live lucrative – or perhaps not so lucrative – second lives as property developers could not have come at a worse time for AIB.
The bank’s insistence this week on appointing Colm Doherty to replace Eugene Sheehy in pretty much all but name has only added to the jaundiced view taken of the bank and the sector in general by the public.
Regardless of where you stand on the issue of Doherty, his appointment represents a continuation and affirmation of the bank’s management culture. If nothing else, it was a case of “better the devil you know”.
The subsequent revelations about the sidelines of some of the bank’s most senior managers are hardly a ringing endorsement of that culture. It’s hard to know where to start when listing what is wrong with senior bank executives running large private businesses on the side, never mind property businesses.
Assuming that the individuals were able to negotiate the myriad conflicts of interest that arise, there is still the issue of how they could find the time to perform their well remunerated day jobs. There is also the issue of what sort of message it was sending to customers who were active in the property sector.
If they were aware of the situation, they have grounds for annoyance; if their weren’t, they have even greater grounds.
The question for AIB as an organisation is firstly how and why it allowed this situation to arise in the first place and secondly why they allowed it to continue.
It is simply baffling for outsiders to understand how the bank could be of the view that this level of extramural activity was compatible with these men’s day jobs, and in the best interest of the bank and its customers
But we must presume that the bank did take this view and that speaks volumes about the culture of the bank and serves to underline the scale of the task facing Doherty.
More hand-ball pain
Bookmakers added their own yelps of pain to the howls of outrage that greeted Thierry Henry’s hand ball on Wednesday night.
Paddy Power announced that it was returning losing bets on Ireland to qualify for and win the World Cup, which the bookie told yesterday's Racing Postwould cost it £110,000 sterling.
Its main Irish rival, Boylesports, is giving free bets to punters who lost out, while Robbie Keane’s goal cost both bookies dear as they offered very generous odds against him scoring first. Keane cost Boyles an estimated €110,000 while he took €125,000 out of Power’s satchels, according to the same report.
But the real pain may be in the future. Boylesports spokesman, Leon Blanche, told the At the Races TV channel’s news programme yesterday morning that Ireland’s participation in the World Cup would have boosted all bookmakers’ turnover – and presumably profits – next summer.
Football is one of the industry’s big plays, aided by the fact that, alongside straight win and lose bets, it can be used to frame lots of markets, such as first goalscorer, half-time full-time result, and of course in-running bets on the final result.
In-running bets allow punters to bet on matches that are under way. Paddy Power’s skill at managing the risk attached to in-running bets was one of the reasons cited for its deal with the Paris Mutuel (PMU), France’s state-owned betting operator.
It’s not clear if the PMU will have the licences it needs and if the pair will have their systems in place on time for the World Cup, but if they did, Paddy Power could still well share in some of the extra revenue that the event is likely to generate in France, whose citizens are every bit as fond of a bet as we are.
Chinks of light
A degree of certainty emerged for Irish banks yesterday with news that the European Commission has approved measures that will allow them to raise debt on the markets under the aegis of an extended State guarantee.
Minister for Finance Brian Lenihan first announced his intention to seek an extension of the guarantee last September, when he outlined the provisions of the Nama Bill.
Since then, the Government has been in regular contact with the European Commission over the details of any extended guarantee. While not unsympathetic to the Government’s position and aware of the continuing parlous state of the Irish banking sector, the EU was also looking to bring the terms of the protection into line with similar schemes across the EU.
As it stands, banks will now be able to raise five-year money with maturity dates out as far as June 2015, although the guarantee will no longer cover subordinated debt.
Debt covered under the existing guarantee will lose protection in September next year and banks looking to further extend it will have to roll over the funds in the new guarantee window – between December 1st of this year and June 1st, 2010. The Government has yet to reflect the EU sanction in a Statutory Instrument which will not come before the Dáil until next month.
Still, alongside the National Asset Management Agency, which expects to transfer large chunks of property debt from the banks by the middle of next year, the EU provisions should provide the breathing room necessary for the banks to get their financial house back in order.
NEXT WEEK:
The Government comes under further pressure next week as unions call a one-day stoppage on Tuesday to protest at planned cuts in resources for the public service in the upcoming budget.
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