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Inside the world of business

All eyes on Court Six for decision on Quinn case

THIS IS a big month and could possibly be a big week for the bankrupt businessman Seán Quinn, his son Sean jnr and nephew Peter Darragh Quinn as they await the ruling on whether they have acted in contempt of High Court orders.

Ms Justice Elizabeth Dunne said last month, after 15 days of hearings in a case taken by the former Anglo Irish Bank against them, that she would try to rule on the case as soon as possible but that it would not be in the last law term which ended on May 24th.

The new term begins tomorrow and all eyes will be on the judge and what happens in Court Six over the coming days and beyond.

The Quinn side is not denying that they took steps to put assets beyond the reach of the bank; they contest the timing of such moves, saying they took no steps to move assets out of the bank’s grasp after it had secured restraining orders in the court in June and July 2011.

The bank secured those orders in legal proceedings to protect international properties valued at up to €500 million which the bank, now known as Irish Bank Resolution Corporation, claims are securing part of the family’s €2.88 billion of debt to the bank.

The judge has said that she will first decide whether there was contempt before hearing arguments for what action should be taken.

If she rules in favour of the Quinns – that they are not in contempt – this will buoy the case of Quinn’s wife and adult children in other proceedings they are taking contesting the legality of €2.34 billion of their loans to the bank.

If she rules against them, choosing the right sanction could be tricky. In similar cases, individuals are found to be in contempt of court until their contempt is purged and the judge could rule that the Quinns must remedy any wrongdoing if she finds against them.

The judge acknowledged last month when considering this matter that when the cat’s out of the bag, it’s hard to put it back in.

Whichever way it goes, it’s going to be an interesting ruling.

Efforts afoot to wean Irish banks off costly State guarantee

ONLINE PRESENTATIONS from the Department of Finance are useful to knowing the challenges facing the banks in the months ahead.

June will be a busy month as the mandarins in the department must submit a restructuring plan to the EU Commission by the end of the month on carving out a good bank out of Permanent TSB.

The draft personal insolvency legislation will also be published this month as the banks work with the Central Bank on their in-house suite of new loan products to tackle their mortgage arrears.

One interesting area the department is looking at, according to the updated presentations posted online late last week, is whether the banks could survive without the State guarantee. The guarantee is costly for the banks, which are already struggling to restore their net interest margins.

The department says it has been trying to reduce the State’s exposure under the Eligible Liabilities Guarantee and on the State guarantees on the Central Bank’s emergency loans to the former Anglo Irish Bank, now Irish Bank Resolution Corporation.

Excluding the guarantee for deposits of less than €100,000, liabilities covered under the other guarantees have fallen from €375 billion in September 2008 to €93 billion this year. Despite this, the banks paid far more in guarantee fees in 2011 than in 2010.

The department is right to ask how much value customers put on the guarantee after the State’s heavy recapitalisation of the banks, which will reach €64 billion once the State completes its purchase of Irish Life for €1.3 billion. The banks have already reduced their reliance on central bank funding significantly but this reliance is expected to reduce more slowly this year, the department says. This is because euro zone risks and Irish economic concerns will make it difficult for the banks to find other sources of funding.

So the department’s approach to determine a speedy but prudent approach to wean banks off the guarantee over a realistic timeframe could be longer-term than hoped.

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TODAY

The Credit Review Office publishes its eighth quarterly report on lending practices in Irish banks