Friday 28 August 2015

The Punt - Bets on house price folly

Published 08/08/2014 | 02:30

Paddy Power is offering odds of 9-to-4 that house prices will increase by between 15pc and 19.9pc this year
Paddy Power is offering odds of 9-to-4 that house prices will increase by between 15pc and 19.9pc this year

It may not be a bubble - at least not according to the strict criteria of the so-called experts - but it is shaping up to be a mess.

Business newswire Bloomberg reported yesterday that Paddy Power is offering odds of 9-to-4 that house prices will increase by between 15pc and 19.9pc this year.

A €4 winning bet would return a €9 profit, the report helpfully points out to the bond traders and banking analysts who subscribe to the service.

You know you're in trouble once the novelty bets are being laid. 
Our home-grown experts have been quick to reassure the public that we aren't back in a bubble, but an intervention by the head of KBC Bank here, Wim Verbraeken, might give some pause for thought.

With a foreigner's instinct for stating the bleeding obvious the Belgian banker has suggested, ever so gently, that spiralling price rises should at least be "reason for concern".

Wise words, but if he keeps it up he can expect a cool reception at the Christmas do from his fellow bank chiefs. After all every hike in house prices means a welcome decline in loan impairments.

International flair at Finance

Finance Minister Michael Noonan, below, may have opted for an insider to fill the top job in his department after John Moran's departure, but it seems the top management rank has had a sprinkling of outside blood. Well, sort of.

Dr Nicholas O'Brien was appointed assistant secretary with responsibility for international and EU divisions at the end of June, taking over from Michael McGrath who left to take up a post with the International Monetary Fund.

While other senior managers are steeped in the economic and financial worlds, Mr O'Brien brings with him a little international flair, having been on secondment from the Department of Foreign Affairs as diplomatic advisor.

He has previously served in the European Commission, as Consul General in Shanghai and as deputy head of mission at the Irish embassy in Berlin. But he's been on secondment in the department for a number of years.

He is now Ireland's representative on the EU's economic and financial committee as well as the alternate governor for Ireland on the board of Europe's bailout fund, the ESM. He is also the Irish director on that board and the EFSF board.

The Punt also understands the assistant secretary role vacated by Derek Moran's appointment as secretary general will soon be opened up to potential candidates.

Deutsche's secret deal

The poor banks. They just can't seem to get a break.

Just when it seems things can't get any worse, Bam!, they are making record settlements with US regulators.

On Wednesday it emerged that Bank of America was offering to make a $16bn (€12bn) payment to settle charges tied to mortgages. Now it has been reported that Deutsche Bank agreed to a memorandum of understanding with US authorities in 2012 to make internal improvements after the bank was excoriated for corporate governance failures - including "serious risk-management deficiencies".

The MOU is still in place. Bizarrely though, it hasn't been publicised until now. This has been a recurring theme in the US. Time and again the big banks have either entered into discussions, or agreed to a deal with regulators that has only been publicised at a later date, if at all.

Clearly it is in the banks' interests to keep these issues secret, but what about the client? If we are doing business, we need to know the lender is acting above board. These secret deals make us very uneasy.

Irish Independent

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