Ireland Financial News – Mortgages & Banking

No-frills bank accounts should be introduced to bring financially excluded people into the banking system, according to the State’s poverty watchdog.

The Combat Poverty Agency has urged the Government to abolish stamp duty on ATM and point-of-sale cards on these accounts.

It also says banks should train staff to be proactive in assisting people to open accounts.

According to the agency, 20% of Irish households lack bank accounts despite a proposal six years ago from the banks to develop a universal one.

It notes some recent progress with Postbank and some credit unions introducing products for low-income consumers.

It says Ireland has the fourth highest level of financial exclusion among the 15 long-standing EU states.

Doing without mainstream and appropriate financial services mostly affects poorer people, says the agency, and many turn to money-lenders.

Paying annual interest rates causes some families to accumulate debt, says agency director Kevin O’Kelly.

He recommends the new account should allow customers to withdraw up to €20 more than is available if necessary.

He also says bank staff should be trained in the variety of documentation that is acceptable for account opening, beyond a driver’s licence or a passport and a utility bill.

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 Figures from the Central Bank show that the annual rate of growth in mortgage lending dropped to its lowest level in 21 years in August.

Residential mortgage lending was up 9% compared with the same month last year, the lowest annual rate since mid-1987.

The increase in mortgage borrowing in August was €508m, just over half the figure for July. The Central Bank said that while August was usually a quiet month, this figure was ‘exceptionally low’.

The annual rate of growth for all private credit in the economy slowed to a six-year low of 12.9% in August.

The Central Bank also said that new spending and repayments on credit cards were noticeably lower in August than July.

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Minister for Finance Brian Lenihan has said that deposits in Irish banks are secure and that bank customers can rest confident in the knowledge that their money is safe.Mr Lenihan said that he is prepared to review the statutory guarantee limit for bank deposits, which is currently set at €20,000.

However, he said the question of an appropriate time to make an announcement about any changes to the guarantee still has to be decided by the Government.

Mr Lenihan said that he did not believe it was helpful to speculate about the legal size of the deposit guarantee in the current circumstances because the Government wants to ensure that all deposits are safe.

The minister insisted that deposits are not in any danger and said that people should not be going to banks to shift their deposit accounts on the basis of unfounded allegations made on radio programmes.

Mr Lenihan said that the Government will take whatever steps are required to ensure the stability of the Irish banking system and that nothing would stand in his way from ensuring that stability in the present circumstances.

He added that that the Financial Regulator had confirmed that, as of today, deposits are safe.

Short selling ban

The Minister also welcomed the decision by the Financial Regulator to ban the short selling of Irish financial stocks, which prompted a rally in bank share prices on the Dublin stock exchange this morning.
The regulator’s ban applies to AIB Group, Bank of Ireland, Anglo Irish Bank and Irish Life & Permanent.

The practice of short selling or shorting has been widely criticised for hastening and even causing declines in the share prices of many stocks in recent weeks and months.

Short selling is when a speculator borrows shares in a company from another party for a particular period of time and then sells them in the hope of buying shares in the same company again for a cheaper price.

The speculator then gives back the borrowed shares making a profit in the intervening trade.

While the practice has critics, others say the falling share values have little to do with shorting, and more to do with underlying very poor sentiment because of rising bad debts and falling profits.

Meanwhile, Anglo Irish Bank is reported to be in talks which may lead to a takeover of Irish Nationwide Building Society.

The development follows concerns about how the building society could be affected by the credit crunch.

It is understood that any merger would see Irish Nationwide branches remaining open.

Shares in Anglo Irish Bank rose by almost 29% to €5.60.

Management and staff at Irish Nationwide Building Society have been informed that the society has had no approach from Anglo Irish Bank in relation to a takeover.

Around 100,000 Irish Nationwide members would be eligible for a windfall in the event of a deal to compensate them for demutualising the society.

Until recent months, a figure of around €10,000 each was being mooted. However, that was before the financial crisis swept the markets and the deterioration in the economy.
Separately, Bank of Ireland has categorically denied reports that the bank is in any takeover talks or has received any approach from Spanish bank Santander or any other party.
World markets soar
Shares surged globally after intervention by financial regulators.

Irish banks rallied strongly with Bank of Ireland jumping over 37.5% to close at €5.20, while Irish Life and Permanent soared 20% to €6.13 and AIB added 19% to end of €6.23.

But despite today’s record gains, the ISEQ index of Irish shares is still below the 4,345 level it closed at last Friday.

Other European markets were up strongly, with the FTSE closing 9.3% higher at 5335.2, which is its biggest one-day gain.

In Paris, the CAC-40 jumped 9.27%, its largest one-day gain, to 4,324.87 points, and in Frankfurt, the DAX was up 5.56% at 6,189.53 points.
On Wall Street, the Dow Jones has gained 4% while the Nasdaq is up 3.7% as President George W Bush today pledged that the US government was acting to shore up the nation’s ailing economy.

The US government has unveiled a financial rescue package to increase confidence in the markets. The measures include buying billions of dollars of bad mortgage-related loans from American banks.

President Bush said the current economic challenges must be met with unprecedented action.

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Lloyds TSB has announced a £12.2bn takeover of rival Halifax Bank of Scotland.HBOS is the UK’s biggest mortgage lender and savings bank. It already has £258bn of retail deposits, and around 15m savers.

Lloyds TSB, which does the bulk of its mortgage lending under its Cheltenham & Gloucester brand, is the UK’s third biggest lender in terms of outstanding home loans. During 2007, the latest year for which figures are available, it wrote 8% of all mortgages in the UK.

Britain’s financial watchdog, the Financial Services Authority, said yesterday that HBOS was ‘well capitalised’ despite sharp losses to its share price this week.

Meanwhile, the value of shares on Asian markets fell sharply again early today as the global financial crisis deepened on reports of trouble at more US banks, including the Wall Street giant Morgan Stanley.

Japanese stocks fell by over 3% with Hong Kong down by over 5%.

The declines followed a drop of over 4% on the Dow Jones index in New York.

Shares in Morgan Stanley and Goldman Sachs – the last two major investment banks standing following the recent upheavals – were down by 24% and 14% respectively.

The Wall Street Journal and The New York Times have reported that Morgan Stanley, whose stock fell to its lowest level in ten years, is considering a merger with a US commercial bank.

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Two of the country’s leading property companies are offering home buyers interest-free loans in an attempt to stimulate activity in the housing market.Glenkerrin Homes and Radora will announce details today of the schemes to assist would-be buyers at key Dublin locations, including Stillorgan, Elm Park, Ballinteer and Palmerstown.

Speaking on RTÉ Radio’s Morning Ireland, developer Ray Grehan of Glenkerrin Homes disagreed that the company was facilitating bad financial practice, by offering buyers a loan for their house deposits.

Builders step in where lenders fear to tread; a lack of money and a lack of confidence – that is how Mr Grehan assessed the problems in the housing market.

Fellow developer Mr McNamara’s apartment development in Elm Park in Dublin 4 has already seen prices fall 20% to attract buyers.

Radora is now offering interest free loans of up to 30% of the selling price to be paid back within five years.

According to a statement, Glenkerrin is stepping in to help out those no longer able to secure loans of up to 95%.

Potential buyers of its properties Stillorgan, Ballinteer and Lucan will have to pay 5% of the asking price. They can then avail of an interest-free loan of 15% of the price to be repaid in seven years.

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