Morning business news – December 4

December 5, 2013

AVALANCHE OF BANKRUPTCIES FROM THOSE IN MORTGAGE ARREARS NOT LIKELY – The final piece in the insolvency and bankruptcy jigsaw was put in place yesterday with a change to the legislation reducing the bankruptcy term from 12 to three years. There had been some predictions of a surge in bankruptcy applications as many householders in mortgage arrears would not be able to find an alternative debt settlement arrangement.

Karl Deeter, of Irish Mortgage Brokers, said it would be some time before this would happen because people would likely go through a series of insolvency negotiations with the bank first. “You can short-circuit it and try to jump straight in by refusing to deal with the banks. That would get you in there quicker,” he said. “But it’s the creditor refusal of solutions that will trigger a lot of bankruptcy. If there’s an avalanche of bankruptcy, really what it shows is an avalanche of bad decision by banks that led people to take that step rather than solve it elsewhere.”

Karl Deeter said the argument that the banks would be forced into action by the threat of somebody going bankrupt was somewhat skewed. “They will have the right to realise their security, so in bankruptcy the family home is not given special protections. It’s not automatically on the table either. It won’t force better decisions,” he explained.

Asked if an upsurge in repossessions would put a dent in the resurgent property market, Karl Deeter said it was hard to predict. He pointed out that it does not solve the supply problem, as people who leave a repossessed property still have to live somewhere else. He also said the banks could hold onto properties for a period before releasing them onto the market like NAMA have done.

MORNING BRIEFS –  Bank of Ireland has informed the stock market that it is going ahead with its plans to raise equity to the tune of €500m. This marks the start of the process to pay back the state’s €1.8 billion euro in preference shares. The balance of the preference shares – €1.3 billion – will be sold to existing shareholders. These preference shares date back to 2009 when the bank was rescued in a bailout. The state will continue to have a 15% shareholding in the bank.

*** The state will receive €2.27 billion euro from the EFSF today – the last installment from Europe as part of the bailout programme.

*** European authorities are expected to issue fines today to at least six large banks for allegedly colluding to rig a key rate at which banks lend to each other. It is alleged that traders were making millions off manipulating the Euribor, the euro equivalent of the Libor or London Interbank lending rate. A number of banks have already forked out over £2.25 billion sterling in fines for rigging that rate. The EU is expected to announce two sets of settlements as soon as today. It is understood that JP Morgan, HSBC and Credit Agricole have all rejected deals to end the investigation into this particular case.

*** Australian growth figures are continuing to disappoint. Numbers published overnight showed the economy expanded at an annualised 2.3% in the year to the end of September with a relatively muted 0.6% in the three month quarter. While that is the kind of growth we would relish at this end of the world, in Australian terms it is fairly muted where the economy has experienced over 20 years of unbroken growth on the back of the resources boom and Chinese demand. Ratings agency Moody’s said it was a sign the Australian economy was underperforming. But the agency is optimistic that a cut in rates there will bring growth back to around 3% next year.

*** A private-sector jobs report out today is expected to show that 165,000 new jobs were created in the US in November. That would be a good improvement on the relatively weak 130,000 jobs produce din the previous month. While Friday’s non-farm payrolls are the more important and relevant number, these numbers will provide an indicator as to whether employment is getting back on track.

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