StubbsGazette.ie http://www.stubbsgazette.ie StubbsGazette | Credit Checking| Debt Collection | Demand Letters | Software | Legal Services en-uk info@stubbsgazette.ie Copyright 2024 How Covid reality is forcing landlords and suppliers to be creative on collecting debts. What is happening in the market place. https://stubbsgazette.ie/news/creative-debt-collection-landlords-suppliers https://stubbsgazette.ie/news/creative-debt-collection-landlords-suppliers By Jim Stafford

 

We are seeing a different type of client during the current Covid financial difficulties than we did from the 2008 Economic Crash. Our “2008 Cohort” of clients were largely people who over leveraged themselves and were caught when the property crash occurred. Our “Covid Cohort” comprises business people in the hotel/hospitality and retail areas who, even if they were prudent business people, are being financially devastated.

We are currently handling two Covid related streams of work categories: Landlord/Tenant, and business customer/business supplier.

 

Landlord/Tenant work stream

We act for either Landlord or Tenant, and there is a certain “template” to be followed.

The well advised landlord will seek full financial information about the tenant, to include accounts/projections and possibly copies of recent bank statements. The landlord will then assess if the tenant has the capacity to pay. The landlord will also review personal guarantees.

As some guarantees are subject to time limits, the landlord needs to assess his options quickly.

If the tenant is unable to make full payments then the landlord can negotiate around the following options:

· Agree a rent free period.

· Defer the rent.

· Charge rent on a % of turnover.

· Have tenant abandon any break clauses.

· Extend the lease.

· Vary the other terms of the lease, such as re-locating tenant to a less favourable “pitch” within, say, a shopping centre.

· Charge interest.

If charging rent on a % of turnover basis, then the landlord needs to consider also obtaining a % of on-line sales. This particular aspect of negotiations can be tough as the tenant may have a separate company for on-line sales or may claim that the on-line sales derive from other stores.

Some retailers have considerably bumped up their on-line sales and deciding to close less profitable outlets.

In practice, we are now seeing many landlords moving away from their initial aggressive position at the beginning of the Covid crisis to a more pragmatic position of “sharing the pain.” We have seen all types of deals from one tenant only paying rates and service charges for the next 12 months, to personal guarantees being called upon.

 

Supplier/Customer work stream

We are providing advisory work to business customers who are unable to pay their suppliers. Many of these clients are already availing of the “debt warehousing” facilities being provided by Revenue, and they are seeking “debt warehousing” or “debt forgiveness (or a combination of both) with their own trade suppliers. In effect, we are negotiating “informal schemes of arrangement.

When seeking “debt forgiveness” from a supplier, we apply the principles of Examinership legislation i.e. we provide creditors with a better outcome than a liquidation. Another key principle is that the business must be viable after the debt forgiveness is granted. Why do creditors participate in such schemes? They receive a better outcome than a liquidation and they retain a customer going forward.

One lesson I have learnt over the years is that it is much easier to do a deal with a single creditor who is owed €500,000 than 10 creditors who are owed €50,000. The more money a creditor is owed, the more the creditor is in a type of “partnership” with the customer.

 

Informal Schemes of Arrangement

When a company gets into financial difficulty the directors have the opportunity to enter into an Examinership. However, Examinerships attract significant legal expense, and are therefore generally not suitable for the small/medium sized company.

 

Situations Suitable for Informal Schemes

Informal schemes are done outside the ambit of the courts and are particularly suitable for situations where there are a handful of large creditors. Dealing with a large number of smaller creditors would be time consuming and the risk of news of the company’s difficulties reaching the market place is increased.

 

Effective Communication

Effective communication is paramount for the creditors to understand how the company got into financial difficulties and for them to support any future recover plan.

 

Hiatus Period

Once the directors become aware of the company’s financial difficulties, they need to take steps to protect their personal position in respect of any subsequent claims for wrongful and reckless trading. Accordingly, no new supplies should be ordered by the company unless the directors believe that they have a reasonable expectation of paying for them.

 

First Meeting of Creditors

Once the directors have decided to try and work out an informal scheme of arrangement with their creditors, they should arrange for the preparation of a brief report which should be distributed to the major creditors. This report should contain the following:

· Reasons for the company’s current financial difficulties.

· Management accounts prepared up to a recent date.

· A listing of creditors.

At the meeting of creditors, which can be held over Zoom, a recovery plan should be presented for the creditors agreement. The recovery plan should clearly show that the underlying business is still viable, or can be made viable if certain steps are taken. The recovery plan may call for changes to the management team, the financial controls, products/market reorientation , pricing, and cost reduction. The plan will generally call for creditors to write off a portion of their debts. Apart from creditors being asked to write off a portion of their debt, they may also be asked to extend support to the company by reducing their prices for a period, providing advertising support and/or extending credit terms.

At the creditors meeting it should be made clear that the continued operation of the company will be dependent upon all major creditors accepting the recovery plan. The recovery plan should clearly show how creditors will benefit by supporting it. This can be illustrated by demonstrating the return which creditors would receive under a liquidation scenario versus the return they would receive from supporting the recovery plan.

A major disadvantage of attempting to implement an informal schemes of arrangement is that the company does not have court protection . Accordingly, if a large creditor decides not to support the recovery plan, then it can take legal action, such as a winding up petition or enforcement of a judgment debt. However, provided the company can establish trust with their creditors and the creditors act commercially, then such legal action should not occur.

 

New Monies

If creditors are being asked to write off a significant proportion of their debts, then in order to encourage the creditors to support any recovery plan it may be necessary to arrange for the provision of "new monies". These new monies my come from the directors themselves or from a new investor and may be used to invest directly in the business or to enable an initial dividend to be paid to the large creditors.

 

Creditor Priority

Not all trade creditors may be in a similar position. Some creditors may have valid reservation of title clauses in their standard terms and conditions, or personal guarantees which would enable them to partially recover some of their debt. The value of such terms need to be established and to be incorporated into any dividend scheme for the creditors.

 

The Revenue Commissioners

Invariably speaking, the Revenue will need to be consulted as part of any recovery plan. While the Revenue are prohibited by law from writing off taxes due, they are prepared to enter into deferred instalment arrangements in certain situations for the settlement of past liabilities provided interest is paid on the instalments.

 

The Bank

The bank will also need to be consulted as part of any recovery plan. Whether the bank will be prepared to write off a portion of their debt will depend on the value of the security they hold.

 

Monitoring

The implementation of an approved plan should be monitored, at least on a quarterly basis, and creditors should be kept informed of progress made.

 

Summary & Conclusion

Landlords and suppliers are beginning to show a more pragmatic approach to tenants and customers in financial difficulty.

What is worrying is that the Covid storm is not yet over, and the Brexit storm is around the corner.

 

Jim Stafford is managing director of Friel Stafford, a company specialising in Corporate & Personal Inosolvency.

 

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Mon, 09 Nov 2020 10:19:08 +0000
FATF outlines an action plan to deal with the rising money laundering risks https://stubbsgazette.ie/news/fatf-outlines-action-plan https://stubbsgazette.ie/news/fatf-outlines-action-plan FATF and G20 held a conference on the 14th of October to tackle the ongoing issue of fraud that has seen a sharp increase in cases since the global pandemic shook the global economy. FATF identifies the major risk of employees working virtually from home as well as an increasing number of non-essential businesses are moving towards online sales.

More than half of the world’s governments’ efforts to detect and prevent money laundering have been affected by the Covid-19 pandemic. “Counterfeit medical goods, cyberscan fraud, and other consequences of the pandemic have made us update our global risk-based standards on fighting financial crimes,” said FATF President Marcus Pleyer.

He emphasised the importance of the risk-based approach, to ensure pandemic support funds rapidly reach the victims of this crisis, rather than fall into the hands of criminals.

FATF are looking into new technologies to make anti-money laundering and counter-terrorist financing systems more efficient and effective, particularly, the work that supports the G20’s ongoing efforts on digital transformation.

The conference went on the cover actions that organisations are taking or could consider taking in response to these challenges:

  • Regional authorities need to collaborate and discuss the impact of COVID-19 on AML/CFT risks and systems, to develop responses and engage with the private sector.
  • Authorities need to work with the private sector to ensure AML/CFT measures are in place and risks are minimised
  • Ensuring that all AML/CFT requirements in the context of economic relief packages for individuals and businesses are communicated clearly and that a risk based approach is adopted
  • Increase and maintain cross-border communication with local Financial Intelligence Units communicating any developments to the Egmont Group Secretariat
  • Monitoring the impact of the pandemic on the private sector as an increasing amount of regulated businesses shut down causing significant money laundering and terrorist financing vulnerabilities

For more on the FATF virtual plenary from AMLintelligence.com:

 

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Thu, 05 Nov 2020 08:47:58 +0000
Ireland and the FinCEN files https://stubbsgazette.ie/news/ireland-and-the-fincen-files https://stubbsgazette.ie/news/ireland-and-the-fincen-files The data showing FinCEN Files transactions graph shows more than $35 billion in transactions dated from 2000-2017 that were flagged by financial institutions as suspicious to United States authorities. Over 2 trillion dollars in transactions were documented in the Fincen files.

The International Consortium of investigative journalists have created a map, representing some of the transactions documented in the Fincen files to illustrate how potentially dirty money flows from country to country around the world, via U.S.-based banks. The data only represents cases which included specific details about both the originator and beneficiary banks, amounting to more than $35 billion in transactions dated from 2000-2017.

The graph details 44 suspicious transactions that flowed to and from Ireland extracted from the FinCEN Files. A total of $64 million was received and $175 million was sent from Ireland.

It then breaks down these transactions, showing the amount of money that was sent and received by banks in Ireland including AIB, Ulster Bank and Bank of Ireland.

These transactions were processed via 4 U.S.-based banks, which filed suspicious activity reports with FinCEN. AMLIntelligence takes a deeper look into the suspicious transactions linked to each bank with Deutsche Bank’s global SARs accounting for a total of $1.3 Trillion  in  value, and making up 982 of the 2100 SARs released by the papers. BNY Mellon has been accused of transferring funds for Ukranian oligarch Dmytro Firtash, wanted on criminal charges in the US. BNY Mellon in conjunction with the other banks named by ICIJ handed transactions for companies in Firtash’s control.

ICIJ then breaks down each transaction showing the money moved between Ireland , the U.S. and 6 other countries.The FinCEN Files reveals the role of global banks in industrial-scale money laundering and show the magnitude and reality of money laundering and terrorist financing and the relation to organized crime, which politicians have not experienced prior to the same extent.
It should have an impact on the next steps by the EU.


To view the map in full go to https://www.icij.org/investigations/fincen-files/download-fincen-files-transaction-data/

For more on the Fincen files go to AMLintelligence.com

 

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Tue, 06 Oct 2020 14:30:33 +0100
Corporate Insolvency Statistics August 2020 https://stubbsgazette.ie/news/corporate-insolvency-statistics-aug-2020 https://stubbsgazette.ie/news/corporate-insolvency-statistics-aug-2020  








 

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Wed, 09 Sep 2020 20:14:27 +0100
Top Corporate Insolvency Practices July 2020 https://stubbsgazette.ie/news/top-corporate-insolvency-practices-july-2020 https://stubbsgazette.ie/news/top-corporate-insolvency-practices-july-2020

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Tue, 11 Aug 2020 09:34:42 +0100
How businesses are being affected by COVID-19 shutdown https://stubbsgazette.ie/news/how-businesses-are-being-affected-by-covid19-shutdown https://stubbsgazette.ie/news/how-businesses-are-being-affected-by-covid19-shutdown The Covid-19 shutdown has had a huge and varied effect on the health of Irish SME’s.  The sudden nature of the shutdown has been particularly difficult for many companies to deal with.  These businesses are not rarefied entities with endless resources, rather small companies on which many families and individuals rely.  It’s said that businesses can cope with most things bar uncertainty and these are very uncertain times.

Many businesses ar,e in a holding position,  waiting to see what happens in relation to Government supports for workers and when their business can finally resume normal operations.

Roughly speaking companies can be divided into three categories

  • Companies  that are still working through the lockdown,
  • Companies that have stopped on a temporary or partial basis and
  • Companies that have stopped and will most likely not reopen when the lockdown is finally lifted.

The key for policy makers is to ensure that as many as possible of the second category are assisted in their return to trading, possibly under some stringent restrictions.

There are a whole host of difficult issues that will immediately face companies once business resumes.  Firstly prior to opening, companies will have to foot the bill for preparing their trading and office areas with PPE that complies with Government regulations.  This will be crucial for customer-facing businesses which necessitate face-to-face contact with their customers.  Retail and the Hospitality sector will face restrictions on space, for example, the number of customers allowed at any one time on their premises.

Staffing will present another major hurdle for returning companies as it is one of the largest variable cost of most companies.  The costs of funding redundancies may be crippling for some businesses, particularly those businesses that have had long-term employees that they cannot afford to keep on.  These companies will be hit very hard in terms of redundancies and minimum notice payments.  Staff retention of key employees may also be an issue for certain sectors after such a long break in normal trading.

Another crucial area will relate to a company’s premises.  Will landlords offer or be induced to offer either rent free or reduced rents to assist in businesses recovery?  The Rating authorities can play a significant role in this regard, particularly in relation to the longer term.  Currently all business will be granted a waiver of commercial rates for the six months until September 2020.  It remains to be seen if this period will be extended.  Businesses are also waiting to see in Covid support will be extended and for how long.

 

Domino effect

One of the defining features of the last recession was the “domino effect” of company failures, particularly in the property and construction sectors.  Companies generally pay their invoices when they can afford to, but the last recession was characterised by a domino effect on interdependent companies. For example, a single development company failure could lead to the failure of number of direct subcontractors and have a damaging effect on builders merchants, architects, quantity surveyors and other professionals and suppliers.

 

Credit Control

Credit control will be key to the success of many businesses.  It can be difficult to chase invoices at the moment, particularly when you know that the client is in a complete shut down as their cash flow will obviously be severely hindered.  For many companies, efficient managing of their debtor list will be a make or break factor in their survival.  Debtors lists tend to be harder to collect the longer they are outstanding and this will inevitably lead to problems for companies that invoice on a credit basis.

Another key factor will be how banks and financial institutions treat their borrowers throughout the recovery from lockdown.  Many companies are now on payment breaks but these will have to end at some stage, and, if the banks aren’t sensitive to the needs of SME’s they may imperil many companies struggling with their cash flow.  Payment breaks are not loan forgiveness and any loans will still have to be repaid in full.

Similarly, the Revenue Commissioners currently have a system of “Tax Warehousing” in place which allows companies to put off payments for a certain period of time to assist with cashflow and thus aid their survival.  The Revenue Commissioners will have difficult decisions to make when it comes time to end this system and will have to ensure that it is not done too quickly, otherwise it could contribute to the failure of many businesses.  The tax warehousing system only allows for the postponement of paying taxes and does nor provide for a remission.

In summary, it is hoped that with the right supports from Government, Landlords, Revenue Commissioners and Banks that we as a country can maximise the number of companies that will be able to resume successful trading once the pandemic restrictions have been substantially lifted. It is essential that there is coordinated policy response from these key players to save “saveable” businesses.  The financial well-being of so many businesses and thus the livelihoods families and individuals will depend on this.

 

By Michael Kennedy

Michael Kennedy is a Partner with Irish Insolvency, 32 Fitzwilliam Place, Dublin 2

www.iis.ie

michael@iis.ie

 

 

 

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Mon, 10 Aug 2020 12:14:30 +0100
Reinventing business as usual https://stubbsgazette.ie/news/reinventing-business-as-usual https://stubbsgazette.ie/news/reinventing-business-as-usual By Simone Caron

Restrictions were being lifted in phase 2, allowing businesses to open in phases, however, it is far from business as usual as there are safety measures that now need to be put into place. While the HSE still recommends keeping a 2 meter distance from others however, sitting in the conference room for a meeting can make this difficult most times and there still seems to be confusion around exactly what is expected of businesses in different sectors that need to be implemented.

Retail is among one of the most affected industries. “The Works” conducted research including some of the biggest retailers and reported that the final week before non-essential stores closed, saw like-for-like sales rise by 81% on last year earlier as shoppers bought education and mindfulness to keep the boredom of isolation at bay.

As expected, online sales remained high during the lockdown and a study done by money.co.uk found that over one third (37%) of Brits are shopping more often online, than before the COVID-19 crisis and a rise in sales of non-essential items. Whilst many employees experienced reduced pay, many business owners are looking for a way to cut costs including reducing rent and cutting their marketing budgets in half.

Ireland’s Cycle to Work scheme has seen a huge increase as those that return to work are looking for alternative transport options meaning that bicycle sales have increased and continue to rise as more businesses return to work

In line with the increase in online retail, Curry’s PC world has launched their “Go Instore” feature which  is powering the Currys PC World ShopLive experience. It involves a video-powered retail service that connects online shoppers with product experts using immersive HD live video.

The feature allows Curry’s employees to showcase products and connect with the customer using the live online chat service which has seen a huge increase in demand. This allows employees to work from home and prevents customers from lining up to purchase products - the perfect solution to prevent over crowded stores.

This Go Instore technology has been widely adopted across some of Europe’s large brand names as the government urges companies to provide a safe working environment for their employees.

However, Goodbody Stockbrokers have warned that lifting the restrictions too slowly may cause more damage to the economy and result in widespread business failure. While the government has been quick to assist businesses and offer unemployment aid, Goodbody reports that Ireland’s plans to reopen the economy have been more conservative when compared to international timetables which means the government will have to offer extended assistance to businesses to prevent them from collapsing.

On a positive note, with the recent success of containing the spread of the virus, analysts suggest the timetable could be implemented more quickly than originally planned. However, almost half of jobs in Ireland are sustained by international demand, the rate of recovery will rely in a large part on the economic recovery in the global market.

Goodbody's chief economist Dermot O'Leary said: "Ireland's attractiveness as a destination for large ICT and healthcare firms puts it in a good position to gain from recovery. However, while a simple narrative about the potential recovery is appealing, it ignores that different sectors of the economy will reopen at different speeds, and many businesses will not reopen at all."

Tokyo lifted it’s restrictions on restaurants and bars a few weeks before Ireland and has employed a digital hostess that  implements stringent hygiene methods, recording customers’ temperatures and requiring them to wash their hands before entering. Customers are then required to step into a machine similar to an airport security scanner to be sprayed with a mist of chlorine-based disinfectant for 30 seconds. Restaurants have also installed protective barriers across the table.

Irish restaurants and bars have implemented a 2 meter distance between tables and are enforcing a 90 minute rule, however, stringent disinfectant measures seem to be more popular and effective internationally, helping customers feel safer.

Safety Pois Ireland is a new product launched last week to address not only social distancing in the work-space but also provides a traffic management system that will manage flow and prevent overcrowding within the workplace……... and the beauty of this system is that it is totally intuitive.

Safety Pois – Dots to Restart will help companies with their return to work protocols and can be easily adaptable to different spaces such as corporate offices / factory floor / shopping centres / retailers / stadia / airports / museums / hotels etc.

It is a patented idea based around the concept of a traffic light system, Green for go, Amber you  pause, on Red you stop. These series of coloured dots are mapped onto the floor of your workspace with a series of 30cm dots, all positioned 2mtrs apart providing a clear and self-managing traffic flow system within the workspace.

It is simple and effective, therefore it removes the responsibility for enforcing social distancing in the workplace from the employer and places it in the hands of the individual, if you are on red you can stop if you are on green you must keep moving…….it is that simple!

The concept originated in Italy and has been licensed in Germany, France, Spain and now Ireland and the UK. Safety Pois Ireland are manufacturing, distributing and installing all locally here in Ireland  ensuring the supply chain should a 2nd / 3rd wave of Covid 19 occur in Europe.

Ph: 012844081

info@safetypois.ie

https://www.safetypois.ie

 

Covid19, work safety, economics, business

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Thu, 09 Jul 2020 09:49:52 +0100
The figures don't lie - and a deep recession after this pandemic looks inevitable https://stubbsgazette.ie/news/post-covid-deep-recession-inevitable https://stubbsgazette.ie/news/post-covid-deep-recession-inevitable By James Treacy

As we begin to exit the Covid lockdown, business activity has resumed in a completely different environment than before the pandemic.

I attended a virtual conference hosted by Bloomberg last week. One of the speakers was American economist Nouriel Roubini - nicknamed 'Dr Doom' - who was one of the few economists to predict the housing bubble of 2008 and the subsequent financial crash.

Professor Noubini's latest predictions are even 'doomier' post-Covid.

He forecasts a V-shaped recovery in the third quarter, fizzling out in Q4, followed by a decade-long depression based on several factors.

These include 'stagflation' - persistent high inflation combined with high unemployment and stagnant demand - due to the fragmenting of global markets and the decoupling of US and Chinese economies.

Other factors he foresees include a slower pace of technological innovation, a democracy backlash leading to a rise in populism, global cyber warfare and deadly man-made disasters both in climate and public health.

His predictions include a new digital wall between China and USA that in turn fuels inflation.

It was a sobering presentation and many of the panel did not disagree with him, including another heavy-hitting American economist - Nobel Prize winner Joseph Stiglitz.

This outlook seems to be shared by the British Chamber of Commerce, whose latest Covid business impact tracker shows that 50pc of firms have less than 3 months' cash flow in reserve.

Chambers Ireland produces a similar survey each month which tracks the effects of Covid on its members. Its latest findings show that, when it comes to revenue, half of firms expect an immediate loss of revenue that is in excess of 60pc.

They also show that smaller businesses will be affected most and that full-year expectations for 2020 suggest a slow rebound for the economy.

As for closures, the Chambers figures suggest that only 15pc of businesses have not experienced some form of closure, while overhead costs for most closed businesses exceed €2,000 per week.

For businesses that need restocking, most expect it will cost in excess of €3,000, according to the Chambers figures. But for 25pc of those businesses that need to restock, costs will exceed €8,000. Meanwhile, half of all businesses will need at least two weeks to reopen, while 25pc will need more than a month, according to the figures.

The Chambers figures suggest that 68pc of businesses are awaiting payments and that the median amount due is €40,000.

They also report that the worst-hit sectors are tourism, entertainment, hospitality and local services.

These findings tally with the new StubbsGazette Covid Impact credit scorecards. Our scorecards predict 90pc of corporate failures three to six months before they happen. We are already seeing a 25pc increase in the forecast number of corporate insolvencies in the short term. This is likely to increase over the coming months and years ahead.

While it is too early to spot any trends from the StubbsGazette insolvency data, it is worth noting that meetings of creditors have increased - going from 40 meetings last June to 51 this year.

Another interesting finding shows that new company formations have increased by almost 10pc from the same period last year. The most likely explanation for the increase will be processing backlogs, due to the 40pc decrease in the number of Irish new incorporations year on year in April 2020 versus April 2019.

However, all previous recessions have resulted in a surge in the number of family-owned businesses starting up. I don't see why this recession will be any different.

James Treacy is publisher at StubbsGazette ]]> Tue, 07 Jul 2020 12:38:54 +0100 Project restart - A new beginning https://stubbsgazette.ie/news/project-restart-a-new-beginning https://stubbsgazette.ie/news/project-restart-a-new-beginning By Simone Caron


Project restart - It means businesses can resume operation however, the way businesses operate under the restriction of COVID19 has fundamentally changed. The government has released a phase-by-phase plan to slowly lift the restrictions put in place.

Phase 1, began on the 18th of March beginning with outdoor workers, essential retailers and public outdoor tourist grounds. Retail shops essential to businesses that are opening and were previously open in Tier 2 (for example: homeware, opticians, motor, bicycle and repair, office products, electrical, IT, phone sales and repair) were also able to open. Taoiseach announced the five phase plan on Friday 01 May 2020 for reopening of society and business by date subject to Public Health guidance from NPEHT. You can view the article HERE.

Although this is good news for business owners, the isolation period has completely severed their business’ cash flow for two months. There are options available to business owners to assist in surviving the  pandemic and various banks have announced specific options and flexibilities available for businesses as well as advisory support from your Local Enterprise Office (LEO). There have been a number of government and private support long term schemes aimed at helping businesses to  keep their doors open and get back on track.

The government has rolled out the Temporary COVID-19 Wage Subsidy Scheme (TWSS), asking businesses to continue playing their employees on the company payroll throughout the  pandemic. A separate  income support scheme Income Support Scheme has also been launched to assist employees who have not been paid through their company or have been retrenched allowing people to  receive for the COVID-19 Pandemic Unemployment Payment of €350 a week. Businesses are able to apply for TWSS if they have lost a minimum of 25% of turnover due to the  COVID-19 pandemic. Employers will have to supply Revenue records confirming this but is available for employers who keep staff on their payroll during the pandemic.

The government also rolled out a number of plans in an attempt to reduce business’ operating costs. Commercial rates were waived for a 3 month period beginning on 27 March for businesses that were forced to close due to public health requirements. Annual returns are due to be filed only by the 30th of June to allow businesses to focus on the more pressing and immediate financial challenges and cash flow. This will be under review with the possibility of an extension depending on the situation at the time. COVID-19 related VAT and payroll tax debts, due from 1 March 2020 to the date when sectoral restrictions are lifted, will be on hold for 12 months and no debt enforcement action will be taken by revenue and no interest chargees will accrue for warehoused debit.

A variety of cash flow supports have been put in place for businesses by government schemes as well as banks with minimal to zero  interest.

With all these measures in place, we still need to ask- Is this enough to protect businesses and minimize the effect of the pandemic on the economy as a whole? An interesting topic discussed by an Irish economist who looks at the idea: “money should be printed and put into the accounts of the public and businesses in a bid to boost consumer spending and combat deflationary shock.” David Mc Williams explains that for people to spend the free money - they have to believe the government has created the funds and that this will not result in a huge tax increase. However, the  Irish minister for finance, Paschal Donohoe, disagreed with this sentiment and said: "I think there are far better ways in which we can get our economy to recover.” Donohoe explains that this policy implies all people will be given the same funding however, the manner in which the government helps those who have lost their jobs will differ from those who were able to keep their jobs. In this way, he suggested the European union would consider a similar approach in a conservative manner. As it is impossible to predict the long term effects of the pandemic and how quickly  the economy will be able to recover, many options are still under review.

When you need assistance in managing your cash flow, Stubbs Gazette steps in while you focus on getting your business’ operation running safely, complying to COVID19 safety standards. If your business is still restricted, Use this quiet period to your advantage. Carry out your due diligence checks. Our national and international PEP/AML/Sanctions Databases, our Local Knowledge Experts, research and reference local sources produce accurate, high quality results.

CONTACT US NOW

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Fri, 19 Jun 2020 12:38:54 +0100
“Right to be Forgotten” clashes with Euro AML regulations. https://stubbsgazette.ie/news/right-to-be-forgotten-clashes-with-euro-aml-regulations https://stubbsgazette.ie/news/right-to-be-forgotten-clashes-with-euro-aml-regulations James Treacy , Co-Founder International Fraud Prevention

 

A landmark case relating to a citizen’s “right to be forgotten” in 2010 reverberates to this day and has the potential to seriously weaken the AML defences of organisations in the EU.

In 2010 a Spanish citizen, Mario Costeja González, took a case against La Vanguardia newspaper. In 1998 the paper published details of the forced repossession of González’s home. González argued that since the issue had been completely resolved in the subsequent 12 years, the information was now irrelevant and should be removed, both from the paper’s digital archives and from the search results of Google.

The court referred the case to the European Court of Justice (ECJ) who found that individuals have the right, based on certain conditions, to request search engines to remove links with personal information about them. This applies where the information is inaccurate, inadequate, irrelevant, or excessive for the purposes of the data processing and this gave birth to the right to be forgotten which is one of the pillars of the GDPR which came into force in 2018.

While this right is not absolute, and only applies in certain circumstances, it is being abused by nefarious actors for the purposes of evading detection when laundering illicit funds.

Google receives over 300,000 of these requests each year in the UK and Ireland and 31% relate to frauds, 20% relate to arrests for serious crimes and terrorist offences, and 12% relate to arrests for child pornography.

Terrorist recruiters in prisons are now instructing newly recruited acolytes how to file “right to be forgotten” requests, presumably with the intention of scuppering AML checks if and when they open bank accounts or try to launder money through other methods such as setting up charities on their release.

The implications are explicit for accurate customer screening. While the search engines are not sufficient KYC screening on their own, they are a very valuable tool to supplement official PEP, sanctions and watch lists from the likes of the FBI, CIA, and United Nations .

The EU’s top court recently ruled that Google only has to apply the right to be forgotten in Europe and does not have to remove links elsewhere in the world.

It will be interesting to how this weakness in the Euro AML defence infrastructure is tackled by the new European AML body when it’s up and running early next year.

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Tue, 16 Jun 2020 10:04:01 +0100
Organised crime poses major risk to Europe's €750BN Covid-19 rescue package - Commission's Justice chief https://stubbsgazette.ie/news/aml-intelligence https://stubbsgazette.ie/news/aml-intelligence By STEPHEN RAE

 

EUROPE’S massive €750BILLION Covid-19 rescue package is likely to be the focus of frauds operated by serious and organised criminals, Didier Reynders, the European Justice Commissioner has revealed.

He told the European Parliament’s Budget Committee on Thursday that the “economic stimuli such as those proposed are likely to be targeted by criminals seeking to defraud public funding.”

The risk of the Euro budget funds falling into criminal hands made the establishment of the European Public Prosecutor’s Office (EPPO) more essential than ever the Commissioner said.

The EPPO has been beset by problems and cuts in budgets and the failure of Malta to forward the names of three suitable candidates to be considered for a role in the prosecutors office.

Mr Reynders also pointed to Europol figures that showed that “98.9pc of estimated criminal profits are not confiscated and remain at the disposal of criminals.”

“To effectively disrupt and deter criminals involved in serious and organised crimes we need to have the EPPO in place more than ever,” he told MEPs.

“Once the EPPO is operational it will be the first European body that has investigative powers” to tackle “the likely rise in fraud against the EU’s financial interest.”

There was a high risk of fraud and he observed that “crimes against the European budget are highly complex and pose a significant threat affecting millions of citizens and thousands of companies in the EU every year.”

However just 20 staff have so far been hired at the EPPO’s office with 70 expected to be in place by the end of the year. Mr Reynders told MEPs the budget for the office would also be substantially increased for 2021.

Separately the European Commission is considering establishing an agency to tackle money laundering.

Valdis Dombrovskis, the Commission’s Economy Executive Vice President (EVP) is consulting EU members over whether to create a new supervisory body to oversee the anti-money laundering fight or hand the additional powers to the European Banking Authority.

Setting out a new action plan, the Commission wants sweeping new regulations to address the differing practices of Members States, including a reluctance by some countries to implement AML directives down the years.

In 2021 the Commission will propose ways of enhancing information-sharing between different member states’ financial intelligence authorities.

“If we want to be more effective, we need to do this at EU level,” Mr Dombrovskis told the Financial Times. “Sometimes . . . issues were falling between two national authorities and none of the national authorities were really taking charge,” he said.

The proposal for a new enforcement body, which would conduct on-site inspections and assess how legislation is implemented, would mark a significant expansion of Europe’s response to a wave of money-laundering scandals.

For some strengthening the EBA would narrow the remit of those new powers.

The commission and MEPs were furious last year when the EBA shelved its own investigation into the Danske Bank scandal despite having prepared a detailed report into supervisory failings.

Its report found four breaches of EU law in how the bank was supervised by Danish and Estonian authorities and made recommendations to the two countries for follow-up action. Instead, the EBA’s board of supervisors, the agency's key decision-making body, voted to close the investigation without adopting any findings.

Meanwhile, MEP Ramona Strugariu, the Parliament Budget Committee’s rapporteur described on Thursday how the European Commission fails to adequately monitor how funds are spent.

Two reports in 2019 said the “Commission lacks insight into the level of detected fraud and has insufficient analysis of fraud patterns and risks,” she outlined.

She also highlighted a report that said the managing authorities “generally lack anti-fraud policies, lack procedures of monitoring evaluation, prevention and detection and most importantly they under-report affecting the reliability of fraud and irregularity detection rates.”

“This is extremely worrying given that €350BILLION went” into European Cohesion Funds between 2014-2020, she said.

Ms Strugariu told fellow MEPs that it was important the EPPO became operational quickly but said she was concerned its budget was just one third of that proposed by the European Parliament.

 

: Justice Commissioner Didier Reynders warned of a “likely rise in fraud against the EU’s financial interest” once the planned €750 billion recovery fund comes into effect. That’s why, he said, the European Public Prosecutor’s Office (EPPO) must be set up “as soon as possible” to launch criminal investigations into such allegations.

More staff, more money: The EPPO has so far hired 20 people, with a goal of having 70 by year’s end, Reynders told the Parliament’s budgetary control committee. But he criticized a previous budget evaluation for the Luxembourg-based office as “largely insufficient” and called for a “substantial increase” for the coming years, which was “a precondition to have a truly independent and efficient public prosecutor’s office.” Hans von der Burchard has more for POLITICO EU Budget Pros.

Speaking of staff … Budgetary control committee Chairwoman Monika Hohlmeier has written to Budget Commissioner Johannes Hahn to express concern about an internal restructuring of the EU’s anti-fraud office (OLAF), which “may have implications on the office’s ability to perform its mandate and protect the financial interests of the Union,” she told Playbook. Hohlmeier said she wanted to “ensure that OLAF’s investigative capacity and staffing levels are not reduced” by what she described as a “clandestine reorganization.“

 

 

 

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Fri, 12 Jun 2020 14:28:48 +0100
Business Credit Scores Crucial During Economic Crisis https://stubbsgazette.ie/news/business-credit-scores-crucial https://stubbsgazette.ie/news/business-credit-scores-crucial By James Treacy - Publisher StubbsGazette

 

Touch wood, it appears that the spread of Covid 19 is practically eliminated from the general community, apart from small clusters in certain sectors such as meat processing factories. This is testament to the huge sacrifices that have been made by everybody over the past 3 months.

Now the truly hard work begins as we resurrect an economy that was forced into hibernation because of the pandemic. Business owners will have many challenges over the coming years and now more than ever, it is crucial to keep a very close eye on their company’s credit score.

 

Covid 19 Impact on Corporate Credit Scores

The economic fallout from Covid 19 is apparent to everyone, with some sectors more severely impacted than others. Even within sectors there are huge disparities for sub-sectors, an example being a grocery store which is currently considered an essential business, compared to their retail neighbour who operate a bar which has been forced to shut down, and not likely to be allowed to return to full capacity for quite some time.

Predicting the Covid 19 Impact for all 18 Sectors is further complicated by the need to drill down into the 1500 Standard Industrial Classification (SIC) Codes, and to closely examine the supply chains and customer network of the individual sectors and business’s.

This will have an obvious impact on the business’s ability to trade normally, get approved for loans, lines of credit or even to negotiate with landlords or insurers.

 

Reengineering Existing Scorecards

The StubbsGazette corporate scorecards are based on data we gather from

  • Company filings
  • Court and other publically available records
  • Media
  • Collection Agencies
  • Suppliers

Historically, the current pass mark enabled Stubbs to identify over 80% of all corporate failures from the bottom 20% of scores and already we know that this scorecard pass mark has increased significantly since the pandemic outbreak and we have readjusted our scorecards and algorithms accordingly. These by their very nature are extremely flexible and constantly change as economic circumstances dictate in this extremely volatile environment.

The credit score, essentially measures financial resilience and regardless of the business sector a firm operates in, it will be the most financially resilient that will last longest, and the financially flimsy that will fail first. If a company’s gearing was on the high side and liquidity was poor when everything was good, it is going to be overly leveraged and liquidity will have gone critical in the post pandemic world, and this is the kind of thing that is reflected in the scorecard.

Alongside this we are developing a dual Covid 19 Industry Score taking into consideration all the factors described above and expanding our datasets to include CSO and other reliable sources.

 

Importance Of A Good Credit Score During An Economic Crisis

After the last economic meltdown in 2009, President Obama’s former Chief of Staff, Rahm Emanuel said that you should “Never Let A Good Crisis Go To Waste.” I wonder what he would have to say today as we are going through a second once in a lifetime global economic meltdown in the space of 11 years.

Many businesses who survived the first crash will struggle both financially – and emotionally - to deal with this latest catastrophe. Some may even decide to throw in the towel and opt to wind up their businesses voluntarily, rather than investing personal wealth which they have rebuilt since the last crash.

 

On top of that, there is likely to be widespread corporate insolvencies in the SME sector as a result of the fallout, both foreseen and unforeseen over the coming years. We do not yet know the scale of the carnage or which sectors are likely to be hit hardest, although many are predicting the hospitality and retail (apart from grocery) sectors are going to be the worst affected.

 

It is more important than ever to maintain a good credit score as banks and creditors will inevitably tighten their credit appraisal policies. A good credit score will give you leverage to negotiate with suppliers, lenders, landlords and insurers which may result in more favourable credit terms, rents or premiums. Needless to say businesses with an impaired credit rating will not have this in their armoury in the challenging times ahead.

One thing is for sure, and Mr Rahm would probably agree, is that there will be opportunities to take advantage of due to pent up demand and less crowded markets as the economy recovers. This could happen very rapidly, with some economists forecasting a V-Shaped recovery. But it is only business’s with good credit ratings who will be able to maximise these opportunities.

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Wed, 03 Jun 2020 13:09:54 +0100
We’re developing new data tools which will make decision making on credit, loans and debt recovery more informed https://stubbsgazette.ie/news/new-data-tools https://stubbsgazette.ie/news/new-data-tools After the last economic meltdown in 2009, President Obama’s former Chief of Staff, Rahm Emanuel said that you should “Never Let A Good Crisis Go To Waste.” I wonder what he would have to say today as we are going through a second once in a lifetime global economic meltdown in the space of 11 years.

 

Many businesses who survived the first crash will struggle both financially – and emotionally - to deal with this latest catastrophe. Some may even decide to throw in the towel and opt to wind up their businesses voluntarily, rather than investing personal wealth which they have rebuilt since the last crash. 

 

On top of that, there is likely to be widespread corporate insolvencies in the SME sector as a result of the fallout, both foreseen and unforeseen over the coming years. We do not yet know the scale of the carnage or which sectors are likely to be hit hardest, although many are predicting the hospitality and retail (apart from grocery) sectors are going to be the worst affected.

 

Government intervention is crucial to limit the long-term damage and to mitigate the worst outcomes of a depression. The European Central Bank (ECB) unveiled a €750 billion stimulus package  against COVID-19, and has underwritten Government borrowings at interest rates of less than zero. This provides a potent weapon to the Irish Government and the Central Bank of Ireland who could make loans available to small businesses at interest rates close to 0. This, I believe would turn the tide and prevent widespread voluntary liquidations of otherwise healthy companies with a bright future.

 

One thing for certain in these uncertain times is that life will be nothing like it was before.

 

That’s why we at StubbsGazette are busy working on exciting new initiatives which will help businesses navigate the new post-Covid-19 financial world. The crisis has sped up the development on new credit scoreboards that we have had in the planning stage only a few weeks ago.

 

I am glad to report to you that the new scorecards and algorithms will factor in the rapidly changing economic landscape as a result of this dreadful pandemic. We will be looking at data outside our traditional credit scoring databases, including the CSO, ESRI and other national and international sources. The tools we are devising will be easy to use and will give business the vital information you need to make informed and timely decisions. I am confident that blending this type of social/economic data with our current credit scores will greatly improve our forecasting and predictability of insolvency across companies and sectors over the coming years.

 

If you’d like further information on developments here at Stubbs or updates on new products please feel free to contact me.

 

We hope and pray that our policy makers make the right decisions over the coming months to ensure that this crisis does not go to waste.

 

In the meantime, as has been the case through many other financial crises through the decades, Stubbs is here to provide you with timely, relevant information which will ensure your business has the right data to make informed decisions around credit, debt recovery and loan decision-making. The only difference is that today we use cutting edge technology, data analytics and AI to guide your decision making.

 

As ever

 

James Treacy

CEO, StubbsGazette

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Thu, 07 May 2020 12:19:12 +0100
James Treacy : 'Irish businesses preparing for worst-case Brexit' https://stubbsgazette.ie/news/james-treacy-:-irish-businesses-preparing-for-worst-case-brexit- https://stubbsgazette.ie/news/james-treacy-:-irish-businesses-preparing-for-worst-case-brexit- By James Treacy

AS the clock ticks ominously down to B-Day, Friday 29th of March, almost half of Irish businesses have already begun implementing Brexit contingency plans in the absence of any coherent agreement.

This week, in conjunction with the Sunday Independent, we at Stubbs Gazette got a revealing insight into the current state of business health on both sides of the border in an exclusive survey sent to a cross-section of Irish companies.

We asked which of the four challenges - Brexit, Trump's tariffs, technology, or other - posed the greatest threat to business.

Not surprisingly Brexit was perceived to be the biggest threat at 59pc. Technological disruption came in a distant second on 22pc.

On the other side of the Atlantic, the mercurial and unpredictable mood swings by President Donald Trump are not causing our businesses any anxiety. A mere 1.2pc of respondents reported that they fear his tariffs regime will negatively impact their business. In aggregate, 82pc of respondents said that they expect Brexit to impact their business in some way, even though only 27pc of the companies surveyed are exporters.

While planning for Brexit is extremely difficult in the prevailing climate of uncertainty and confusion, 46pc of businesses report that they have drawn up contingency plans. The vast majority of firms, 39pc, have started to implement those plans.

One business reflected the confusion and frustration out there: "It is hard to plan for something that's not agreed on (soft/hard/no-Brexit), tariffs, taxes, customs fees and delays; shock to the currency market and economy with no decision."

Of the three contingency plans identified by respondents - re-routing of inbound orders, re-routing of outbound deliveries, or stockpiling - the majority, 53pc, said they are re-routing inbound orders while only 16pc plan to re-route outbound deliveries. Around a third of the companies, 31pc, said they are stockpiling goods in anticipation of a hard border. One company noted: "We have commenced our Brexit plan along with our clients by transferring contacts and communication from the UK to other countries within the EU."

While this is heartening, and reflects very well on State agencies such as Enterprise Ireland, we should not lose sight of the fact that a hard Brexit will have a detrimental impact on many Irish businesses, with 50pc of respondents reporting that WTO tariffs will have a medium to severe effect on their purchases and sales.

Unsurprisingly the majority of respondents lay the blame for the state of uncertainty and lack of leadership with the UK. "British politicians do not know what they want. We are in limbo until they decide what to do," is representative of views.

The Stubbs survey illustrates that the looming Brexit is not all doom, gloom and fear, with several companies expressing optimism that the new socio-economic post-Brexit world will create a land of opportunity. One company reported they are already benefiting from the Brexit effect: "Our business is increasing as a result of Brexit and GDPR". Another predicts that Ireland will gain from Britain's loss with an increase in employment: "Big impact on employment in this country due to loss of competitiveness in the UK market".

The area where the new market reality will be felt most acutely will be in the crucial food and drinks sector which in 2018 accounted for €4.5bn of sales to the UK, while we imported €3.5bn from the UK.

Experts are forecasting that these exports will be hit severely, to the tune of €1.5bn in WTO tariffs, thus representing a third of the overall value of Irish exports to the UK.

But herein lays Ireland's opportunity at the expense of Britain's bungling. Excluding Ireland, the UK currently exports around €10bn worth of food and drink products to the EU27 which, in the event of a no-deal Brexit, will incur extra EU tariffs, not to mention the additional logistics and bureaucratic costs under WTO rules.

In the event of a no-deal post-Brexit EU, Irish companies will emerge more competitive than their UK counterparts as they will not be subject to EU tariffs and thus, with proper strategic planning, there is a golden opportunity for Irish producers to fill the trading vacuum by stepping in to replace a good proportion of UK food and drink exports to the EU 26.

We also posed preferred solutions to the current Brexit impasse would be, and the results were quite surprising considering the Government and the EU's entrenched position on the backstop.

Almost 26pc of businesses surveyed would be prepared to accept an agreement with a compromise over the backstop. The most-preferred option was for a rerun of a referendum, 56pc, and the least popular options were to delay Brexit, 12pc, and for another UK election at 6pc.

Companies hate uncertainty more than anything else, and this is the defining feature of the Brexit crisis. But so far there doesn't appear to be any panic and Irish businesses are quietly preparing for the worst. Let's hope it does not come to that.

  • James Treacy is CEO of Stubbs Gazette.
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Thu, 14 Feb 2019 12:17:52 +0000
Vulture funds swoop with big increase in debt judgements as Irish 'endgame' comes into sight https://stubbsgazette.ie/news/vulture-funds-swoop-with-big-increase-in-debt-judgements-as-irish-endgame-comes-into-sight https://stubbsgazette.ie/news/vulture-funds-swoop-with-big-increase-in-debt-judgements-as-irish-endgame-comes-into-sight By Shane Phelan
Irish Independent

Tuesday 09-10-2018

 

The most prolific vulture fund this year in terms of registered judgments has been CarVal. Photo: Reuters

 

Vulture funds have significantly ramped up action against debtors in recent weeks, new data reveals.

Judgments amounting to €32.7m were registered in one eight-day period alone at the end of September by Irish-based affiliates of major funds CarVal, Goldman Sachs and Deutsche Bank.

Market observers believe the flurry of debt enforcement activity is a sign many of the funds are reaching their "endgame" in Ireland and are planning to move on.

Internationally, vulture funds typically operate on a five-year cycle after buying distressed debt portfolios, meaning borrowers do not get an extended period of time to pay back the loans.

According to data compiled by debt analysis experts StubbsGazette, 21 judgments were registered against individual debtors last month by vulture funds, compared to only six in the rest of the year.

Altogether, judgments amounting to €74.4m have been registered by the main vulture funds operating in Ireland this year - more than five times the amount registered in all of 2017.

The registering of a judgment allows a fund to take steps to pursue the borrower's assets to clear or partially clear the debt. This can include getting a judgment mortgage. This is where a creditor registers a charge against a property owned by a debtor.

When the property is sold, the proceeds have to go towards paying off the debt.

StubbsGazette managing director James Treacy said vulture funds generally "get in and out" within five years.

However, this has taken slightly longer in Ireland, in part due to personal insolvency legislation passed after the financial crash.

"What is being seen now is the logical progression of their strategy," said Mr Treacy. "They are moving to enforcement."

Mr Treacy told the Irish Independent he expects the level of judgments being registered by vulture funds to continue on an upward trajectory in the coming year.

"That is likely to increase over the next 12 months as the vultures get set to leave the Irish market," he said.

The most prolific vulture fund this year in terms of registered judgments has been CarVal.

Its Irish affiliate, Launceston Property Finance DAC, has registered judgments against 13 people for sums totalling €28.5m.

Promontoria (Arrow) Ltd, an affiliate of vulture fund Cerberus, registered the single largest judgment against a debtor, for €30.7m, last February.

Ennis Property Finance DAC and Kenmare Property Finance DAC, affiliates of Goldman Sachs, have registered judgments against nine individuals so far this year, the total value of which was €11.2m.

 

https://www.independent.ie/business/personal-finance/latest-news/vulture-funds-swoop-with-big-increase-in-debt-judgments-as-irish-endgame-comes-into-sight-37398709.html

 

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Tue, 09 Oct 2018 10:41:46 +0100
Revealed: Tax-dodging 'blackspots' mapped across the country https://stubbsgazette.ie/news/revealed:-tax-dodging-blackspots-mapped-across-the-country https://stubbsgazette.ie/news/revealed:-tax-dodging-blackspots-mapped-across-the-country  

By Shane Phelan
Irish Independent

Tuesday 27-02-2018

 

New research has identified tax-dodging blackspots in certain parts of the country.

The Revenue Commissioners secured court judgments worth more than €106m against tax defaulters during the past two years, new data reveals.

But an analysis of the data, matching the country's 139 Eircode routing keys, effectively geographic districts, with judgments secured by the Revenue against tax defaulters, shows significant variations.

For example, the research, conducted by debt analysis experts StubbsGazette and UK technology firm Sagacity Solutions, indicated people living in north county Dublin were seven times more likely to be brought to court for not paying their taxes than people living in Mayo.

The analysts calculated the number of judgments per thousand individual addresses to measure the frequency with which judgments were entered against tax cheats in different parts during 2016 and 2017.

The average number of judgments per thousand addresses was 2.4 across the 16 north Dublin districts, compared to an average of just 0.33 across the six Mayo districts.

 

22

 

The data also revealed that seven of the top 10 Eircode districts in terms of judgment per household were in north Dublin.

The highest concentration was in Oldtown, an area with just 508 Eircode addresses, which had four judgments. This worked out at 7.9 judgments per 1,000 addresses.

A similar concentration of judgments was entered against tax defaulters in the nearby Ballyboughal district.

In fact, the concentration of judgments in these areas was three times higher than most other districts in the top 10.

The other north Dublin districts to feature were Dublin 15, Rush, Lusk, Swords and Skerries.

The only non-Dublin Eircode districts in the top 10 were Dunboyne, Co Meath; Cashel, Co Tipperary; and Watergrasshill, Co Cork.

In stark contrast, no tax defaulter judgments were entered against anyone in Ballyhaunis, Co Mayo; Boyle, Co Roscommon; Belturbet and Cootehill, Co Cavan; Carrignavar, Co Cork; and Cahersiveen, Co Kerry, over the past two years.

Only one tax defaulter judgment was entered in each of the districts covering Ballinrobe, Co Mayo; Clones, Co Monaghan; Crookstown, Co Cork; and Garristown, Co Dublin, in the past two years.

The Revenue secured judgments worth €55.8m against 1,422 individuals and companies in 2016, and judgments worth €50.2m against 1,408 parties last year.

Meanwhile, an analysis by StubbsGazette of bankruptcy statistics over the past five years reveals Newbridge, Co Kildare, is the district with the largest proportion of bankruptcies in the country.

There were 34 bankruptcies there in that timeframe, working out at 3.33 bankruptcies per 1,000 addresses.

Two other Kildare districts, the Curragh and Kildare Town, also had proportionally more bankruptcies than most other Eircode districts.

StubbsGazette managing director James Treacy said there was likely to be a number of variables at play to explain this, including the fact a very strong personal insolvency practice was operating out of Newbridge.

Other areas with proportionally higher bankruptcy levels than elsewhere include Dunshaughlin, Co Meath; Cobh, Co Cork; Cootehill, Co Cavan; Ballymote, Co Sligo; and Wicklow Town.

Source : https://www.independent.ie/business/personal-finance/latest-news/revealed-taxdodging-blackspots-mapped-across-the-country-36647743.html

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Tue, 27 Feb 2018 12:08:11 +0000
Value of debt judgments down by a third, but recovery remains 'patchy' https://stubbsgazette.ie/news/value-of-debt-judgments-down-by-a-third-but-recovery-remains-patchy- https://stubbsgazette.ie/news/value-of-debt-judgments-down-by-a-third-but-recovery-remains-patchy- By Shane Phelan
Irish Independent
Monday January 08 2018

 

Ireland is recovering from the debt crisis, with the value of judgments approved by the courts last year dropping by a third.

Lenders secured judgments worth €232.1m in connection with unpaid loans last year, compared with €346.7m in 2016.

But the recovery has been described as "patchy", with some parts of the country seeing the volume of debt judgments decline more quickly than others.

A number of areas also saw the overall value of judgments approved by the courts significantly increase.

Newbridge, Dublin 15, Dublin 18, Tralee, Athlone and Westport were among the areas where the value of judgments skyrocketed by several million euro during 2017, compared with the previous year.

While judgments relating to property developments have plunged, the past year also saw an upsurge in moves to pursue debts owed by lawyers, retailers and in the transport and automotive sectors.

The findings have emerged from research conducted by debt analysis experts StubbsGazette and UK technology firm Sagacity Solutions.

More than 500,000 pieces of data gleaned from the courts system were matched with the country's 139 Eircode 'routing key' areas.

The researchers were able to match two-thirds of debt judgments last year with specific postcodes.

Such judgments, once secured, mean that a lender can seek to pursue the borrower's assets to clear the debt.

The researchers found that the number of judgments plunged by 16pc last year, down to 2,760 from 3,288 in 2016, while the overall value of judgments secured against debtors fell by 33pc, year on year.

Nationally, the data revealed that some 41.1pc of debt judgments were against people who described themselves as business people or company directors, down more than 2pc on 2016. Builders accounted for 13.3pc of judgments where occupations were recorded.

In the vast majority of postcode areas, the number and value of judgments decreased.

However, StubbsGazette managing director James Treacy described the national recovery from the debt crisis as "patchy", with several districts bucking the national downward trend and instead recording significant increases in the value of debt judgments.

For example, in Dublin 15, which includes the areas of Clonsilla and Mulhuddart and parts of Castleknock and Finglas, there were 159 judgments valued at more than €9m last year. In 2016, the postcode had judgments valued at just €4.2m.

Over half of the judgments there last year were against people who listed their occupation as 'business person' or 'company director', 9.5pc were builders, while a further 9.5pc worked in transportation.

At €14.3m, the postcode area around Newbridge, Co Kildare, had the highest value of judgments last year, despite only 11 judgments being recorded. The value figure was skewed by a particularly large corporate judgment.

Elsewhere, the value of judgments in Dublin 18, which includes Foxrock, Carrickmines and Leopardstown, rose from €3m in 2016 to more than €8.2m last year.

In Dublin 2, which covers the south inner city, the value of judgments jumped from €2m in 2016 to €6.7m last year.

In the postcode area covering Tralee and Dingle, in Co Kerry, the value of judgments surged from €1.5m in 2016 to almost €5.3m the following year.

In the postcode area covering Athlone and Moate, in Co Westmeath, the value of judgments rose from €1.3m to €4m.

Other surges were seen in the Westport area of Co Mayo (€3.3m in 2017, compared with just €171,995 the previous year); Malahide in Co Dublin (€3.5m last year, up from €971,135 in 2016); Portlaoise, Co Laois, (€2.6m last year, up from €925,523); Thurles, Co Tipperary (€2.6m in 2017, up from €830,132); and Carlow (€2.1m last year, up from €888,631).

 

Source: https://www.independent.ie/irish-news/value-of-debt-judgments-down-by-a-third-but-recovery-remains-patchy-36466240.html

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Thu, 11 Jan 2018 12:24:42 +0000
Firms need to embrace technology to ensure robust anti-money laundering procedures https://stubbsgazette.ie/news/firms-need-to-embrace-technology-to-ensure-robust-anti-money-laundering-procedures https://stubbsgazette.ie/news/firms-need-to-embrace-technology-to-ensure-robust-anti-money-laundering-procedures Late last year we predicted in these pages that the fine imposed of €98,000 on Bray Credit Union by the Central Bank for failures in its anti-money laundering (AML) procedures would be "the thin end of a very large wedge as the Central Bank signals a no-nonsense attitude to anti-money laundering (AML) practices by financial institutions".


With the announcement this week of a €2.3m fine levied on AIB for similar offences, that prediction now seems credible to say the least.


The escalating demands by central banks around the world for banks to have in place "fit for purpose" AML and countering financial terrorism (CFT) procedures are increasingly onerous, yet the resolve of the regulators, as evidenced by recent enforcement measures, seems clear. "In particular, we expect that our retail banks, as gateways to the financial system, have in place exemplary anti-money laundering systems and controls," noted the Central Bank's director of enforcement, Derville Rowland, in relation to the AIB case.

 

Similarly, appeals on the grounds of insufficient resources are unlikely to be heard sympathetically.


AIB was reprimanded for and admitted to six breaches of the Criminal Justice (Money Laundering & Terrorist Financing) Act 2010 (CJA 2010). Two breaches were highlighted: failure to report suspicious transactions and failure to conduct customer due diligence (CDD).

In respect of reporting suspicious transactions, the failures centred around AIB's acquisition of EBS in July 2011.


The Central Bank found "AIB failed to apply adequate resources to ensure alerts of potential suspicious activity (in a 'backlog' generated by its EBS business), were promptly investigated and, where necessary, reported to An Garda Síochána and the Revenue Commissioners. Notably, AIB's centralised AML unit, responsible for investigating and reporting suspicious transactions, took more than 18 months to fully address the backlog which at one point stood at over 4,200 alerts outstanding for 30-plus days".

AIB also failed to conduct customer due diligence (CDD) on customers who had accounts prior to May 1995 ('Pre-95 customers') when the first Irish laws on anti-money laundering and countering the financing of terrorism became effective.


In reality, the two issues are interrelated. Suspicious transactions are more often than not the result of inadequate due diligence and the latter the result of insufficient - but more pertinently, inefficient - resources being applied.

With the Central Bank resolve and its determination to enforce with punitive measures so evident, banks and credit unions must now reassess the cost/benefit equation of deploying sufficient resources to the task. The cost side of that equation may make many managers wince.


But it doesn't have to be that way. Technology provides the answer, in particular at the crucial customer onboarding stage.

 

Here at 'StubbsGazette' we have partnered with HooYu to deliver almost-instant online ID verification, doing away with the costs and complications of manual verification.
Anyone who has tried in the past to open a bank account knows full well the inconvenience and potential frustration involved: from submitting proof of address to having passport photos stamped at the local garda station. Small wonder that up to 70pc of bank customers asked to go in-branch to provide ID documentation drop out of the process.

 

The mobile device is at the heart of the 'StubbsGazette'/HooYu system. The bank texts the prospect to establish initial contact. The user then takes a selfie of themselves using their phone. This image is plotted and matched against the passport image and any anomalies identified. The system (on user opt-in) allows the bank to examine the eight major social media platforms in a customer context. PayPal and Facebook provide rich material.

 

This social media dimension dramatically increases the level of scrutiny at verification time. It is this combination of digital footprint, with ID documentation and facial biometrics that delivers an extraordinarily robust yet extremely efficient onboarding process that satisfies AML/CFT requirements.

Proper deployment promises to end fraud at the ID stage.

James Treacy is managing director of StubbsGazette
Irish Independent

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Mon, 08 May 2017 16:03:31 +0100
Foreign vulture funds to step up court actions against debtors https://stubbsgazette.ie/news/foreign-vulture-funds-to-step-up-court-actions-against-debtors https://stubbsgazette.ie/news/foreign-vulture-funds-to-step-up-court-actions-against-debtors Irish independent published 31/12/2016 Shane Phelan
Foreign vulture funds are expected to significantly step up efforts to recoup their investments in Irish loans in 2017.


The funds have been turning to the courts with increased frequency in recent months as they seek to recover debt bought from Nama and other financial institutions.
Debt analysis experts Stubbs Gazette predict a rise in court judgments against debtors in the coming year, now that vulture funds have "got their feet under the table" in Ireland.

Securing a judgment allows a fund to pursue various avenues to recover the debt, including attaching it to property or future earnings.
Although debt enforcement cases took a dip in 2016, major funds bucked this trend.

Big international players, such as Cerberus, Goldman Sachs and Carval, ramped up their activity in the courts in the past 12 months.
Taken together, the Irish operations of the three funds initiated at least 120 High Court cases against debtors in 2016 compared with just 58 cases the previous year.

None of the funds wished to comment when contacted by the Irish Independent, but it is understood the vast majority of the cases relate to company debts.
Three of the cases involved Goldman affiliate Beltany Property Finance, the firm which purchased loans at the centre of the Tyrrelstown controversy, where dozens of renters were issued with eviction notices when the developers sought to sell the properties to pay off construction debts.

Two subsidiaries of Cerberus, which acquired large loan portfolios from Nama and Ulster bank and recently bankrupted TD Mick Wallace, initiated 18 cases in the High Court in 2016 compared to just five the previous year.
In the past two months Cerberus's Promontoria (Aran) Ltd subsidiary has sought High Court judgments of €21.45m and €4.8m respectively against businessmen in Cavan and Wicklow arising out of loans bought from Ulster Bank two years ago.

Goldman Sachs, which bought up Irish loan portfolios from IBRC, Ulster Bank and Danske Bank, used three of its affiliates to issue High Court proceedings in 50 cases in the past 12 month, compared to just 11 in 2015.
Another US fund CarVal, which along with Goldman Sachs bought up €3.7bn in Irish commercial loans from Lloyds Bank in 2014, initiated 52 High Court cases via three Irish firms, up from 42 in 2015.

Around 90,000 Irish loans are now thought to be owned by foreign investment funds.
Stubbs Gazette managing director James Treacy said that following a significant dip in 2016 he expected increased vulture fund activity and other economic factors would lead to a rise in debt judgments in the coming years.

"As the economy continues to grow at an expected 3-4pc for the next few years there will be a temptation to relax credit policies as shareholders insist on higher revenues and profits," he told the Irish Independent.
"In conjunction with this we also expect the vulture funds to step up their debt recovery efforts now that they have got their feet under the table, and the combination of both will see a rise in judgments over the next few years."

While debt recovery proceedings by vulture funds are on the rise, the overall trend in 2016 was for a major decline in the number and overall size of judgments being registered in the courts.

The number of judgments dropped by 32pc in the past 12 months, falling from 4,479 to 3,031, according to figures compiled by Stubbs Gazette.
The overall value of judgments dropped from €567.8m in 2015 to €277.6m in 2016.

The Revenue Commissioners secured 44.5pc of debt judgments in the past 12 months, banks accounted for 8.1pc and credit unions 8.3pc,

Other institutions, including vulture funds, accounted for 38.9pc of judgments, up almost 5pc on 2015.
Mr Treacy said the legacy of the credit crunch was continuing with credit being "more tightly managed".

"As a result there are less bad debts and this manifests itself in the judgment figures," he said.

"We also see this being played out in the banking sector where most bad debts have already been through the courts and/or have been sold to the so-called vulture funds."
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Tue, 10 Jan 2017 15:48:45 +0000
Judgments down 30pc to €277.6m in past year https://stubbsgazette.ie/news/judgments-down-30pc-to-E277.6m-in-past-year https://stubbsgazette.ie/news/judgments-down-30pc-to-E277.6m-in-past-year Published by the Irish Independent 31/12/2016.
Data compiled by Stubbs Gazette revealed there were 3,031 debt judgments in the past year, down 32pc on 2015’s figure of 4,479

The highest debt judgment registered in the past 12 months was against property developer Tommy Finnerty.

Danske Bank obtained a €9.2m judgment against Mr Finnerty, of Oughterard, Co Galway, last January.

The largest judgment against a company was for €6.3m against Connotes Ltd, a company run by Monaghan hotelier Sean McElvaney.

The debt related to loans for development work at the former Setanta House Hotel in Celbridge, Co Kildare.

Data compiled by Stubbs Gazette revealed there were 3,031 debt judgments in the past year, down 32pc on 2015's figure of 4,479.

The overall value of judgments dropped from €567.8m in 2015 to €277.6m in 2016.

The decline is thought to be due to the impact of new insolvency legislation and banks cleaning up their loan books.

There were 2,261 judgments against individuals, worth a combined €257.8m, in 2016. This was down from 3,610 judgments for a total of €550.5m the previous year.

The number of judgments registered against companies dropped from 869 in 2015 to 770 in 2016.

But the sums involved jumped from €13.9m to €19.8m in the same period. However, just 4.2pc of the sums sought in judgments were recovered each year.

The Revenue Commissioners accounted for around 45pc of all registered judgments in the past two years.

It sought to recover €64.5m via judgments in 2015 and €51.9m in the past 12 months.

The banks accounted for just 11.2pc and 8.1pc of all judgments in 2015 and 2016 respectively.

However, the sums involved were considerably larger than other institutions, with €397.8m sought in 2015 and €158.6m in 2016.

Credit unions accounted for 9.7pc and 8.3pc of judgments respectively in 2015 and 2016, with the sums sought for recovery totalling €6.7m and €4.6m in each year.

Other entities, including vulture funds, accounted for 34pc of judgments in 2015 and 38.9pc in the past 12 months. The overall sums sought amounted to €98.8m in 2015 and €62.4m the following year.]]>
Tue, 10 Jan 2017 15:37:03 +0000
Irish developers have had to face new realities in the post-crash era https://stubbsgazette.ie/news/irish-developers-have-had-to-face-new-realities-in-the-post-crash-era https://stubbsgazette.ie/news/irish-developers-have-had-to-face-new-realities-in-the-post-crash-era

Institutional equity has replaced the compliant bank as the source of funding but what else has changed in the cash-fuelled world of the Irish developer? asks James Treacy

With precious few exceptions, Irish property developers could hardly be considered a shy and retiring group. Rather, they are more usually characterised as a group of metaphorical bulldozers, accustomed to getting their way - qualities that are no doubt useful when negotiating the typical obstacles in the way of development projects in this country.

The role of property development and its sponsors in the national disaster that befell the country post-2008 is well known and there has been much public odium directed at the more culpable names involved. But as the recovery has taken hold, some of the familiar names have reappeared in the news pages, emerging from bankruptcy or acting as apparently pivotal figures in property deals.

Could it be that it is business as usual for the old guard?

The fact that so many of the old names are still standing is a testimony to the sheer resilience and bloody-mindedness of the group. But while any involvement whatsoever of certain figures in the property sector might well be deemed unacceptable, outraged citizens can take comfort in the fact that this group is presently operating in a very different set of financial circumstances.
Pre-2008, the greatest single attribute of some of Ireland's property magnates was their ability to pursue ambitious schemes while transferring risk almost totally to others - in other words, the equally culpable banks, where risk-management was an aspiration, rather than a policy.

Many developers operating in Ireland used vastly inflated land prices as their equity and as collateral for 100pc debt financing of working capital requirements.
The personal guarantees extended by some individual developers proved relatively worthless in the aftermath of the crash, particularly as they had in some cases been given to numerous providers.

In the new world, with the entire banking sector emasculated by regulation and effectively off limits, the master is institutional equity, where the standards of due diligence are somewhat higher than 10 years ago, to put it mildly.
The first requirement for institutional backing is financial credibility and the technically bankrupt need not apply. All remaining cases are subject to financial scrutiny of the most exacting nature.

The only circumstances where the description "shy and retiring" might be applied to your average property developer might be when it comes to disclosing their beneficial interest in the labyrinthine and secretive structures they typically used to house their business interests.

Such structures are no longer necessary or appropriate for those wishing to do business in the present market.

The new institutional names we have become familiar with over the last few years - the Kennedy Wilsons, Lonestars, Carvals and so on - are nakedly commercial enterprises.

Their involvement with some of the bigger names of yesteryear have a sound logic: they are looking for the undoubted know-how, expertise, contacts - the familiarity and skill-sets that these individuals have in what is a singular and challenging property market.

For the developers, the benefits of getting back on the construction horse are several. It raises their profile for future deals and it also provides them with a valuable revenue stream when it is most needed.

But while familiar names may ostensibly lead some of the more high-profile deals in the media, and while their institutional backers are happy to operate behind these names, this is not to say that they have any equity interest in those deals. Rather, most (if not all of them) are being hired on a fee basis, with, in some instances, a profit-share arrangement.

This is very far from the model in the good old days - but nonetheless remains a valid and potentially rewarding business.

At this point in 2016, the prospects for the construction sector look bright, with massive demand in the residential sector in particular.

This market, however, is being stymied by the lack of public investment in the necessary infrastructure.

Evidence of a buoyant office sector in Irish cities can be seen with the reappearance of cranes on the horizon. And while retail capacity may be at a plateau, much of the space available is in need of substantial improvement.
In these promising circumstances, the challenge for the old guard is for them to demonstrate their ability to work within the confines of an new institutional mindset.

Huge rewards await those who can put aside issues of ego and lack of independence and who can transfer their efforts to what is now a service business, rather than holding out for a role as a principal.
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Tue, 30 Aug 2016 16:09:41 +0100
Rise of RegTech https://stubbsgazette.ie/news/rise-of-regtech https://stubbsgazette.ie/news/rise-of-regtech Just as we have got used to the ubiquitous term “FinTech” so we are now noticing the increasing visibility of its little brother, “RegTech”.

The financial crisis exacerbated an already marked trend towards increasing regulations, to the point where regulatory red tape is seen as a major obstacle to effective business operations. Anecdotal evidence of bankers in the front line of the regulator’s assault indicates an almost Kafkaesque level of bureaucracy governing every aspect of banking operations as regulators seek to ensure no repeat of past sins.

Of course what is often conveniently forgotten in assessing regulatory regimes is the simple fact that they exist to protect industry participants from themselves as much as anybody else. Regulatory compliance costs much but poor practices usually ends up costing many multiples of that.

So, the increasing demands of regulation have begotten RegTech.

There is something about regulation and compliance that seems to evoke images of paper forms and fountain pens, as if it is a task that requires above average levels of human intervention to accomplish. As if it is a place beyond the reach of automation.

In fact, as Deloitte notes, there has been technology used at various levels in the Regulatory space for over 20 years. However, what the new ReghTech label recognises is that “the gap between software and non-software enabled services has widened significantly”.

That is to say that non-software enabled services are now considered to be markedly inferior and inefficient by comparison to their software-driven alternatives. In fact, in any enterprise of scale, regulatory compliance without the aid of technology can now be considered almost inconceivable.

A good part of the reason for this is the incorporation of cognitive technologies that, as Deloitte puts it, allows people “understand not just explicit meaning from regulation but also the implicit meaning or ‘nuance’ that is so often a challenge to digest and assess.

Yet the perception remains of regulation in general and regtech in particular as a cost centre rather than a contributor. This misses the reality that opportunities abound to create significant value added from efficient compliance.

Consider collateral management, for example. Use of collateral in a derivatives context (rather than a pure credit context as security for loans) has taken off since the crisis.

Collateral in mitigation of counterparty credit risk (CCR) is now a permanent part of the securities trading landscape and collateral management is growing in sophistication.

The challenges are many and complex.

•    The overall exposure must be calculated at various levels of probability
•    The collateral must be appropriate to the risk and of sufficient quality/liquidity

Consequently a new role has evolved within investment banks: the collateral manager whose duties include:

•    Design, negotiation, and set-up of new collateral legal agreements
•    Collection and return of cash and collateral
•    Collateral valuation and marking-to-market

Technology to facilitate real-time monitoring of exposures is an absolute must. The objectives of regtech platforms therefore include:

1.    Agility – the ability to separate and organize intertwined data sets through ETL (Extract, Transfer, Load) technologies.
2.    Speed – The ability to generate custom reports quickly
3.    Integration to provide solutions in short timeframes
4.    Analytics – Intelligent data mining to maximize the potential of existing “big data” sets for multiple purposes.
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Wed, 29 Jun 2016 12:36:05 +0100
AML and the problem of “derisking https://stubbsgazette.ie/news/aml-and-the-problem-of-derisking https://stubbsgazette.ie/news/aml-and-the-problem-of-derisking One of the more welcome aspects of the post-financial crash environment has been the consolidation of momentum towards financial literacy and financial inclusion.

Governments and regulatory authorities have long recognized the positive economic benefits of maximum public participation in the formal financial system, in terms of overall economic growth, personal prosperity and the overall tax take.

But one of the ironies of the present clampdown on money laundering, however, is that the same requirements that raise the bar for customer due diligence might have the undesirable secondary effect of excluding perfectly valid customers from the financial system.

As the UK’s Financial Conduct Authority (FCA) states, while everyone can agree that tackling financial crime is desirable, “the steps that the financial services industry takes to tackle money laundering and comply with financial sanctions are not costless. They are, in fact, expensive, occupying the time of many thousands of staff across the financial services industry.” This, the FCA suggests, is having a knock-on effect of at least implicitly discouraging people from participating in the formal financial system and certainly restricting mobility between suppliers.

The question is retaining the correct balance between vigilance and “red tape”. The UK Government is currently preparing a report on the impact on business of the current anti-money laundering and terrorist finance regime, and specifically the role of supervisors in that regime. Another UK review, by the Competition and Markets Authority, is examining what barriers might constrain competition among banks offering services to small businesses and has specifically identified the need for customer due diligence checks as a potential obstacle. 

“Is the need to provide documentary evidence of the identity a small business’s owners one of the reasons those same businesses do not switch provider?” the FCA asks. “And could more uniform customer due diligence requirements for small businesses encourage more switching without significantly increasing money laundering risk?”

This “derisking” phenomenon, as it has become known in regulatory parlance, is now recognized to have far-reaching implications beyond what may have originally been envisaged, particularly around financial inclusion and competition.

“The measures taken by industry to detect and prevent money laundering pose burdens on the public, particularly on some types of firm, like small businesses. Some people – a minority, but not an insignificant group – may also be left without banking facilities as a result of decisions banks make about financial crime risks,” the FCA states.

In particular, “money transmitters, charities and financial technology companies say they are affected and some banks are also withdrawing from providing correspondent banking services. This is a matter of widespread concern in some sectors, social groups, among regulators and at senior political level.”

The need to provide a balance between a suitably rigorous and effective regime and also to make the banking and financial system as accessible as possible is no doubt something the Central Bank is pondering in the run up to implementation of the 4th Money Laundering Directive.

Have a question about Anti-Money Laundering? Fill out the form below and we will get back to you.


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Tue, 31 May 2016 14:27:12 +0100
The overtrading paradox https://stubbsgazette.ie/news/the-overtrading-paradox https://stubbsgazette.ie/news/the-overtrading-paradox One of the more extraordinary paradoxes of the Irish economy post-crisis is that following the greatest building spree in the Republic’s short history and the ruinous fallout that followed, we now find ourselves saddled with a housing supply crisis.

This must come as a surprise to anyone who frequents the river Shannon and its lakes which have been despoiled by a ribbon of concrete along its course from Killaloe to Carrick-on-Shannon as opportunist builders sought to exploit nature’s natural bounty by pouring concrete on beauty spots for profit. Sadly for all concerned, we are now saddled with a legacy of half built ghost estates. Meanwhile, the housing shortage is causing personal misery and seriously distorting the economy as it begins to attempt to emerge from recession.

The decoupling of the Irish economy with the property market is something dearly to be wished but alas it may take more lessons and even more pain before the Irish property speculation obsession is adequately diminished.

This is to illustrate that economic crises can have unexpected consequences. One such consequence has been a noticeable spike in business distress and failures just as the economy starts to take off again. The cause of this will be a familiar one for those who have been through a couple of business cycles.

Just like the property market, any kind of pickup in the order book can be greeted over-enthusiastically by businesses for so long starved of good news. The understandable reaction is to chase and fulfil any and every piece of business in the market. The wrongheadedness of this approach then quickly becomes apparent in an inevitable cash crisis caused by overtrading.

Engaging in any kind of business requires a minimum level of cash resources and all too often management minds are fixed on sales figures rather than actual cash outlays. The result frequently is at best, embarrassment, at worst, failure.

Working capital management – management of the funds you have ties up in wages and salaries, inventory and work-in-progress and debtors – is something that requires constant vigilance and, If anything, even more so in the good times.

In this regard, the quality of your debtors’ leger is critical. The days sales outstanding (DSO) metric measures the effectiveness of your company’s credit and collections policies. The measure can be applied at a company-wide or individual customer level.

The formula is as follows:

(Accounts Receivable/ Annual Revenue) x Number of days in the year

For example, a company has an accounts receivable balance of€5m with an annual revenue of €30m. Its DSO figure is as follows: (€5 accounts receivable / €30m annual sales) * 365 = 60.8 days
There is no universal, definitive benchmark to determine on the quality of accounts receivable management – it depends on the industry in question. Instead, measurement should focus on the variance with the company’s credit terms. So, for example, a variance of more than, say, 20% above the stated credit terms might indicate a lax credit policy. Conversely, a DSO figure that corresponds closely to the prescribed credit terms indicates that there may be room to relax credit policy.

Of course, prevention is always better than the cure and the most important work in debtor management is done before any new account is approved, because while late payment is a pain, non-payment can be positively fatal.

Something we have noticed recently here in StubbsGazette has been a fresh appetite for Irish business on the part of UK exporters as they pick up the positive noises emanating from across the Irish sea. The likelihood or otherwise of Brexit has resulted in an unusual attention on the sheer volume of business taking place between Ireland and the UK.
Some facts:
•    The UK exported some STG18 billion in goods to Ireland in 2014
•    Ireland is the largest UK export market for food and drink
•    The UK exports more to Ireland than it does to China, India and Brazil combined

Small wonder that we have seen an upsurge in enquiries from UK businesses around our credit reference services as they attempt to form a view from a distance on the credit credentials of prospective customers.
Perhaps more significantly, UK exporters who have recently intensifies their business with Irish customer are reporting difficulties with their collections. In response, we have started a dedicated credit reference and collections service for UK exporters.

Regardless of how geographically close are Ireland and the UK, small but significant legal and cultural differences can make debt collection significantly more difficult. In response, we are offering UK exporters a bespoke and systematic collections service. Already the service is beraring fruit as the following testimonials signify:

Lauren Cowen, Wolverine Worldwide - “We use StubbsGazette Automated Collections for late payers in Ireland. It produces excellent results. We would have no problem recommending them to other companies doing business in Ireland.”

Annette O'Neill, Wexford County Council - "The dedicated resources of Stubbs to the debt management process provides us with a mechanism of a timely and sustained follow up process..."

Ber O'Brien, Cork County Council - "Stubbs were excellent to deal with...we had access to our database for our contract 24/7 to see any on-going payments, comments from conversations with customers, etc.. We would have no hesitation in highly recommending them...."

If you have any queries about our services simply fill in the form below and we will get back to you very soon.


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Fri, 06 May 2016 14:31:56 +0100
Ireland - collecting on the export opportunity https://stubbsgazette.ie/news/ireland-collecting-on-the-export-opportunity https://stubbsgazette.ie/news/ireland-collecting-on-the-export-opportunity The Irish economy is back in full recovery mode and key economic metrics suggest a lucrative and rapidly growing foreign market for UK exporters. Indeed, the UK exported more than £18 billion in goods to Ireland in 2014.
 
Ireland is extremely receptive to the UK, its closest neighbour and by far biggest trading partner, but doing business in Ireland has challenges.
 
While Irish industrial practices have been utterly transformed over the past couple of decades, with levels of professionalism and innovation markedly improved thanks to prolonged membership of the EU and massive inward investment from Tier 1 US enterprises, there remains a small rump of problematic companies.
 
If you are considering doing business in Ireland you need a reliable local partner to validate your prospects and, most importantly, collect on your debtors.
 
StubbsGazette is Ireland’s leading credit bureau and debt collection agency and as a brand has extraordinary resonance and brand recognition with Irish business and public alike.
 
StubbsGazette the print publication first appeared in 1828 and since then has been synonymous with all aspects of the credit cycle.The company has evolved to a comprehensive online database/credit rating bureau and in 2008 extended its franchise by moving into the debt collection business with hugely impressive results. For any UK exporter it offers an unrivalled single source and local insight for customer vetting, the credit decision and, ultimately, debt collection.
 
Indeed, many UK exporters and Irish companies and have already good reason to be grateful for their association with StubbsGazette. Here is just a small sample:

Lauren Cowen, Wolverine Worldwide - “We use StubbsGazette Automated Collections for late payers in Ireland. It produces excellent results. We would have no problem recommending them to other companies doing business in Ireland.”

Annette O'Neill, Wexford County Council
- "The dedicated resources of Stubbs to the debt management process provides us with a mechanism of a timely and sustained follow up process..."

Ber O'Brien, Cork County Council - "Stubbs were excellent to deal with...we had access to our database for our contract 24/7 to see any on-going payments, comments from conversations with customers, etc.. We would have no hesitation in highly recommending them...."


Interested in what other companies have said about us? See for yourself here. Or contact us to see what we can do for you.


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Fri, 22 Apr 2016 10:33:32 +0100
Panama - The Unthinkable Truth https://stubbsgazette.ie/news/panama-the-unthinkable-truth https://stubbsgazette.ie/news/panama-the-unthinkable-truth
Into that category comes the Panama scandal.

It’s really not a surprise that the world’s wealthy have contrived to hide their assets on a massive scale. What is more disturbing is the apparent complicity of the global banking system and the apparently tacit contrivance of the global political establishment. Indeed, politicians representing a sizeable proportion of the world’s population are deeply involved, often personally.

It brings to mind one of the “Unthinkable Futures” published by musician Brian Eno a number of years ago. The premise of Unthinkable Futures was that what seems utterly improbable today, may well be commonplace in the not too distant future. Consider the following Unthinkable Future in the context of the global tax haven scandal:

“It turns out that nearly all the conspiracy theories you ever heard were actually true — that the world really is being run by 150 malevolent men with nasty prejudices.”

As Eno’s colleague in the exercise, Kevin Kelly says: “Much that is happening today would have been dismissed as unbelievably bad science fiction only 15 years ago. The US with secret prisons torturing Muslims? Street sweepers in India with their own cell phones? Obesity a contagious disease? A trusted encyclopedia written by anyone? Yeah, right, give me a break.”

So the main difficulty with the Panama scandal is not in fact the millions and millions of tax revenue foregone by cash-strapped states, particularly in the developing world, it is more to do with another damaging blow to credibility of governments and hence to democracy. The idea that governments throughout the world would apparently contrive to preserve systems and practices designed to keep secret and untaxed the wealth of the super-wealthy.

It is this that led the Guardian to abandon its journalistic reserve and objectivity to label Prime Minister David Cameron a “Panama prat”.

At this point it seems the involvement of Irish citizens in the Panama affair seems relatively slight but before we congratulate ourselves on our probity it should be remembered that we Irish have a long-standing attraction to the offshore world.

Beaten down by excessive taxation and reined in by exchange controls until the late-1980s, Irish citizens have long sought to get access to a more benevolent regime – something readily accommodated by the Irish banks. Remember the bogus non-resident account scandal? The Revenue clampdown on this and the widespread uncovering of offshore activity on the part of Irish citizens led to the closure of Irish bank's Isle of Man operations in 2012/13.

Over the past few days a host of individuals have been queuing up to reassure the sceptical public that having money offshore is in fact a perfectly respectable activity. That may be for some individuals but where this argument falls down is when the individuals in question move heaven and earth to preserve secrecy over their affairs. The awkward question arises: if offshore is ethical, then what is the problem with removing secrecy?

It would be perfectly easy for any government to pass a law for the beneficial owner of an offshore trust or bank account to be required to disclose that fact in their country of residence. It would then be up to Revenue to adjudicate on its legitimacy or otherwise.

Neither the government and certainly not the UK, where the London property market has become the world’s greatest money laundering operation, seems to have the appetite for this. Could it be that there is really a giant conspiracy to facilitate the wealthy and their massive support professions such as legal, banking, accounting and PR. Or is that just unthinkable?]]>
Thu, 21 Apr 2016 11:16:58 +0100
Fintech reaches tipping point for traditional banking https://stubbsgazette.ie/news/fintech-reaches-tipping-point-for-traditional-banking https://stubbsgazette.ie/news/fintech-reaches-tipping-point-for-traditional-banking
“Growth of fintech to spur almost 2m banking job cuts” read the front page of the Financial Times in response to the publication of a new report from Citigroup, Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.

Certainly the potential of fintech to displace banking incumbents is a view shared by the capital markets. As the report states: “FinTech investments have grown exponentially in recent years: $19 billion of investment in 2015 was up two-thirds from $12 billion in 2014 and from low single-digit billions of dollars per year earlier in the decade.”

Yet, according to Citi’s own head of digital strategy, we are not even past the foothills. “Currently only about 1% of North America consumer banking revenue has migrated to new digital business models (either at new entrants or incumbents) but that this will increase to about 10% by 2020 and 17% by 2023.”

Contrast this, however, with China, where the market is “well past” the tipping point for disruption. The report sets out the reasons for this contrast.

“China’s e-commerce ecosystem is now larger than any other country in the world in terms of transaction volume. China’s top FinTech companies (such as Alipay or Tencent) often have as many, if not more, clients than the top banks… China’s FinTech companies have grown fast due to a combination of: (1) high national Internet and mobile penetration, (2) a large e-commerce system with domestic Internet companies focused on payments, (3) relatively unsophisticated incumbent consumer banking, and (4) accommodative regulations. While the US and Europe also share high mobile Internet savvy, their local Internet leaders have not as yet strategically focused on paymnets/finance and their local consumer banks are more sophisticated.”

Emerging markets are of course ripe for fintech penetration with “a high percentage of unbanked population, relatively weak consumer banks, and a high penetration of mobile phones.”
The extraordinary rise of mobile money in emerging markets is a major signifier of the power of technology to revolutionise banking.

“The recent mobile Internet and smartphone revolution has created a game changer in consumer and SME finance and payments. Smartphones in the US and Europe are increasingly part of the SME and micro-enterprise payment space (e.g. Square or iZettle) Apple Pay and Android Pay debuted in 2014 and 2015 respectively and allow consumers to make payments via phones, tables or watches. The original mobile devices based payment service, M-PESA, launched in Kenya as far back as 2007.”

But it is payments information in particular, once harnessed to big data engines, that promises rich revenue opportunities way beyond traditional payments processing fees.

And the data revolution is not just about generating customer offers related to historical payment patterns – it will revolutionise credit also. The report quotes JP Morgan CEO Jamie Dimon in his 2015 Annual Shareholder Letter: “Silicon Valley is coming. There are hundreds of start-ups with a lot of brains and money working on various alternatives to traditional banking, The ones you read about most are in the lending business, whereby firms can lend to individuals and small business very quickly and (these entities believe) effectively by using Big Data to enhance credit underwriting.”

The potential of the various parts of the banking pie from a fintech perspective is perhaps best gauged by the allocation of investment dollars.

Some 37% of Fintech capital deployed to date has been in the Personal or SME banking segments. Some 47% of that amount has been targeted at lending, 265 at payments and 10% at savings and investment.
According to Citi, however, not all fintech new entrants will have a sustainable competitive advantage. “Companies that are trying to solve a financial need in a different rather than simply a cheaper way are more likely to maintain their innovation edge for longer.”

Citi notes that while payments, personal financial management and lending are “leading the pack”, lending is “crossing from its consumer base to the first rung of corporate segments and small and medium sized enterprises.”

However, one thing we should remember, the report warns, is that “digital disruption will not discriminate. It is a pervasive technology that will eventually transform every business model for every product and every segment. While we may debate where it stats, the end-game is a lot clearer.”
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Thu, 07 Apr 2016 15:54:03 +0100
Lenders gear up for CCR Launch https://stubbsgazette.ie/news/lenders-gear-up-for-ccr-launch https://stubbsgazette.ie/news/lenders-gear-up-for-ccr-launch Another milestone on the road to the proposed Central Credit Register was reached last month with the publication of the responses to the Central Bank Consultation Paper CP 93.

Some 20 parties, including 9 Credit information Providers (CIPs) and 6 CIP representatives bodies made responses. (In the world of the CCR, a CIP corresponds to a lender and CIS(Credit Information Subject) is a borrower.)

Nobody can argue with the objectives of the CCP, which include:
  • To create a comprehensive credit register though mandatory reporting requirements;
  • To provide an accurate Single Borrower View of loans;
  • To provide consistent and comprehensive reporting of credit agreements;
  • To provide controlled access to CIPs at key points throughout the credit lifecycle, and to CISs upon request;
  • To ensure that data is collected, stored and used properly and securely;
  • To facilitate the Central Bank in the performance of its functions through access to credit information;
  • To support consumer protection; and
  • To support broader economic development.

All the same, it should not be forgotten that the Credit Reporting Act of 2013, on which the formation of the CCR is based, is a direct mandate of the EU/ECB/OECD troika and a necessary part of the credit infrastructure to save us from repeating our worst excesses. But, as we have reported previously in these pages, there remain serious issues around the attitude to credit and our ability to monitor creditworthiness.

The Irish Credit Bureau (ICB) we know to be barely fit for purpose.  For years it operates as a closed shop for banks to share information with each other but excluding the participation of all the other credit providers – the credit unions, the utility companies, telephone companies.

One of the ICB’s major shortcomings was lack of completeness of its data – for example, it has no access to judgments, probably the single most predictive element of any person’s credit profile. Likewise, the ICB has no visibility on business debt. In a country where perhaps 30% plus of individuals are also company directors or business owners whose financial affairs are intrinsically linked with their private affairs, this renders many credit assessments on that basis decidedly suspect.

Hence, for many years we here at StubbsGazette have advocated a multi-bureau approach, similar to the US and UK, the better to get a full picture of an individual’s (or business) financial profile and general creditworthiness. In those countries, when there is a credit application it is referred to three or four different credit bureaus each of which have their own personality and strengths. Creditors typically also have their own score cards built so they’re able to get a much more holistic view of their customers’ financial position, using the credit bureaus’ scores and blending it with their own credit score to get a better picture.

Instead of this approach, the Central Bank has elected to keep the CCR in the hands of the State, albeit operated by company called CRIF, which we believe stymies innovation. In fact, most of the major credit bureaus – Experian, Equifax, D&B, CallCredit – initially expressed interest in the CCR but all pulled out, presumably because there was no incentive for them to invest their resources and IP in developing the system.

Ireland Is still handicapped by the inexplicable decision of the Irish Court Services to stop publication of unregistered judgments. For years StubbsGazette’s network of correspondents collected those judgments, travelling to some 70 courts throughout the country, manually transcribing that information and then processing it for inclusion in our credit bureau. Under data protection regulation we were obliged to send a data processing notice to give the debtor 30 days to respond and if they hadn’t responded after 30 days we would have posted that information on the credit bureau that would have affected that person’s score.

We’ve seen many cases where individuals and companies have had more than 50 unregistered judgments – if that is not indicative of a certain mode of behaviour then nothing is. It would be interesting to note the attitude of the troika if this were made known to them.

But let’s not be negative – the credit decision will certainly be made easier with the arrival of the CCR. At that point it will be mandatory for lenders to submit information on credit agreements and payment histories to the CCR and check credit information on the CCR when considering credit applications for €2,000 or more.

When exactly can we expect to see the CCR in place is a matter of conjecture? Based on the feedback received to CP 93 the Central Bank is proposing that Data submission into the CCR will occur in two phases.
Phases 1 will cover all lending by CIPs to consumers. Phase 2 will cover all other lending by CIPS (non-consumers).

The Central Bank is proposing that CIPs will provide data in respect of Phase 1 from 30 September 2016. CIPs may commence reporting this data in the 6 month period from 30 September to 31 March 2017; any CIP that commences reporting for the first time after 30 September 2016 in respect of Phase 1 will be required to backdate data to 30 September 2016.

For Phase 2 reporting of data will commence from 30 June 2017. CIPs may report this data in the 6 month period from 30 June 2017 to 31 December 2017; any CIP that commences reporting for the first time after 30 June 2017 in respect of Phase 2 will be required to backdate data to 30 June 2017.

Unfortunately, these timelines seem highly aspirational if the feedback of Bank of Ireland is any indication. In its submission the bank states; “The absence of data definitions and specifications is a major limiting factor in making any definitive comment on proposals at this stage. The first step towards the establishing of consistent, reliable data in the CCR needs to be the setting of definitions and standards for the collection, calculation and provision of that data. It may take some time to arrive at common, achievable definitions and standards across hundreds of data suppliers so we would urge that this exercise is addressed with urgency… It is likely to be some years before there is sufficient data in the CCR to support credit decisions with the same degree of statistical power as the current services in place for consumer lending
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Mon, 14 Mar 2016 12:50:35 +0000
The stakes just got higher for Financial Institutions https://stubbsgazette.ie/news/the-stakes-just-got-higher-for-financial-insitiutions https://stubbsgazette.ie/news/the-stakes-just-got-higher-for-financial-insitiutions New money laundering directive to raise AML/CFT stakes

Just as financial institutions and other interested parties have come to grips with the ongoing requirements of the 3rd Money Laundering Directive, as effected in an Irish context by the CJA 2010, over the horizon comes the next wave of requirements courtesy of the 4th Money Laundering directive (MLD4), which will extend and replace MLD3, the current EU anti-money laundering (AML) and counter terrorist financing (CTF) regime. Member states are obliged to transpose MLD4 into national law by 26 June 2017.

MLD4 came about as a reaction to revisions of to the Financial Action Task Force (FATF) Recommendations which were adopted in February 2012 in order to address newly emerging AML and CTF concerns as well as a European Commission review of MLD3.

One of the key aspects of MLD4 relates to beneficial ownership.

Here in Ireland we are familiar with the extraordinary labyrinthine nature of too many corporate structures. We have a long history of concealment of beneficial ownership and this lack of transparency does nothing to inspire confidence in business practices – witness the soon-to-return Michael Lynn whose web extended to companies in Brazil, Romania and elsewhere – hardly natural places of business for a private practice solicitor.

MLD4 requires that Member States must ensure that entities incorporated in their jurisdictions obtain and hold “adequate, accurate and current information on their beneficial ownership” which can be accessed by competent authorities and EU Financial Intelligence Units (FIUs). Member States will also be required to store that information on beneficial ownership in a central register, accessible to:
  • competent authorities and FIUs without restriction;
  • “obliged entities” (i.e. those listed in Article 2(1) of MLD4 as being entities to which MLD4 applies) within the CDD framework; and
  • others that can demonstrate a legitimate interest.

The storing of beneficial ownership information on a central register will not relieve obliged entities of their CDD obligations which they will be required to continue to fulfil using a risk-based approach.

MLD4 also provides clarity around “indirect ownership” and introduces some new rules in respect of the beneficial ownership of trusts, including details of the beneficial interest held. Member States must require trustees to obtain and hold adequate and up-to-date information on beneficial ownership regarding the trust and, when the trust gives rise to tax consequences, Member States must ensure that the beneficial ownership information held by trustees is held on a central register. Trustees must also provide beneficial ownership information to Obliged Entities in a timely manner, in accordance with CDD (customer due diligence) framework requirements.

The scope of customer due diligence requirements will also be extended. Obliged Entitiees will soon have to carry out CDD related to occasional cash transactions amounting to €10,000 or more in the case of persons trading in goods. This is where persons trading in goods who make or receive cash payments of €10,000 or more will be obliged to conduct CDD whether the transaction is carried out in a single operation or over a number of operations which appear to be linked.

Providers of gambling services must condust CDD for single transactions where winnings exceed €2,000 on collection. The scope of exemptions for CDD in relation to rechargeable electronic money devices has also been tightened.

MLD4 also clarifies the definition of a politically exposed person (PEP) and widens the categories of individuals who can be regarded as PEPs to include members of the governing bodies of political parties, and directors, deputy directors and members of the board or equivalent function of an international organisation.

The rules relating to PEPs are also extended to cover domestic PEPs. MLD4 requires that, when a person ceases to be a PEP, an Obliged Entity must consider the continuing risk imposed by that person for at least twelve months. Risk-sensitive measures must be applied until that person is deemed to pose no further risk specific to PEPs. Furthermore, Obliged Entities are not entitled to rely exclusively on PEP lists, they are responsible for making their own determination as to whether a customer is a PEP, or associated with a PEP.

In mitigation, MLD4 will continue to allow Obliged Entities to rely on third parties for CDD requirements in order to ease the burden of compliance.

Undoubtedly, while an Obliged Entity may not rely “exclusively” on external lists, there is no question that referral to such lists is a critical part of AML/CFT procedures. To that end, and as previously disclosed, StubbsGazette is making available to its subscribers a comprehensive global database of PEPs.

That will be welcome to many as MLD4, in the words of legal firm Dillon Eustace, places greater emphasis on enforcement and sanctions and sets out detailed provisions as to the type of administrative sanctions and measures that, at a minimum, should be implemented by Member States.

“Sanctions under MLD4 include pecuniary and non-pecuniary sanctions. A maximum administrative pecuniary sanction of at least twice the amount of the benefit derived from the breach (where that benefit can be determined) or at least €1,000,000 may be imposed. In respect of credit institutions and financial institutions, a maximum administrative pecuniary sanction of at least €5,000,000 or 10% of total annual turnover in the case of a legal person, and at least €5,000,000 in the case of a natural person may be imposed.”

From here on, the stakes over AML/CFT compliance are very real.
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Thu, 10 Mar 2016 11:15:34 +0000
Fear and Fatigue point to New Credit Union Model https://stubbsgazette.ie/news/fear-and-fatigue-point-to-new-credit-union-model https://stubbsgazette.ie/news/fear-and-fatigue-point-to-new-credit-union-model
The strong bond of the credit union with local customers is an undoubted strength but the singular, independent nature of the various individual credit unions makes the movement as a whole under-equipped in a competitive context: some consolidation of their resources is necessary to provide the scale to take on the main commercial banks. The improvements that could be gained from, say, a single IT platform and the ability to develop and market nationally-targeted products capable of drawing business from rivals are immeasurable.

Delegates to the recent address of by the Registrar of Credit Unions, Ann Marie McKiernan at the Credit Union Development Association (CUDA) Conference in Cavan last week may have detected a subtle change in tone from her previous remarks to the sector last November that might provide some encouragement but the shortcomings of the movement, as she articulated once more, remain clear, specifically:
• A fall in aggregate loans from €7bn in 2008 to €4bn in 2015
• A fall in total interest income of 40% over the same period
• “Unacceptably high” arrears at 13% of the loan book
• Downward trend in numbers of new loans

Perhaps more profoundly there are structural issues that inhibit the ability of the sector to catapult itself where it feels it ought to be. The challenges here, according to Ms McKiernan, are “considerable”.

“The biggest challenge is the need to grow income from core lending. This in turn leads to the need to address the ageing membership base, allied to the difficulties which many credit unions face in changing their product and service offerings to attract the younger members who will be the drivers of loan growth into the future. The need to offer new services via different channels is a particular challenge, given the technology and other investment costs which smaller credit unions, in particular, struggle to meet.

“For the sector’s future sustainability, we see four main requirements: further restructuring; a greater drive for new, active borrowers; a marked increase in core lending, and business model development in a multi-step, well-managed way.”

Signs are, however, that the movement is taking steps to provide such a sustainable platform through centralization. Weekend newspaper reports suggest that “A radical shake-up of how credit unions operate is being planned in a bid to turn the movement into a third banking force,” with a report presently being prepared that proposes that credit unions form a federated system, with a strong central structure, similar to the model successfully operated in Canada. “This would allow them to maximise their strengths, develop new products, and benefit from greater scale and savings from the economies of operating collectively,” according to the Irish Independent.

These proposals will apparently be put to the vote at the Irish League of Credit Unions’ Irish League of Credit Unions in April and the members of the rival CUDA body, the Credit Union Development Association, will also be involved, comprising as it does of some of the largest credit unions on the island.

One of the most timely and pressing examples of how such centralization of activities could benefit the movement as a whole is in the area of Anti-Money Laundering (AML), Countering Financial Terrorism (CFT) and Financial Sanctions.

Credit Unions up and down the country are currently grappling with the implications of the escalating compliance obligations in these areas and the growing realisation that as things stand they are woefully unprepared to implement the required supervisory standards insisted by the Central Bank. A 31st March 2017 deadline and the severe sanctions for non-compliance will concentrate minds but a coherent, sector-wide approach to the problem would surely provide great comfort, particularly for smaller credit unions. And the same goes for IT systems and product development.

In fact, there is no aspect of the credit union business that could not be utterly transformed by such a centralised approach with the potential to at last realise the vast, untapped potential of the sector.
Since the onset of the financial crisis and the well publicised difficulties of the movement the interventions of the Regulator have been consistently (and justifiably) downbeat (although it should in fairness be said that the damage to the public purse at the hands of credit unions was minimal in comparison with the commercial banking sector).

Yet the ongoing deluge of regulation, from lending restrictions to caps on individual customer deposits, and now AML, make the job of the typical volunteer member an increasingly uphill experience. The cumulative effect of fear and fatigue on the part of the workforce will surely lead to acceptance of a new model for the movement.
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Fri, 19 Feb 2016 09:36:21 +0000
Regulators turn the screw on AML https://stubbsgazette.ie/news/regulators-turn-the-screw-on-aml https://stubbsgazette.ie/news/regulators-turn-the-screw-on-aml By James Treacy, Managing Director, StubbsGazette

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures have been at or close to the top of bank compliance agendas for the past few years. This has been apparent as national and supra-national authorities have left the industry in no doubt as to their resolve in pursuing breaches of ever more onerous legislation.

This new resolve dates from 2012 and the record fine of USD 1.92 billion imposed by the US authorities on the then world’s largest bank for its role in aiding money laundering by various Mexican drug cartels. In June 2015 the bank was fined a further USD30 million by the Swiss authorities for “organizational deficiencies” that enabled its clients to launder cash.

This anti-AML and CFT sentiment has spread globally, undoubtedly related to public distaste for the activities of drug cartels and terrorist groups such as ISIS. These groups have demonstrated an astonishing ability to build quasi-states out of their activities, something that could only take place without extraordinary financial nous more than likely linked to the formal financial system. Disclosure of widespread massive tax evasion through various offshore centres in both the corporate and personal spheres have also fuelled anger.

Ireland’s Central Bank is typical of this new world and has ramped up legislation considerably in recent years. The Criminal Justice (Money Laundering and Terrorist Financing) Act of 2010 (CJA 2010) is the bedrock that brought the EU’s Third Money Laundering Directive into law.
The Act sets out legal provisions to ensure technical compliance and effective implementation of international standards relating to AML and CFT. In the words of the Central Bank the Act:
    
•    Defines broadly the offence of money laundering.
•    Defines designated persons and beneficial owners that come under the provisions of the Act.
•    Provides for Directions, Orders and Authorisations relating to investigations.
•    Sets out customer due diligence, reporting, internal policies and procedures, training and record keeping requirements of designated persons.
•    Provides for monitoring of designated persons.

In a globalized financial services marketplace where reputation is all, the Bank most recently issued its report on Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Funds Sector in November last year. Given that the Irish Funds sector is a major success story with Irish domiciled funds having a net asset value of EUR1.8 trillion, it is not surprising that the Central Bank should be at pains to guard against the sector’s reputation.
The Central Bank’s report on AML in the Funds sector identified a number of issues for the sector to address. One of these was “deficiencies in the on-boarding process of Politically Exposed Persons, including the failure to sufficiently identify, verify and document Source of Funds and Source of Wealth.”

The credit union sector is not immune from these developments. In May 2015 the Central Bank issued its Report on Anti-Money Laundering/Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Credit Union Sector.

While the report noted that one of the unique features of the movement, the Common Bond, assists credit unions in knowing their members, this “does not minimise or reduce the obligations of credit unions pursuant to the CJA 2010.”

“Credit unions need to use this knowledge to comprehensively assess the money laundering and terrorist financing risk in their business and implement the recommendations of this report as appropriate to the nature, scale and complexity of that business,” the Bank reported. “The number and nature of issues identified during the inspections of the credit union sector suggest that credit unions in Ireland need to significantly improve their AML/CFT policies, procedures, systems and controls to ensure compliance with the CJA 2010.”

Among the issues identified by the Bank were:

  • Failure to implement the requirements of the CJA 2010 in a timely manner. 
  • Lack of oversight of AML/CFT issues at Board level;
  • Inadequate policies, procedures and processes in relation to Customer Due Diligence (CDD) for new and existing members, on-going monitoring and classification of risk;
  • Non-adherence to stated AML/CFT policies;
  • Failure to conduct adequate Money Laundering/Terrorist Financing risk assessment of the business;
  • Engaging in non-standard practices without appropriate Board oversight and approval and without proper policies, procedures and systems and controls in place. For example, accepting large cash lodgments from local businesses, or lodgment of business proceeds to members’ personal accounts, without considering and documenting any risks associated with these practices or any additional due diligence or on-going monitoring requirements which may apply;
  • Lack of documented procedures to identify and verify beneficial owners where warranted, for example in the case of business customers, clubs and societies etc.;
  • Failure to have adequate systems and controls, procedures and documentary evidence of on-going monitoring of transactions;
  • Failure to define Politically Exposed Persons (PEPs) within policies. Lack of systems and formal processes for identifying, verifying and monitoring PEPs;
  • Failure to ensure the provision of appropriate training to the Board members, staff and volunteers at all levels, as well as enhanced training for staff in key AML/CFT and FS roles;
  • Inconsistent and/or undocumented approaches for the reporting of Suspicious Transaction Reporting (STR) by staff to the Money Laundering Reporting Officer (“MLRO”), or the process for onward reporting to the relevant authorities.
  • Lack of a documented timeframe for reports to be received and reported and failure to reference the penalties for not reporting or the offence of ‘tipping-off’ within the AML Policies.

The Central Bank findings give an indication of the challenges faced by Credit Unions in satisfying the AML/CFT requirements of the Central Bank. StubbsGazette is pleased to have for some time been a key source for financial institutions intent on verifying their clients’ bona fides and legitimacy and now we have massively expanded the scope of our search facilities to assist financial institutions in meeting their regulatory obligations in AML/CFT,


Due Diligence – what you need to know

StubbsGazette will shortly be making available to its subscribers a comprehensive database specifically designed towards providing background checks to identify potentially compromised individuals for the purposes of anti-money laundering and countering the financing of terrorism. Specifically, the following categories will be highlighted.

Heads & Deputies State/National Government
  • Presidents,Taoiseach etc

National Government Ministers
  • This category contains a country’s government ministers, for example, Minister of Finance, Minister of Foreign Affairs etc.

Members of the Dail, Seanad, Stormont Assemby etc
  • This category contains members of the bodies/assemblies making up the national legislature

Senior Civil Servants–National Government
  • This category contains the uppermost levels of the regional civil service. Titles vary depending on the country concerned, but include those like Secretary General etc.

Embassy and Consular Staff
  • Watchlist aims to cover the top two positions at a country’s foreign representations and the top position at a country’s consulates.

Senior Members of the Defence Forces

Senior Members of the Police Services (Garda Siochana, PSNI)

Senior Members of the Secret Services

Senior Members of the Judiciary

State Corporation Executives

State Agency Officials

Heads & Deputy Heads of Local Government

Religious Leaders

Political Party Officials

International Organisation Officials

City / Town Mayors

Political Pressure and Trade Union Officials

International NGO Officials

Local Public Officials

Local Councillors etc.

International Sporting Organisation Officials

Relatives or Close Associates (RCA)
  • Apart from establishing the need to identify Politically Exposed Persons (PEPs), Anti‐Money Laundering regulations stipulate relatives or close associates of PEPs should be monitored to the same extent as Politically Exposed Persons

Sanctions Lists (SAN), Other Official Lists (OOL), Other Exclusion Lists (OEL)
  • Risk & Compliance profiles contain the names of individuals, companies, organisations, aircraft, banks and vessels contained in over 900 current international official lists covering 60 jurisdictions. Lists published by the U.S. Office of Foreign Assets Control (OFAC), the United Nations and the European Union are included.
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Fri, 22 Jan 2016 14:24:05 +0000
2015 – A Turning Point? https://stubbsgazette.ie/news/2015-–-a-turning-point- https://stubbsgazette.ie/news/2015-–-a-turning-point-
All seems rosy enough, yet there remains a nagging doubt that the current performance may be taking place on thin ice. That would be natural, not to say prudent, given past disasters from seeming positions of impregnability. Ironically, all of this good economic news came at the same as the RTE Investigations programme that uncovered the appalling behavior of certain local councilors.

In the same week as much of the country lies under water – something that might reasonably be attributed to, at best incompetent, and at worst nefarious planning activities – it is relatively easy to be visited with a chilling sense of déjà vu. One wonders sometimes what has been learned from the ruinous years post-2007.

Against a background of one of the greatest property crashes in history, there is something about the extraordinary recovery in prices, particularly within the M50, that simply does not ring true. Central Bank measures have stabilized the price increases but, regardless, we now have the first generation that will probably never be able to buy their own home without substantial help from their parents.

And how galling is it that after the biggest property glut of all time, runaway rent levels are eating into employees’ take-home pay, destroying competitiveness in the process with the inevitable pressure on salaries. The potential for the housing market to become a casino once again is real.

It almost seems as if some phantom puppet-master is acting malignly to rig the market. As anybody who has been through the pantomime of attempting to buy a house through private sale will testify, there is something profoundly unsatisfactory about the process in terms of complete lack of transparency. They don’t do things this way in other countries.

The neutering of the reform of the legal profession likewise sends a bad signal to anyone who yearns for the dismantling of vested interests and cartellist behavior that has made business such an uphill struggle in the past.

Ironically, the biggest threat to the recovery in Ireland probably comes from without rather than within.

The global economy, on which Ireland as a relatively tiny open economy still depends, is balanced precariously.

Western governments have effectively “solved” the debt crisis by issuing more debt and in fact carry more debt than at the time of the banking crisis. Fissures in the Euro structure remain unresolved. Nothing has changed except that people have grown more accustomed to the position.

The alternatives remaining open to “solve” the sovereign debt crisis – whether to pay it off or inflate the economy – are equally unpalatable. Both routes are damaging for growth and investment.

Interest rates in general and on government bonds in particular are an anomaly with a “new normal” of 2 percent replacing the “old normal” of 5 percent – although signs are that in the United States at least some moves in the direction of the old normal are under way. Regardless of headline bond rates, the appetite of heavily indebted governments to invest in infrastructure is seriously diminished by their precarious positions.

But there are long-term positives. Lower oil prices are welcome but for those countries such as the UK which have vast swathes of their economy predicated on oil the transition will be painful in the short term.

All that said, at local level the recovery is certainly welcome for those sitting on (diminished) negative equity and the effective removal of the banks’ veto for Personal Insolvency Arrangements (PIAs) will undoubtedly remove a fairly significant obstacle that threatened to render the Personal Insolvency regime stillborn. That, and the proposed change in Bankruptcy law to reduce the term of Bankruptcy from three years to one will have a knock-on effect of making it far easier for debtors to negotiate with their banks.

We at StubbsGazette were opposed to reducing the discharge period to one year and submitted to the Government our reservations on such a change. We felt, and still feel, that some debtors might sleepwalk into bankruptcy without understanding the grave consequences for their future ability to get credit. But notwithstanding this, reality is a prerequisite for resolution, for debtors and creditors alike, and at last the structures are in place to deliver.

Here’s hoping that the positive signals deliver in 2016. Happy Christmas!]]>
Fri, 18 Dec 2015 16:09:01 +0000
Personal Insolvency Emerges from Limbo https://stubbsgazette.ie/news/personal-insolvency-emerges-from-limbo https://stubbsgazette.ie/news/personal-insolvency-emerges-from-limbo The Q3 figures released by the Insolvency Service of Ireland (ISI) indicate that the personal insolvency regime is operating in a state of limbo at this point.

The headline the ISI would have us highlight is the 25 percent increase in Personal Insolvency Arrangements (PIA) approved but nearly two years into the new regime the overall figures of 185 for the quarter is less than impressive.

When one considers that about 80 percent of these 185 cases are likely to be “mom and pop” arrangements where a couple is involved this means that little over 100 homes are involved.
Contrast this with the fact that there are some 20,000 cases before the various County Registrars’ Courts whose mortgages are deemed unsustainable with Civil Bills seeking possession (and that there are probably another 20,000 cases in the pipeline) and the ISI figures are placed in sharp relief.

The ISI figures also show that the number of Personal Insolvency Practitioners (PIPs) recognised by the ISI has fallen fractionally to 140. The reality, however, is that less than 50 are practicing in a serious manner and there are probably only 15 of any consequence.

This is hard to square with the fact that there are 40,000 homes in jeopardy with an average of three persons per household. If the system were actually to work as intended the numbers of PIPs would simply not be able to cope.

Last week the Circuit Court Rules Committee met to agree the Court Rules governing the appeal process for a vetoed PIA. It is understood that in order to be eligible for an arrangement (without creditor right of veto) five criteria must be satisfied:

  •  The family home must have been in arrears since on or before 1 January 2015
  • The proposal must seek to keep the family in the home
  • The outcome for creditors must be better than bankruptcy
  • There must be an equitable return for all classes of creditors
  • At least 50% of any single class of creditor must be in favour of the proposal; the class of creditors to be determined by the PIP

This will help matters but as some 80% of PIAs that come before the courts are currently approved by creditors on the face of things the overall effect of modifying dysfunctional behaviour of some creditors would seem to be minimal.

But that view is mistaken. It is the very fact that creditors have the power of veto that is holding back applications in the first place. And a second and related factor has been the waiting time for the relevant Court Rules committees to approve the Court process for dealing with an appeal of a vetoed PIA that has further backed up the system.

In fact, dysfunctional behaviour and lack of join-up thinking seems to be the order of the day when it comes to personal insolvency.

Anecdotal evidence indicated that every repossession incurs around €20,000 in legal costs and some 15 percent of market value in realisation costs – a total of around €40,000 average across the market. PIP fees for a PIA are something like €10,000 yet the resistance over PIP fees is substantial in spite of the fact that the PIP will give the same or an even better realisations to the creditor.
But the new rules that would smash the veto promises to improve matters, in particular the stipulation that more than 50% of any single class of creditor – as determined by the PIP – can push through the scheme so long as all of the other criteria are met to the satisfaction of the relevant Court.

This is likely to alter the balance of power among various creditor classes markedly.

Consider a household with €3,000 in income, €2,000 in set costs and a mortgage of €150,000 on a home with negative equity of €100,000.

In the old world the secured creditor would insist on all of the available €1,000 per month going against the mortgage. Under the new rules it is possible for any single class of creditor for example a credit union, to posit and arrangement to the PIP that €700 goes to the mortgage holder but €300 to the unsecured creditors and the PIP over 72 months. So long as the family home is saved and the court believed this is a fair and equitable arrangement for all classes of creditors then this has every change of being passed. It certainly will sit well with the hard-pressed PIPs who may also look forward to the possibility of debtor assistance towards meeting legal and PIP fees according to industry rumours.

Perhaps the mortgage providers have overplayed their hand until now? We shall see in the coming months.
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Wed, 25 Nov 2015 12:22:33 +0000
The rise of digital payments https://stubbsgazette.ie/news/the-rise-of-digital-payments https://stubbsgazette.ie/news/the-rise-of-digital-payments Digital payment is the fastest-moving, most dynamic sector in financial services today. That potential is duly recognised by the share prices of the major card networks – Visa, MasterCard Amex and others – and also by the fact that well over 80 % of all transactions are currently carried our with cash, so the potential to replace with digital is enormous.

In the developing world, the consequences of the arrival of mobile money schemes has been extraordinary and has hugely improves quality of life in those countries.

Digital payments are instant, and more secure = no longer the need to carry cash in unfriendly places. Greater ownership and use of mobile money accounts has reduces the cost of financial transactions, particularly in the area of remittances where costs have heretofore been extortionate. The need for the consumer to travel long distances – whether to bank branch, money transfer operator (MTO), counter, or government office, which may only be available in a regional capital – in order to receive a remittance or government transfer or make a bill payment, has been eliminated. This means massive savings on travel time and travel expenses, as well as income forgone while travelling and waiting to collect a payment. Meanwhile, governments worldwide are enthusiastically promoting digital payments to rein in the black economy.

The World Bank also notes that greater access to financial services has increased the incentive to save and has encouraged improved personal finance habits: “Digital payments create the opportunity to embed poor people in a system of automatic deposits, scheduled text reminders and positive default options than can help people overcome psychological barriers to saving” and these behavioural modifications brought on by digital have just as much significance for the developed world.

But the wider implications of digital are nor just flowing from the arrival of speedier, more accessible and cheaper execution of payments per se. Digital platforms allow providers to design powerful and compelling applications that harness the data underlying the transactions.

For some time payments services providers have understood that the value of the payments transaction in terms of fees is less than the potential revenue from the data it generates.
That seems accurate. An individual’s payments profile and patterns represent nothing short of that person’s financial DNA. In the right hands – and let’s call that entity a bank, although that is becoming less and less the case – such information can be analysed so as to allow for optimisation of customer behaviours to the considerable benefit of both customer and bank.
This is a worthwhile exercise. Any study on the ‘average’ consumer’s income and expenditure and balance sheet would reveal significant suboptimal behaviours.

At a P&L level it would likely reveal careless patterns of expenditure and failure to source best value in individual spending categories. At a balance sheet level it would likely show lack of liquidity, excessive leverage, sub-optimal placing of cash in low-yielding instruments (while carrying expensive revolving credit and other short-term loans). And , even more seriously: material investments in financial instruments at inappropriate levels of risk.

But nobody is suggesting that the regular banking customer be issued with a private banker to regularise his or her finances. There already exists an array of attractive and automated tools to accomplish this – the financial app.

The consumer banking revolution, and the spread and increasing depth of consumer financial services and suppliers, would seem to indicate that we are at or approaching saturation point in supply of such services. In fact, nothing could be further from the truth. Like digital payments, the business of retail banking, on back of these new technologies, is still a business of incredible potential.

True, the arrival of digital has led to a wave of disruptive new entrants but, energetic and creative as these operators are, they start from the bottom of the mountain when viewed in the context of typical bank levels of trust and access to customer profiles.

Like digital payments, the need for financial services is practically inexhaustible because of massive latent financial needs.

But while banks have major advantages in the digital age in terms of historical customer data and trust for the digital age, they also have the disadvantage, unlike new entrants, of needing to transform legacy systems for the digital age. That is why bank digital transformation strategies need to do nothing short of reimagining a centuries-old business.

Towering over every imperative for the new digital bank is customer experience. Catalysed by digital, the interconnectedness between individuals, organisations and business has led to almost instantaneous spread of ideas and expectations. This means that the effort to attain a competitive position based purely on the price of goods or services, or on product features and functions, is often futile.

When it comes to price, increasingly it’s the case that there’s somebody somewhere in the world who is prepared to offer the same thing as a bank, only cheaper. There will always be somebody out there who will copy a product, legally or illegal. Hence, delivering sustainable competitive differentiation in banking has to be about more than products and price and all to do with customer experience, often through new, digital channels.

Cracking the customer experience/product design/customer education nexus is the key to tapping into the next wave of demand for consumer banking and financial services and at the heart of these payments – the most frequent, resonant, and vital activity undertaken by bank customers. It is the banking function that most directly relates with their daily lives.

Until now, payments were merely a utility function. Digital brings it into the heart of the customer offer.

And it’s not just about financial planning. Expect in the very near future the developed world to follow the trend in emerging markets and have disclosed payment patterns of individuals to be part of the credit decision process. No doubt this will be in a strictly on an opt-in basis, but ultimately the decision will be to opt in or to lose access to credit at some level.
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Wed, 21 Oct 2015 10:38:56 +0100
Futureproofing your financials: How your data can help you get the most value from your customers https://stubbsgazette.ie/news/futureproofing-your-financial-how-your-data-can-help-you-get-the-most-value-from-your-customers https://stubbsgazette.ie/news/futureproofing-your-financial-how-your-data-can-help-you-get-the-most-value-from-your-customers by Malka Townshend
All businesses love their customers. Analysis of customer numbers, how they behave, there they come from, what they buy and what they spend provides essential information for companies, enabling them to manage their customers effectively and profitably.

But what about knowing which customers are giving you the best return on your investment and why? Imagine knowing how to identify customers that generate the highest levels of profit and determine which customers deliver the most value for the lowest cost and then being able to retain them.

Many organisations have a large number of products and many sectors to target, and it isn’t always easy to determine which communications channel will have the highest impact. Others, such as utilities, have customers where income is only generated after the customer is signed up, making it difficult to know the value of a customer at the point of joining. Furthermore, companies often incur significant costs in order to take on a potentially valuable customer – for example, to provide valuable equipment as part of the joining process.

Common forms of monthly performance tracking and analysis do not provide enough information to be able to resolve these sorts of issues. We have the tools that help companies answer many key questions: Do you know which of your campaigns are effectively impacting the right audience? Would you like of find out how much value a long-term customer plan represents to your business? And wouldn’t you prefer to be certain that an investment made in a prospective client will eventually pay dividends?

With the help of Sagacity Solutions Ltd and our QTOX Customer Value Management, you can have an answer to those key questions which help identify and improve profitability.

What is Customer Value Management?   

Sagacity’s Customer Value Management solution allow businesses to get a better understanding of what drives their profit, and how to improve it. By modelling the profit attributable to each customer, we can determine which customer groups, products, services or channels are generating the best return on investment allowing businesses to focus investment and generate the most profit; in other words – to get the most bang for their buck.

Key features and benefits of QTOX Customer Value Management include:
  • An end-to-end solution providing transparency between commercial activity and profit
  • Data analysis and modelling that delivers information a business needs to maximise profit
  • Reporting, dashboards and data visualisation to present information – allowing business users to understand the trends in their data
  • Governance to ensure the right decision-making is in place
  • Cultural change to reinforce the importance of long-term value generation over short-term ‘quick wins’

Without Customer Value Management, there is a danger that decisions are made on ‘belief’ or based on ‘habit’ rather than ‘fact’; short-term benefits may be prioritised over those providing long-term value generation – as the long-term benefits can’t be as easily quantified. Sub-optimal investment decisions might also go through, causing missed targets and lower company profit.

In the case of one of our clients, many of their ‘more mature customers’ were attracted to the latest smart phones. These customers were considered ‘low risk’ as they paid their bills regularly and were long-term customers but, a large proportion of them were calling product support as they could not use their phones. Using Customer Value Management, Sagacity identified that despite generating monthly revenues, many customers were making the company a financial loss, meaning that the initial investment made in them could not be recouped – largely due to their high support costs associated with this customer group. As a result, additional training was given to the customer at the point of sale, along with a leaflet explaining how to use the core phone functionality, saving our client what had previously been a loss of over €1 million per annum.

How does Customer Value Management work?

Our Customer Value Management solution works in three stages:
  • Customer Modelling – our dynamic QTOX software examines the value that will be generated by each individual customer, and determines the cost of acquiring and managing those customers. A detailed model is produced to forecast all aspects of the customer cash flow – from the cost of acquisition, to the length of time the customer will stay, how much it costs to manage them and the amount of revenue each customer will generate each month. In summary, all relevant and costs are taken into consideration
  • Customer Insights – We then provide detailed reporting on our findings, using them to inform the business on the best way to acquire and manage its customers
  • Fact-Based Decisions – We provide specialist expertise and support to enable our clients to implement revised strategies and maximise revenue income based on this information.

Our solution identifies where best to focus resources, how to make the most out of the money customers generate, and to use data to understand what drives a business, allowing an organisation to make better-informed decisions.

 

 

How has customer Value Management helped our clients?
For our clients who have taken full advantage of our solution, we have been able to:
 
  • Identify unprofitable customer segments – customers who were generation good income but didn’t offset the money spent to acquire and service them
  • Pinpoint individual stores responsible for acquiring customers with high levels of customer churn – driving staff retraining and revised commercial terms
  • Determine that high customer service costs came from specific customer groups with particular devised – significantly lowering their profitability
  • Present Sales teams with the financial impact of their sales – not just the volume of business that they have done – aligning them with the overall business strategy
  • Highlight the lone- term impact of short-term budget gap closure initiatives
  • Optimise return on investment by spending their money in the right ways

While traditional measures of profitability provide a short-term view, our Customer Value Management services allow companies to identify their most valuable customers with the bigger picture in mind. A decade of experience in delivering the highest quality solutions and services for businesses means that we can bring our extensive expertise, as well as our sophisticated software, to the table. Implementing Customer Value Management from Sagacity is essentially like having a crystal ball with which to predict your own levels of success and profitability, allowing you to steer away from that which may slow your progress. So, the only question is: would you like to see into your company’s future?

For more information about QTOX, please visit our website at sagacitysolutions.co.uk or email us at enquiries@sagacitysolutions.co.uk.
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Thu, 17 Sep 2015 16:21:42 +0100
Assure your Revenue with QTOX: Find the Leak and Fix it https://stubbsgazette.ie/news/assure-your-revenue-with-qtox-find-the-leak-and-fix-it https://stubbsgazette.ie/news/assure-your-revenue-with-qtox-find-the-leak-and-fix-it  

 

By Malka Townhend   

 

 

Businesses know what it is to communicate with their customers by selling quality products and services. Systems containing the details of thousands of account holders mean that companies can send out essential information regularly.

However, sometimes, almost inevitably, when the sheer amount of data stored is so vast, correspondence doesn’t reach its intended destination for a number of reasons – a misspelled name here, an incorrect address there. Before long, this can add up to numerous customer bills remaining unpaid, and large amounts of annual revenue floating in limbo.

At Sagacity, we love providing solutions which empower our clients to resume cash flow into their businesses enhance their processes to prevent reoccurrence and completely cleanse big databases so that they serve as they should.

Does that sound too good to believe? Believe it. In previous cases, Sagacity has been instrumental in recouping up to €58m per annum for our clients – all in money that was owed to them, but not reaching them due to data discrepancies. It’s amazing the amounts which can be recovered from the quagmire.

How much can we recover for you? We examine procedures and policies with a view to improving the overall journey of your customer, hone operational practices, turn ‘Big Data’ into ‘Right Data’, and unclog that steady flow of income you never even realised had stopped flowing. How does Sagacity do this? Via our robust Revenue Assurance solutions and services – powered by QTOX.

What is Revenue Assurance?

Every business suffers revenue leakage – glitches and discrepancies which cause a loss of money. These could be minor system errors or broader issues concerning processes and policies. However, if left untreated, these revenue leakages can add up to significant business shortfalls and increased costs.

With our pioneering QTOX Portfolio Reconciliation technology, which provides advanced data analytics and trusted process control techniques, we identify revenue leakages throughout the client’s customer journey, saving on operational costs and increasing their bottom line.

The process is as follows:
Assess – We investigate the data sets and systems of the business to pinpoint leakages
Quantify – We inform the client of how much these errors are costing them
Plan – We plan the solutions to fix the revenue leakage
Fix – We deliver the changes to reduces the revenue leakage and provide a lasting solution

The revenue leakage fixes provide organisations with the opportunity to transform their customers’ experience and finally receive the correct amount of revenue they are entitled to. In fact, many companies reap the financial rewards of our approach and tools within months of using our service.

Benefits of Revenue Assurance
Irrespective of the size or maturity of an organisation, our tailored approach to Revenue Assurance identifies and delivers significant cash recoveries, 10-20 times the investment.
Revenue Assurance provides a range of benefits including:

•    Reduced revenue leakage
•    Cash recoveries
•    Improved profitability
•    Process efficiencies
•    Reduced customer complaints
•    Regulatory complaints
•    Regulatory compliance
•    Control Frameworks

It can take as little as 12 weeks for our Revenue Assurance methodology to pay for itself and identify several €m of Revenue Assurance Opportunities in the same period.

Our Revenue Assurance Methodology
Our approach to Revenue Assurance is robust and supported by Control Frameworks to highlight weaknesses and robust and supported by Control Frameworks  to highlight weaknesses and revenue opportunities. This is followed by detailed data analysis to verify our findings and the creation of a series of recommendations for improvements. We achieve this by using our pioneering QTOX Portfolio Reconciliation tool, advances data analytics and trusted process control techniques.

For Sagacity, development of relationships across the operational business are the key enabler of the control framework. We leverage understanding attained through our extensive industry knowledge to the benefit of the client, ensuring optimal results. Under our approach, proven benefits include identification of €116m revenue leakage in a major utility company within the first 24 months.

How QTOX powers our Revenue Assurance Approach
Our QTOX software is central to the reconciliation process. Its sophisticated data cleansing capabilities make it possible for Sagacity to easily and quickly identify inconsistencies in client databases which may be costing them money. This also allows us to accurately pinpoint the specific amount of annual revenue which may be clocked, and begin to get things flowing again in order for that stray capital to come back into the client’s business.

To date, QTOX has helped us to reclaim several €millions of annual revenue for our clients, and one particular case study has led to Sagacity being shortlisted as a finalist in the Credit Today Utilities & Telecoms Awards Innovation of the Year 2015 category.

For more information about QTOX and Revenue Assurance, please visit our website at enquiries@sagacitysolutions.co.uk

Coming Soon: Sagacity Solutions Limited talk about their Customer Value Management solutions.
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Thu, 03 Sep 2015 11:48:36 +0100
Detox Your Data: From Big Data to Right Data https://stubbsgazette.ie/news/detox-your-data:-from-big-data-to-right-data https://stubbsgazette.ie/news/detox-your-data:-from-big-data-to-right-data
Words by Malka Townshend

Businesses have customers but how well do you really know yours? Who are they, what is going on in their lives, and how does that impact your business?
In 2014, there were 22,045 marriages in Ireland (http://ow.ly/QIbTK). In the same year, there were 29,095 deaths registered (http://ow.ly/QIcSa). The population of Ireland is estimated to be around 6.2 million (http://ow.ly/QIgNl) – but how many of those changed addresses, how many people went overseas and how many people moved to Ireland? With all of these constant changes, how can any business ensure that their customer information is always up to date?

Human error is inevitable

Customer circumstances are constantly changing, and we all need to make sure our records are up to date, whether that is through customers contacting our call centres, writing letters or making changes themselves using ‘online’ forms. But, honest mistakes, such as typing errors, can easily occur; a member of staff might mishear the pronunciation of a name over the telephone; a customer may accidentally press the wrong letter on the keyboard when completing an online form or a customer who has filled out a form may have handwriting which is hard to read – they’ve written an ‘H’ but it looks like an ‘N’.

Added to these challenges, when handling customer calls, one of the common call centre metrics is average call handling time (AHT), resulting in call centres teams being targeted to keep their call handling times to a minimum as well as maintaining a high degree of accuracy to ensure the data remains compliant with regulatory requirements.
These issues can soon add up, and before too long, customer data can be riddled with errors.

The cost of data inaccuracies
Though minor mistakes can seem inconsequential, these small errors result in:
  • Customers not able to pass initial identity checks when contacting you because the details on the system are incorrect
  • Increased overdue debt due to invoices and letters not containing the correct customer and address information
  • Reduced ability to target customers for future sales opportunities and campaigns
  • Customer correspondence being printed and posted that never reached the customer
  • Sacks of returned mail which need to be processed
  • Customer dissatisfaction, increased complaints and customer churn
  • Regulatory non compliance

Needless to say, the cost from both a financial and reputational standpoint is vast. The number of outbound calls chasing for payment increases as bills are not received by customers, as does the amount of bad debt write-offs due to non-payment; more staff need to be brought in to manage and handle increased customer complaints; opportunities for marketing, such as the ability to up sell/cross sell are lost – and so it goes on. Soon enough, a snowball effect has taken hold, resulting in thousands – possible millions in annual revenue ceasing its flow into the business.
While everybody is aware of the huge potential in ‘Big Data’, the benefits for getting your data right are equally as important. After all, Big Data is only good if it is accurate.

The Solution
Thankfully, there is an answer.
Sagacity Solutions Limited are experts in completing customer data analysis and leaders in delivering data cleansing capability. We can address all of your data quality issues using our QTOX software, which contains sophisticated logic and matching algorithms to maximise data quality.

We can seamlessly analyse customer data, in any data format, and pinpoint data quality issues as well as cleanse customer data as one-off exercise or on an ongoing, managed service basis. Many of our telecommunications, energy, water and banking clients are already benefitting from these services and realising significant operational benefits. For example, one of our major clients in the UK had 1.7 million incomplete records from a customer base of 3 million. Using QTOX, we were able to cleanse 1.47 million records resulting in significant financial savings. Based on past experience, on a base of 250,000 customers, we expect to deliver savings of between €1 million and €3 million annually for our customers, thanks to QTOX.

How does QTOX work?

QTOX is an intelligent data system which is able to identify errors in your data and automatically fix them. In effect, it acts like a laundry for your data – your data goes into QTOX dirty and crumpled, and comes out clean and tidy.

How? The sophisticated QTOX logic automatically detects errors in key data fields, i.e. names, dates of birth, addresses, contact information – and it actively fills in the blanks, corrects the mistakes, and irons out the creases.

In addition to the internal QTOX data logic, our tool is able to connect seamlessly with multiple client and third party data sources to further enhance our client data sets. We are also delighted to announce that we are currently working with StubbsGazette to look at ways in which we could harness their extensive customer credit reference data too.

For more information about QTOX, please visit our website at sagacitysolutions.co.uk or email us at enquiries@sagacitysolutions.co.uk

COMING SOON: Sagacity Solutions Limited talk about their Revenue Assurance solutions
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Tue, 18 Aug 2015 10:20:57 +0100
Banks embrace new world of APIs https://stubbsgazette.ie/news/banks-embrace-new-world-of-apis https://stubbsgazette.ie/news/banks-embrace-new-world-of-apis One of the most compelling signs that traditional, mainstream banks are beginning to engage with new business realities has been their relatively late support of APIs for the purpose of enhancing banking applications around their brands.

An application program interface (API) is a set of routines, protocols, and tools for building software applications. The API specifies how software components should interact. In a banking context, it allows third party developers to develop powerful and attractive applications based on existing bank customer information.

APIs first arrived on the scene in 2000 when salesforce.com and eBay published APIs to enable third party developers to develop applications that could integrate with their core platforms. This ultimately led to the evolution of effective ecosystems around their offerings, thus greatly enhancing customer utility.

Banks have been slower to adopt APIs but are now doing so in earnest as they seek to harness financial innovation for their benefit and counter new competitive forces. Enabling legislation such as the Payments Services Directive (PSD) and the Second e-Money Directive  in Europe has seen a host of cherry-picking ‘Fintech’ start-ups, none of which have a banking licence but which are picking off formerly lucrative business lines (such as payments) where they can. Their offerings are characterised by extremely attractive and intuitive front-ends delivered through mobile applications – all of which serves to highlight shortcomings in the conventional banking sector.

The rise of new entrants is happening with the support of governments and regulators and the same bodies are also encouraging the development of APIs in finance. A lack of standards, however, is inhibiting progress in some cases, as noted by the UK Treasury this year.

“An open API standard would entail UK banks developing a single and common API, which is publicly available and can be used by any FinTech firm or app developer to design products or apps which work for all UK banks. This would help to create a better market for app development and a greater ecosystem for FinTech firms and developers to work within, as a single app could then connect with, and be used by customers from, any bank. This would help to ensure that the UK remains at the forefront of financial technology and innovation.”

Banks have traditionally guarded any access to their technological platforms with extraordinary zeal. In a world where the traditional perceived security of banks is one vital remaining competitive differentiator this seems sensible, but the demands of the new competitive marketplace has forces a review of past attitudes.

Banks have been forced to adopt and enhance digital channels but have implemented this by adding a host of their own new, front-end applications that improve the customer interface and provide a working fix but have done little or nothing to render the underlying systems architecture fit to consolidate customer information from all parts of the banks.

Banks, therefore, have been hampered in adopting APIs by the existence of these legacy systems, that has meant that APIs are forces to extract data from siloed databases, all of which integrate with the API independently.

In spite of these complications, however, there is much evidence that banks are increasingly willing to set aside cost issues in order to increase customer utility through third party innovation.
Earlier this year Barclays Bank admitted a further ten companies to their accelerator programme, giving each of the successful applicants $20,000 seed capital and access to their APIs and other resources. Ulster Bank organizes a two day hackathon in January – “a marathon of brainstorming and software building focused on new thinking for banks and bank customers.”

The rationale for these initiatives was expressed by a Barclays officer: “We recognise that to drive innovation within Barclays, we also need to look outside of the organisation and embrace the innovative start-up ecosystem... I’m looking forward to working with these start-ups as we shape and co-create future financial technology. Many of the teams enrolling today are exploring technologies that could particularly help transform the ways banks operate so I’m keen to see how their ideas develop.”

According to Currency Cloud, one of the dynamic new companies hoping to profit from the new API regime, banks’ main consideration regarding the use of APIs seems to revolve around solving the issue of customer aversion to cumbersome security measures. “Utilising APIs to build more convenient services that don’t compromise security will increase trust in banking services as users will no longer be required to hand over their log-in details and passwords, potentially compromising their online banking guarantees.”

It seems inevitable as more and more third party apps are endorsed and facilitated by the banks that the face of banking seems set to change markedly over the coming years.
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Fri, 14 Aug 2015 11:58:35 +0100
Real Alternatives to Examinership https://stubbsgazette.ie/news/real-alternatives-to-examinership https://stubbsgazette.ie/news/real-alternatives-to-examinership Normal 0 false false false EN-IE X-NONE X-NONE

Article by Jim Stafford partner with Friel Stafford

The commencement of the Companies Act 2014 (“the 2014 Act”)on 1 June 2015 brings with it a much more streamlined approach to many company law issues, one of which, Schemes of Arrangement, will be seen by many struggling companies to be a much improved tool for companies looking to enter a compromise agreement with its creditors.

The old Scheme of Arrangements under the Companies Act 1963(“the 1963 Act”) was rarely used by companies due to a number of factors,including the costly number of court appearances required. Under the 2014 Act a Scheme of Arrangement is possible with only one court appearance. Schemes of Arrangement are now a real alternative to Examinership which can be very costly. It is expected that the number of Schemes of Arrangement is likely to increase considerably in the coming years.

Unlike Examinerships, the business need not be viable.Schemes of Arrangement may be used to wind up a company’s affairs and pay a greater dividend to creditors. In such “wind up” schemes, monies could be set aside for voluntary strike off.

So what exactly is a Scheme of Arrangement?

Scheme of Arrangement is a procedure which can be used by a financially troubled company to reach a binding agreement with its creditors about payment of all, or part of, its debts over an agreed period of time. A Scheme of Arrangement can be proposed by the directors of the company.

Where scheme meetings are convened, the court may place a stay on all proceedings against the company or restrain further proceedings for such time as it sees fit.

A scheme meeting can be convened by sending the appropriate notices to each class of creditor, or members, giving them 14 days notice of the Scheme of Arrangement meetings. The notice must include a “scheme circular”which sets out the effect of the compromise or agreement and additional requirements as set out in the 2014 Act.

The Scheme meetings decide whether to approve the Scheme of Arrangement. If 75% of the creditors present and voting in person or proxy (or members as the case may be) agree to the proposal, it is then binding on all creditors, or class of creditors.

The Company can continue trading during the Scheme of Arrangement and afterwards.

Who Can Benefit From A Scheme of Arrangement?

  • Businesses that have experienced trading difficulties since start up and need time to prove their business model.
  • Businesses that want to avoid the stigma of liquidation.
  • Businesses that know they can be profitable and successful in the future but need a bit of time.
  • Businesses that need some time to put together anew business plan for the company.
  • Businesses that will be profitable in the short term but are under pressure from creditors.
  • Businesses that are profitable but have experienced bad debts or late payers thus affecting the short term health of the company.
  • Businesses that need to restructure.
  • Companies that wish to wind down trading in an orderly fashion.
  • Companies that wish to close down over a certain time.

A Scheme of Arrangement proposal can be drafted by the directors with assistance from their professional advisors. The approved Scheme of Arrangement binds every person who in accordance with the rules had notice of, and was entitled to vote at, that meeting (whether or not they were present or represented at the meeting) as if he were a party to the Scheme of Arrangement.

Advantages of Scheme of Arrangement

  • The government, banks and large creditors are keen on promoting the “rescue culture” and so they are generally prepared to work with troubled businesses to save them.
  • Scheme of Arrangements allow structured payment of tax arrears.
  • A Scheme of Arrangement is a cost effective method for avoiding outright insolvency for a company with financial problems.
  • A Scheme of Arrangement allows the core business to trade on and so provides the company directors with continued income.
  • A Scheme of Arrangement allows the directors time to re-organise and restructure the company without the threat of creditor action.
  • A Scheme of Arrangement costs less than other more serious insolvency procedures such as Receivership, Liquidations or Examinership.
  • Some tax losses may be retained.

Scheme of Arrangement or Examinership?


Schemes or Arrangement have the following advantages over Examinerships:

  1. Less Costly
  2. Less publicity
  3. No need for an independent Expert’s Report to commence the process.
  4. No advertising of the “Business for Sale”.
  5. No need to prove to the High Court that there is a “reasonable prospect” of the company surviving.
  6.  No need for approval of the High Court to enter the process. This can be particularly relevant where the directors have, for example, deliberately under-stated liabilities on tax returns. The
  7. High Court might reject an Examinerhsip in such a case.
  8. The shareholders will not lose control of their company. In an Examinership, the Examiner is required to evaluate possible investments from interested parties. As some shareholders have discovered, they might be ousted by a new investor, even though they spent their lifetimes building up the company.
  9. No strict deadlines to adhere to.

However, there are some disadvantages of Schemes of Arrangement,namely:

  1. The bank may still appoint a Receiver. (In practice,many banks will be supportive of their customers.)
  2. Trade creditors may claim retention of title.
  3. There is no provision for compulsory repudiation of leases.
  4. The voting thresholds for a Scheme of Arrangement are higher at 75%, as opposed to 51% in an Examinership.
  5. Leasing companies may repossess assets.

Costs of a Scheme of Arrangement

The 2014 Act has substantially reduced the complexity and costs of Schemes or Arrangement. Most cases would be suitable for a “two stage”Process:

1.      Stage 1 – Send out Scheme of Arrangement proposals to shareholders and creditors and hold scheme meetings. If shareholders and creditors meetings vote in favour of scheme, then move onto stage 2.

2.      Stage 2 – Instruct solicitors to bring an application to the High Court to have the Scheme approved. This process would involve placing advertisements in 2 daily newspapers stating that the creditors voted in favour of the scheme and that an application will be made to court to approve the scheme.

In summary, the 2014 Act has reduce the burdensome court appearances previously required for Schemes of Arrangement which will lead to a considerable cost saving when compared to Examinership. It is therefore expected to see an increase in the number of Schemes of Arrangement being approved before the courts in the coming years.

 

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Tue, 14 Jul 2015 10:58:31 +0100
Bankruptcy Proposal Goes Too Far https://stubbsgazette.ie/news/bankruptcy-proposal-goes-too-far https://stubbsgazette.ie/news/bankruptcy-proposal-goes-too-far The Oireachtas Joint Committee on Justice, Defence and Equality had extended its deadline for submissions on the proposal to reduce the discharge period for bankruptcy to just one year to June 26.

The proposal to once again reduce the automatic discharge period for bankruptcy from three years to one year is unnecessary and may lead to dysfunctional behaviours and outcomes from a debtor perspective. Furthermore, it is unfair to creditors.

The decision in 2014 to reduce the period of discharge from 12 years to 3 years was correct. In the context of encouraging entrepreneurs who suffer business failure, excluding their participation in the economy for this period was excessive. The new proposal, however, tilts the balance too far in favour of the debtor and diminishes the legitimate punitive sanction of bankruptcy. It also may have a dysfunctional effect of making bankruptcy appear to be a relatively attractive option and obscuring the very significant restrictions placed on the bankrupted individual.

From a creditor perspective, consider the situation in the UK where a bankrupt is automatically discharged 12 months after the date of the bankruptcy order even where no payments have been made to creditors. After discharge, the bankrupt is released from all bankruptcy debts and any property he or she acquires after discharge is the erstwhile debtor’s property. The official receiver (or trustee in bankruptcy) cannot lay claim to these assets as only the property comprised in the debtor’s estate at the time of the bankruptcy order remains under the control of the official receiver to be sold for the benefit of the creditors.

While the 12 month discharge in the UK was designed originally to encourage entrepreneurs who had experienced business failure to get back in to business, unhindered by the earlier failure, the reality is that 80% - 90% of bankrupts are consumers who quite simply lived beyond their means and their bankruptcy has nothing to do with business debts or anything remotely connected to enterprise.

Regardless of whether the bankrupt is a consumer who lived beyond their means, or a failed entrepreneur, a 12-month discharge period is insufficient to retain a prospect for the creditor to secure an acceptable outcome. The reduced time period of 12 months makes it too easy for the bankrupt to defer asset/income acquisition until after that date expiry, thereby denying creditors a legitimate share of the debtor’s subsequent wealth creation.

Bankruptcy has far-reaching (and potentially ruinous) consequences for creditors and diluting the sanction of bankruptcy encourages reckless and unscrupulous behaviour.
From a debtor perspective, while a reduction of the bankruptcy discharge term to one year might seem attractive, bankruptcy discharge term to one year might seem attractive, bankruptcy retains some very severe disadvantages and restrictions and is not to be entered into lightly.

  • Proponents of a reduced discharge period cite the increased probability of the bankrupted retaining the family home but this files against the facts: some 75% of bankrupts end up losing the home.
  • The bankrupt is persona non grata with banks; will lose his or her bank account and credit cards; is disbarred from seeking credit in excess of €600
  •  The bankrupt’s credit rating is effectively destroyed
  • The bankrupt may lose his or her job due to bankruptcy status and may well be disbarred from seeking certain forms of employment
  • The bankrupt may not become a company director for the period of bankruptcy

Reducing the period of bankruptcy discharge also distorts the balance of attractiveness with alternatives such as a Debt Settlement Arrangement (DSA) or Personal Insolvency Arrangement (PIA). DSAs and PIAs are long term commitments, lasting 5 or possibly 6 years, which is already a much longer time frame than bankruptcy. If debtors going bankrupt will be discharged after just 12 months and only have to pay contributions for 3 years, how seriously are they going to consider the alternatives, which by comparison will seem like a real endurance test?

According to Mitchell O’Brien of Insolvency Resolution Service, the vast majority of personal bankruptcies since Nov’13 fall into two groups. The first are “social welfare cases”, individuals who have no capacity in bankruptcy, a DSA or PIA to make a contribution to previous debts/creditors. The second group are those that do have a capacity but their creditors have acted irrationally [or have indicated they would act irrationally] in the context of a DSA/PIA.

For those in group one, the term of bankruptcy won’t really make any difference. They have nothing, so they’ll pay nothing.

The debtors in group two find themselves in a different situation. There have been multiple instances where backs have vetoed insolvency deals and ended up taking far less under the inevitable bankruptcy.

The reason to propose the reduction in the terms of bankruptcy is to get creditors to act rationally. If the PIA mechanism was working as it was intended, the bankruptcy term would not even be on the agenda, according to Mr O’Brien.

“The reduction in the terms of bankruptcy was Labour’s suggested solution. Fine Gael favour ‘limiting the creditor veto in PIAs/DSAs’ as the appropriate fix. Now we are playing politics.”
Some form of compromise is likely, possibly a two year bankruptcy and a three year payment order, along with the creditor veto being limited as announced by Government last month.
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Thu, 09 Jul 2015 15:32:13 +0100
P2P lending threatens bank marginalisation https://stubbsgazette.ie/news/p2p-lending-threatens-bank-marginalisation- https://stubbsgazette.ie/news/p2p-lending-threatens-bank-marginalisation-
Retail banks are the product of years of accumulation of branches, staff and legacy systems that add up to a highly inefficient and costly whole. Small wonder that a host of new entrants and technologically-savvy organisations are in the process of deconstructing the consumer banking offering and cherry-picking the most profitable parts.

To compound the problem (from a bank perspective) they are doing so on top of the existing banking infrastructure, positioning innovative and attractive “front-ends” while leaving the banks to handle compliance and other legacy costs.

The arrival of the internet and mobile banking has done away with the need for physical proximity and human interaction as essential components of the banking transaction. In tandem with the technological liberation that fintech start-ups now possess, there has been a raft of enabling legislation.

Consider deposit-taking. This fundamental service of a traditional bank was by necessity a highly-regulated activity. Consequently, the regulations attached to gaining a banking licence meant that obtaining a licence was only achievable by promoters with immense resources, effectively sustaining the status quo and preserving effective oligopolies.

As the attraction of the deposit-taking business has diminished, so the legislation governing other, more profitable aspects of the banking business such as payments, foreign exchange and even lending, has become far more liberal.

Nowhere is this more evident than in the world of lending, specifically peer-to-peer (P2P) lending.  This is an online credit market that allows masses of individual users the ability to buy and sell credit to each other at better rates than exist in conventional markets. A single loan is usually made up of contributions from many lenders in order that risk may be diversified.

Many commentators see peer-to-peer lending as the future of all small sum and short-term lending. Unlike P2P platforms, conventional banks have costs of compliance, infrastructure and client servicing. The writing is already on the wall with some banks already investing in and outsourcing their SME lending to P2P platforms.

Of course, one of the critical by-products of peer-to-peer lending is the collateral effect on the deposit business. In the post-financial crisis world, and indeed for most of this century, the retail depositor has had to endure effective negative rates of interest after taking into account the effects of inflation. That situation is unlikely to reverse any time soon. P2P lending gives those same depositors the opportunity to boost returns as they supply funds to the market directly without bank intermediation.

And the ripple effect doesn’t end there, according to John Egan, author of Innovation in Banking: “Increasingly, financial advisory services are advocating on behalf of P2P lenders as a portfolio investment for average bank customers, individuals who typically don’t have equity or debt investments. Part of the attraction is the ease and convenience of investment as well as the simplicity of the product and how it’s communicated. P2P lending is significantly easier to understand than, say, mutual funds and debt securities for a depositor with a low level of financial literacy.”

A similar role is provided by Crowdfunding, which is the process of raising money for a new product or venture by sourcing a large number of small contributions. Banks used to be exclusive arbiters of the credit decision – something that was bound up in the lending skills of the branch banker who relied on his or her judgment and probity and the assessment of traditional criteria such as character, creditworthiness and collateral. The arrival of P2P lending and Crowdfunding can be in a good part attributed to the de-skilling of branch staff, the centralisation of the credit decision and the accumulated discrediting of the banking system in general.

Indeed it is not so long ago that the notion that the bank could be so strikingly removed from its role as credit intermediary would have been treated as something fantastical, but the fact is that default rates in the P2P world have been more than acceptable – something that can be attributed to the robust credit criteria employed. A good example was set out in the Lending Club IPO prospectus where the world’s largest P2P lender successfully raised €250 million last year.

“After we receive a loan request from a borrower member, we evaluate whether the prospective borrower member meets our credit criteria. Our borrower member credit criteria are designed to be consistent with [our] loan underwriting requirements and require prospective borrower members to have:
•    a minimum FICO score of 660 (as reported by a consumer reporting agency);
•    a debt-to-income ratio (excluding mortgage) below 40%, as calculated by Lending Club based on (i) the borrower member’s debt reported by a consumer reporting agency; and (ii) the income reported by the borrower member, which is not verified unless we display an icon in the loan listing indicating otherwise; and
•    minimum credit history of 36 months; 5 or fewer inquiries on their recent credit profile in the last 6 month, and at least 2 current revolving accounts.”

These conditions imply access to a relatively sophisticated credit infrastructure is a prerequisite to P2P success and few if any economies can boast the same level in this respect as the U.S. Nonetheless, as these infrastructures improve, the P2P momentum as far as small loans goes seems unstoppable.


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Tue, 09 Jun 2015 17:00:59 +0100
Insolvency regime comes of age https://stubbsgazette.ie/news/insolvency-regime-comes-of-age https://stubbsgazette.ie/news/insolvency-regime-comes-of-age
The premise behind behavioural economics is that while conventional economics is replete with formal, mathematically-based models, the fact that it relies on human beings behaving rationally very often renders this rigour obsolete. In fact, human beings habitually make disastrous economic and financial decisions: indeed they are hardwired to do so.

Very often the focus of the effect of behavioural economics is the consumer; their vulnerability when faced with an array of financial product choices is recognised by bank regulators worldwide.

But the decoupling of rationality from financial decision-making goes just as hard with the financial industry – very few predicted the financial crisis.

And in Ireland, with the arrival of the personal insolvency regime, we have until now been presented with a case study in irrationality on both debtor and creditor sides that is only now being corralled into order by the forthcoming reforms as disclosed by the government earlier this month.

Following the anticipated passing of new legislation before the Summer recess, the power of the mythical bank veto to scupper realistic and sustainable insolvency proposals will be confined to the past thanks to the proposal that gives power to the Courts to review and, where deemed appropriate, to approve proposals that have been rejected by the banks.

Whether this will have a material impact on the throughput of cases from present disappointing levels remains to be seen but in terms of public perception alone the shift in power should be telling – and perception is everything where human behavior is concerned.

It is simply a fact that there are tens of thousands of individuals who continue to struggle with unsustainable and unnecessary repayments well in excess of what would be required under the legislation that protects minimum living standards; individuals who pass on the availability of more or less instant relief. That’s not rational.

But the issue is even more pronounced on the creditor side. The government’s action was spurred by incontrovertible evidence of the rejection by some banks of sustainable solutions offering a superior outcome for creditors than the alternative of bankruptcy.

It is difficult to understand where this impulse towards irrational behavior comes from. Presumably it is rooted in the traditionally punitive nature of our bankruptcy legislation and societal disapproval of the errant debtor. Under than thinking, punishment rather than debtor relief was the reflex movement of the creditor and society in general.

It took a financial holocaust of the proportions of that recently experienced to change attitudes somewhat but one can recall newspaper reports in the early days of families in negotiation with banks being invited to consider parting with the family dog better to meet their repayments.

For some banks, the change in legislation will have no effect: they are the banks who recognise the irrefutable laws of arithmetic rather than clinging tenaciously onto some censorious, outdated and arguably vindictive attitude.

Every bank should welcome the arrival of the letter of appointment of the Personal Insolvency Practitioner (PIP). If a bank hires a valuation consultant, a lawyer or an auditor, it presumably does so intending to act on that advice. Banks need to rely on PIPs in similar fashion as the arbiter in the only framework where the creditor can achieve an outcome that is better than that available under bankruptcy.

And so another consequence of the reforms is that we will now see consistency across the country in personal insolvency cases: to date, the discrimination and differentiation between banks has been marked and has undermined the regime.

Under most scrutiny will be the vulture funds that have acquired substantial loan books. These funds are now overseeing financial contracts often originated through mutual societies and intended for a lifespan of 20 years plus. Vulture funds, on the other hand, have a far shorter time horizon – probably less than 20 months. Some evolution in thinking here will certainly be required.

Coupled with a number of administrative and procedural changes that should allow for speedier and more efficient processing of cases, as well as improved public information, the outlook for personal insolvency seems brighter than at any time since inception from the perspective of all sides. In many ways, if participants can keep their rational heads on, the regime has now come of age.

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Fri, 22 May 2015 14:06:52 +0100
Cash tells the truth in accounting https://stubbsgazette.ie/news/cash-tells-the-truth-in-accounting https://stubbsgazette.ie/news/cash-tells-the-truth-in-accounting
Of course, as any student of accounting knows, the profit figure is usually something in the eye of the beholder with an array of accounting policies illuminating or obfuscating the true reality of affairs as the case may be. Accounting profit as reported in the income statement is derived after the application of numerous accounting techniques related to areas such as inventory valuation and depreciation policy.

In short, the options available to the creative accountant in preparing the profit and loss account or balance sheet mean that, depending on circumstances and the type of business, there is always a degree of subjectivity.

Cash, as opposed to profits, however, is an entirely objective measure and leaves no room for interpretation. For this reason the cash flow statement has assumed increasing significance over the years and while small business is not required to produce these statements for public disclosure purposes, an understanding of the methodology behind its preparation is useful.

A cash flow statement essentially provides the answer to the following questions: “Where did the money come from?” and “Where did it go?”

The principle difference between the cash flow statement and the income statement/profit and loss statement in that the latter is prepared under the accruals principle. This means that that revenue is recognised during the period when it is earned and expenses are recognised when they are incurred, whether or not cash is received or expended.

Cash flows that appear on the cash flow statement are typically divided into three types.

Operating cash relates to all cash generated and expended from normal business activities – the core product or service.

Investing cash flows relates to non-operating activities, for example the buying and selling of long-term assets, maintenance and servicing of assets.

Financing cash flows is the cash used to finance activities, receipts and payments to shareholders, investors and lenders.

The example below is typical, showing how the net inflows and outflows of cash explains the increase in the cash balance in the balance sheet.

Cash Flow Statement year ended 31 December 19xx (EURm)
Cash flows from operating activities
Operating income
567
Adjusted for:

Depreciation167
Increase in debtors(57)
Decrease in creditors(23)
Decrease in inventory1299
Operating Cash Flow
666



Investment cash flows

Interest paid(23)
Interest received(11)



Tax paid
(76)



Capital expenditure/Financial investment

Fixed assets expenditure
(256)
Dividends paid
(123)



Financing

Repayment of long-term loans(321)
Issue of common stock221(100)



Increase in cash over year
100

The uses of the cash flow statement are numerous.

First, it allows an assessment of the overall health of the business. It answers questions such as “Can the business meet its funding needs from internally generated cash if external sources of funding dry up?”

It allows for a reconciliation with profit – major discrepancies should be analysed, such as sharply rising levels of debtors or inventory.

The cash flow statement also is a good starting point for projecting future cash flows. It is important to distinguish between one-off changes from those likely to be sustainable. For example, a sharp fall in debtors with no corresponding drop in turnover may represent improved collections but this may well be a one-off event unlikely to be repeated.

The cash flow statement also helps to address any questions over the company’s liquidity. In this respect there are three key areas.

First, there is the question of repayment of existing loans due in the next couple of years.

Second is working capital requirements. Working capital will normally rise in line with inflation or business expansion rates (turnover). A useful ratio to keep an eye on over time is the working capital/sales ratio:

Inventory + Debtors – Creditors / Sales

Finally there is capital expenditure: attention needs to be paid to future requirements although this may not be fully predictable.]]>
Fri, 08 May 2015 14:54:56 +0100
Payments Critical to FinTech Growth https://stubbsgazette.ie/news/payments-critical-to-fintech-growth https://stubbsgazette.ie/news/payments-critical-to-fintech-growth The IFS2020 document, “A Strategy for Ireland’s International Financial Services Sector 2015-2020, published last month, is a useful point to assess the story of Ireland’s experience in financial services since the beginning of the IFSC in 1987 when the Centre employed just 60 people. The industry now employs some 35,000 people and, having apparently shaken off the catastrophe of 2007/8, seems to show no signs of flagging.

The Irish it seems have a particular appetite and acumen for financial intermediation. However, very many of that 35,000 are employed in relatively low-level processing operations: Ireland needs to have far more front office positions to become a truly world-class financial centre but the country has the talent at its disposal to catapult itself to the next level.

What is encouraging is the level of activity around the area of financial services innovation where technologically minded entrepreneurs have spotted the vulnerability of old models and practices to disruptive new offerings.

There have been notable successes such as payments company Stripe, while the location of global innovation labs from MasterCard and Citi is a major vote of confidence. Consequently, the report makes much of the FinTech sector as a source of growth.

In 2014, Enterprise Ireland supported twice as many early stage FinTech start-ups than in the previous year. This thriving tech start-up scene, according to the report, combined with established research centres, “creates what is an internationally recognised ecosystem for FinTech research, development and innovation.” As a result, the report continues, “Ireland is uniquely positioned to become a leading global centre for FinTech investment – Where global multinationals can develop and implement their innovation strategies, while Irish-owned start-ups continue to scale up and succeed in global markets.”

If Ireland is to succeed in FinTech, then the area of payments will be critical. Payments is by far the largest sub-sector in FinTech – in the UK, Ireland’s main rival for FinTech investment, come STG20 billion has been invested in the FinTech sector and about €10 billion of this relates to payments.

The key reason for this is data, according to Vocalink CEO, David Yates. “Every payment has a business even or personal event connected to it,” says Yates. “A large part of payments innovation is about getting to that underlying data.”

With established start-ups such as Stripe and MasterCard’s strategic presence, Ireland has a platform for potential payments excellence, much in the way that GPA’s experience before its implosion provided the foundation for a host of aircraft leasing start-ups. The sale of Realex Payments earlier this month highlights another local success story.
Innovation around payments, however, is not just interesting from the point of view of growth and employment, new entrants also have the potential – rapidly being realised – to transform the retail financial services space utterly.

Legislation such as the Payments Services Directive and Second e-Money Directive has opened the door to new innovators to ride on the rails of the existing banning and payments infrastructure while offering a dramatically improved user experience. This implies that much of the value from those transactions will accrue to those new entrants with banks becoming relegated to the position of mere utilities. But in fact, as has been commonly observed, the value behind payments lies less in the revenue attached to the transaction. Put simply, payments data is the DNA of an individual’s personal financial profile. Understanding spending patterns is critical to those who would position themselves to meet consumer needs – it is a highly saleable commodity.

Perhaps the most dramatic illustration of bank disintermediation at the hands of FinTech innovators is that of peer-to-peer lending with companies such as Lending Club, which raised USD1 billion in funds through an IPO last December.

The legendary Citibank head, Walter Wriston, once remarked that banking was at heart a simple business: “You borrow at three percent, lend at six and you’re on the golf course by three.”
That may once have been true, but no longer
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Fri, 24 Apr 2015 14:33:29 +0100
Mortgage market going round in circles https://stubbsgazette.ie/news/mortgage-market-going-round-in-circles https://stubbsgazette.ie/news/mortgage-market-going-round-in-circles

On the face of things, the publication of the Central Bank’s Q4 2014 Mortgage Arrears Resolution Targets (MART) paints a reassuring picture of an orderly process around the return to sustainability in the mortgage market but a wider perspective shows the myriad conflicts and trade-offs.

The MART targets cover both proposed and concluded sustainable solutions with respect to the lenders’ Republic of Ireland principal dwelling home/primary residence (PDH) and buy-to-let (BTL) mortgagees, and specifically is concerned with resolving arrears cases which are 90 days or more overdue.

The figures for PDH and BTL combined show 104,938 proposed solutions and 67,617 concluded solutions reported to date. Of the reported concluded solutions, 40,837 (60%) relate to repayment and restructure arrangements, including split mortgages, term extensions, arrears capitalisations and borrowers clearing their arrears. Some 91% of the concluded restructure and insolvency solutions are reported to be meeting the terms of the arrangements.

Two-thirds or 34,279, of the reported PDH concluded solutions relate to repayment and restructure arrangements “agreed bilaterally between borrowers and lenders, which seek to deliver an affordable mortgage payment aimed at keeping borrowers in their homes.” But 16,683, or 33%, involve “potential loss of ownership outcomes”. According to the Central Bank “15% of these cases involve voluntary sale/surrender agreements with the balance relating to cases where lenders are involved in different stages of repossession proceedings with borrowers, with the majority of these cases involving borrowers that have been classified as non-cooperating.” In the BTL sector, some 60% of the reported concluded solutions involve potential loss of ownership.

MART Performance Against Q4 2014 Targets

Q4 Cumulative SummaryTargetReported
Proposed (Target 1)85%97%
Concluded (Target 2)45%62%
Terms Being Met (Target 3)75%91%
Source: Central Bank of Ireland


While the application of the banks in meeting their targets seems laudable, the criteria for determining an offer of a “sustainable solutions” masks a less wholesome underlying reality.

As mentioned, one-third of the concluded solutions in the PDH sector involve loss of home ownership. For the purpose of meeting targets, the Central Bank accepts the issue of a standardised sustainability letter as evidence that a particular bank has proposed a solution.

This letter includes four options for the debtor: voluntary sale, voluntary surrender, mortgage-to-rent and trade down mortgage. In many cases, there is no choice here: it is well accepted that mortgage to rent is simply not working and instances of trade down mortgages are almost non-existent.

Yet, as the banking sector takes plaudits for apparently coming to grips with the mortgage crisis, the irony of this becomes rich when taken in context with the escalating controversy over mortgage rates, in particular the single variable rate (SVR).

Today the SVR mortgage average is 4.5%. Meanwhile, banks have three sources of funding available: the EURIBOR market, the ECB marginal lending rate, which is slightly higher than ECB rate, and customer deposits. The EURIBOR rate at April 1 was 0.018% and the average retail deposit rate 1.5%.

It doesn’t take a particularly gifted mathematician to work out that the margins involved here are staggering.

A large part of the apparent reluctance of the government to address this blatant profiteering must be tied up with the desire to allow a banking sector with such a massive government ownership factor to repair their balance sheets (all the better to sell those government stakes at a later date).

Yet the effect that the status quo has on the affordability of mortgages is clear and has massive implications for personal insolvency numbers.

Variable mortgage rates in Ireland are running at about twice the European average and were rates at just over 2% rather than the current 4.5% there are many individuals and families who would not be insolvent. It is difficult to avoid the conclusion that the banking sector in general is heartily prepared to take a hit on marginal mortgage lending in the context of the massive honey pot it enjoys from the performing loans.

Some figures to illustrate. Take the case of a €200,000 mortgage at 4.3% over 20 years. A reduction of 1% would see monthly payments reduced from €1,243 to just €1,139. In other words, the 1% difference accounts for a mortgage balance of some €17,000 over the lifetime of the mortgage or 3 years and 2 months of extra payments.

The government, Central Bank and the banks themselves would have us all believe that the banking sector has been adequately recapitalised at taxpayers’ expense yet clearly this is apparently not sufficient to allow them to break off from the mortgage teat. But with clear signals that the government is about to dilute the bank veto over personal insolvency schemes, and with the courts overflowing with repossession cases, how long can it be before it is forced to deal with the single greatest threat to personal solvency?

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Wed, 08 Apr 2015 11:13:36 +0100
Pressure Mounts on Debt Managers https://stubbsgazette.ie/news/pressure-mounts-on-debt-managers https://stubbsgazette.ie/news/pressure-mounts-on-debt-managers
As momentum behind the personal insolvency regime continues to grow, the environment for Debt Management firms continues to deteriorate, courtesy of the findings of a thematic review of the sector by the Central Bank.

The findings of this review, published at the end of February, show multiple breaches of consumer protection requirements by a majority of practicing Debt Management firms and across a range of activities.

Some six out of 10 firms reviewed failed to meet know the Customer Protection Code.

The Central Bank also found that information disclosed on fees and charges was generally poor with significant variations between firms. Debt Management firms are required to make their fees and charges publicly available including placing a schedule of them on the firms’ websites but the Central Bank found that only one the 26 websites reviewed contained such information.
The Central Bank noted that fee transparency is of particular importance in light of the significant variations in the fees charged by debt management firms, examples including:

•    Initial consultation fees ranging from free to €615
•    Hourly fees ranging from €125 to €246
•    Some firms charging retainers of between €35 and €50 per month
•    Some firms requiring upfront payments (most included a refund)

Terms of Business documents were up to standard with only a tiny minority of the firms reviewed, with lack of information and/or inconsistent or out of date versions commonplace.

“Firms must give consumers a terms of business document which included key information they may need including fees and charges, complaints procedures, details of relevant statutory compensations scheme etc. However, just 12% of the online documents reviewed contained the required content. In addition, just half of firms inspected were able to demonstrate that they had provided each consumer with their Terms of Business.”

There were serious problems with disclosure with out-of-date information on websites, an absence of warning statements and regulatory disclosure being used in a manner which could be deemed to be an endorsement of the firm by the Central Bank.

Finally, there was failure by firms to ensure that staff members were working towards getting the appropriate qualifications. “Since 1 June 2014, persons providing debt management services must meet minimum competency standards. In eight of the 10 firms inspected, staff members providing debt management services had not registered for the first available sitting of the examinations required by the Minimum Competency Code.”

With withering assessment of the Debt Management sector by the Regulator comes hot on the heels of a raft of new consumer protection requirements and prohibitions imposed on the sector since the beginning of the year, including:
•    Ban all payments for client referrals or client leads
•    Ban the arrangement of credit for consumers for the purposes of paying debt managers’ fees or charges for providing debt management services.
•    Ban the prevention of clients from directly dealing with creditors.
•    Establish explicit consumer agreement on charges. (A debt management firm can only charge after the consumer has signed an agreement which clearly specified the charges payable for the service, when they must be paid and the services that will be procided for those charges.)
•    Require the firm to undertake full financial assessments. (Firms must consider the full range of debt solutions available to and suitable for the consumer, based on their personal circumstances.)
•    Require the provision of statement of advice to include an explanation of the options available to the consumer, how these options work and a description of the consequence for the consumer of accepting such options (the consumer must be given at least 5 business days to consider the advice).
•    Require firm to give creditor negotiation updates and consumer consent to agreement.
•    Require firm to provide a standard information template upfront to the consumer on ‘What you should know about Debt Management services’ and to signpost consumers to the availability of free debt advice.
This all adds mounting pressure to a sector whose raison d’etre has been under tremendous scrutiny ever since the arrival of the new personal insolvency regime.

Broadly speaking, debt management firms fall into two categories:
•    Those that advise and facilitate a debt restructure for a fee
•    Those that will manage a debtor’s debt payments. Collecting free cashflow from the debtor and making monthly payments to the debtor’s creditors

It was the collapse in early 2012 of a firm of the latter type, Dunne & Maxwell, and consequent loss of client funds, that began the intensification of regulation of debt management firms. But the requirements and sanctions under the new regulations go well beyond the client funds issue and it is difficult to avoid the conclusion that most Debt Management firms will ultimately find the environment too unfriendly to trade especially with the rising prominence of the Personal Insolvency Practitioner (PIP).

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Thu, 26 Mar 2015 15:00:22 +0000
Fine Gael TD who owes bank millions appointed wife to €38k government job https://stubbsgazette.ie/news/fine-gael-td-who-owes-bank-millions-appointed-wife-to-€38k-government-job https://stubbsgazette.ie/news/fine-gael-td-who-owes-bank-millions-appointed-wife-to-€38k-government-job Morgan Flanagan Creagh

Fine Gael TD John Perry Appointed his wife Marie Perry to a €38,000 a year job after he lost his position as minster for small businesses in a Government reshuffle.

StubbsGazette reported in 2014 that a judgement was registered against Mr Perry for the repayment of a €2.47 million debt.

The judgment was quietly registered by Danske last Tuesday, the day he lost his job as minister of state for small business when the Cabinet reshuffled the junior ministerial ranks of Government, reported StubbsGazette.

Following the reshuffle his wife Marie Perry was given a job as parliamentary assistant on January 2 last, the RTE Investigations Unit reported.

The Salary scale for this position is between €38,760 and €49,035 a year.

A representative from Mr Perry's Constituency office said "no comment" in relation to the hiring of Ms Perry.]]>
Fri, 20 Mar 2015 17:08:36 +0000
Credit unions lacking the will to live https://stubbsgazette.ie/news/credit-unions-lacking-the-will-to-live https://stubbsgazette.ie/news/credit-unions-lacking-the-will-to-live

First the good news. Total arrears at credit unions have decreased and there has been a slight increase in new lending volumes but, apart from that, the picture painted by the Registrar of Credit Unions, Anne McKiernan, at the CUMA Spring conference this week, was one of grim foreboding.

As background, Ms McKiernan set out the latest sectoral statistics that “starkly illustrate the financial challenges which the sector faces.”

Since September 2013, loans to credit union members have decreased by almost 10%, to €4bn. The sector average loan-to-asset ratio has continued to decline and is now at 30%. Over 200 credit unions are below this ratio, some “significantly so”. Total interest income has fallen by almost one half since 2009. Average sector arrears at end-September 2014 were around 17%, but almost 10 per cent of credit unions had arrears exceeding 30% of their loan book. The average dividend for 2014 is continuing to weaken and is below 1%.  Critically, little over half of all credit unions remain subject to some form of lending restrictions.

Ms McKiernan’s presentation marked a change in tack for the regulator insofar as the focus was less on more sanctions and more on questioning the entire business rationale for a sizeable number of credit unions. In short, it appears that for many credit unions, the ability – or indeed appetite – to survive as a sustainable business is open to question.
Until now, sanctions were perceived as providing sufficient motivation to modify behavior, but things have not worked out as planned, according to Ms McKiernan.

“It is clear that many credit unions have yet to adequately address weaknesses in credit policies and controls to meet regulatory standards. Given the level of our engagement and communication with credit unions on this core issue, and key documents setting out our expectations (such as the 2014 PRISM report and the Credit Union Handbook), we expect credit unions to have embedded significant improvements in relation to credit risk management.

“We have used lending and other restrictions as temporary measures to reduce risks until our concerns have been addressed.  Our expectation is that the sanction of a lending restriction would motivate credit unions to take all necessary steps to effect its speedy removal. Regrettably, this has not been our experience across the sector.”
Consequently, and to bring a “renewed focus” on this issue, the Central Bank has launched a review of lending restrictions. 

All affected credit unions have been contacted and challenged to set out a business case to be made to apply for a review of the lending restriction. The Central Bank is looking for internal audit validations and other documentation “to certify that prudentially sound practices are fully embedded in the credit union.”

In the cases of those credit unions who do not intend to apply for removal of their lending restriction they must set out the reasons why and declare the current state of their remediation work and likely timeline for completion. “This ‘comply or explain’ approach is to ensure that all credit unions with lending restrictions are actively working on getting their credit risk management framework to the right prudential standard, consistent with their obligations to protect members’ funds and lend responsibly.  Credit unions who do not address this issue in a substantive fashion must expect that we will use our powers to reduce the risk to members’ funds.”

Given the persistently low levels of loan-to-asset ratios and the mounting levels of compliance is difficult to avoid the conclusion that many of these credit unions may find they lack the will to live in this demanding environment.

Central Bank pressure, however, is being ramped up at all levels and even the ambitions of more forward-looking credit unions are under scrutiny.
Specifically, the Regulator mentioned the plans of some credit unions to offer full service payment accounts and electronic transactions through both payment cards and mobile phone and spoke at length on the challenges posed by such initiatives.  “It is important to consider very carefully the business case for any such business activity and assess your credit union’s resource capability to develop the operational model, infrastructure and expertise to deliver such services, while recovering the costs involved and mitigating risks,” she said.

Clearly, as the Regulator raises the bar significantly, the entire basis for existence of a substantial proportion of credit unions is being called into question. The tenor and content of the Regulator’s comments makes that clear, as she criticised the lack of strategic planning in the sector:
“A clear challenge is the reluctance of some boards and management to proactively address viability issues and develop new sustainable business models to deal with the current challenges.  In this respect, we remain concerned about the quality of strategic thinking and planning in many credit unions.  This is demonstrated in many strategic plans that contain generic or high level aspirations rather than a clear road map for the credit union’s future. Having no clear vision or strategy is not an option when you consider the scale of challenges which your sector is facing.”

These challenges are likely to be compounded by the expected spike in personal insolvencies that will likely leave credit unions at the bottom of the creditors’ listing when it comes to payment. In these cases, miniscule dividends can be expected but, perhaps more importantly, the new legislation has serious implications for lending practices at credit unions that habitually lend to individuals under the Reasonable Living Expenses guidelines set in the personal insolvency legislation.

Those concerned the likely effect of thepersonal insolvency regime on the credit union sector are invited to joinStubbsGazette at a seminar on the Fiduciary Obligations of Credit Unions inRelation to Personal Insolvency on Wednesday 11th March.

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Fri, 13 Mar 2015 11:33:58 +0000
The Science of Set Costs https://stubbsgazette.ie/news/the-science-of-set-costs https://stubbsgazette.ie/news/the-science-of-set-costs One of the virtues of the personal Insolvency regime is that when it comes to setting Reasonable Living Expenses (RLE) for those availing of the schemes everybody is, apparently, equal. This is particularly the case with the Set Costs element of the RLE, that part that relates to typical expenditure outside of childcare, housing and special circumstances costs.

But while the Set Costs allowed are transparent, one of the features of the personal insolvency regime since it came into existence has been a strong body of opinion on the part of creditors that the amounts allowed by the Insolvency Service of Ireland (ISI) in respect of Set Costs are in fact too generous.

Officers of the credit union movement in particular, a group that finds itself well down the list when it comes to dividend payouts under the schemes, are generally unhappy about the amounts allowed. Some have pointed out that many of their members, whom they have happily loaned money in the past, would often exist on less than the recommended guidelines.

The existence of the Set Cost tables, backed as they are by statutory force, has major implications for unsecured lenders. First, the greater the RLE figure allowed, the less available for unsecured creditors under the terms of any insolvency scheme. Second, any lender who has extended funds to an individual whom they knew (or who they failed to inform themselves) was living on less than the appropriate RLE figure, is standing on very precarious ground when it comes to default.

The fairness or otherwise of the statutory RLE is a matter of debate but it is fair to say that the Set Costs figures that comprise the large majority of the RLE figure, were not picked out of the proverbial nether regions as per ex-Anglo boss David Drumm.

The ISI used as its model a modified version of the consensual budgeting model originally developed in Ireland by the Vincentian Partnership for Social Justice (VPSJ). The ISI defends this on the following grounds: “One of the greatest strengths of using consensual budget standards is the level of transparency it affords. Each category of expenditure is supported by detailed lists of items within each category which are individually priced. Different people will naturally have different opinions on what is meant by reasonable living expenses but the level of transparency offered by this method should help inform any discussion.”

Behind the science is an objective that the figures arrived at allow for “reasonable standard of living”. This, according to the ISI, does not mean that a person should live at a luxury level but neither does it mean that a person should only live at subsistence level.

“A debtor should be able to participate in the life of the community, as other citizens do. It should be possible for the debtor ‘to eat nutritious food ..., to have clothes for different weather and situations, to keep the home clean and tidy, to have furniture and equipment at home for rest and recreation, to be able to devote some time to leisure activities, and to read books, newspapers and watch television’.”

But while the overall level allowed is, while open to debate, at least prescribed and transparent, the experience of Personal Insolvency Practitioners (PIPs) gives grounds for believing that there are discrepancies between the treatment of different household types.

This is highlighted by an examination of, say, a single individual and, say a family comprising a couple and three children of pre-school, primary and secondary ages. Under the tables, the aggregate amount allowed to the individual (as detailed below) is €938 per month. The equivalent sum for our model family is €2,492.

But the allowances seem to discriminate against single individuals in so far as they do not seem to recognise the economies of scale that arise where the household is comprised of more than one individual, in particular a family as set out above.

For example, taking food into account, the single person struggles to avail of the kind of volume discounts available to family units with more mouths to fees.
The area of Household Goods (furniture, appliances, cleaning goods etc.) appears to be particularly discriminatory. Perhaps this is a function of the assumptions behind the figures allowed, as disclosed in a note published by the ISI: “Single adults of a working age living in an urban area are assumed to be living in a rented furnished studio apartment.” That is a fairly bald assumption and not necessarily reflective of reality but, be that as it may, the figure allowed for our single adult appears miserly in comparison with the family. Electricity and Home Heating likewise seem less-than-generous in relative terms.

The ISI has pledged to review these figures on an annual basis – it will be interesting to see just what the experience of PIPs has been as the first cases reach their first cases reached their anniversary and whether the amounts are revised.
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Fri, 13 Mar 2015 11:24:48 +0000