Irish Financial Review

Is another financial crisis looming – IMF thinks so

In its latest World Economic Outlook (WEO), the IMF warns that another financial crisis is brewing even though many parts of the world are still not finished fixing the last one.

IMF head Christine Lagarde

IMF head Christine Lagarde

Across the EU, a massive quantitative easing programme is still in play and despite its enormity, inflation and economic growth not to mention unemployment levels are still a massive problem. Even in the US, which has been showing signs of a recovery of late, the economic recovery there is not as seamless as many had hoped for. Just last month, Janet Yellen, head of the US Federal Reserve decided against increasing interest rates citing softer than expected economic performance.

Across developing economies, cheap money flooded in. In the case of Brazil, cheap credit inflated asset prices and encouraged both companies and government to load up on debt. The economy there has since weakened. Just this week, the organising committee of the Rio Olympic Games ordered a massive cost cutting programme to save the games. We were told that the BRICS (Brazil, Russia, India, China and South Africa) would be the saviors of the world economy, now it seems, they are struggling to save themselves!

According to the IMF, “Balance sheets have become stretched thinner in many emerging market companies and banks. These firms have become more susceptible to financial stress,”

The IMF warns that a failure to patch up the international financial system after the last crash, by ensuring that banks in emerging markets hold enough capital, and constraining risky borrowing, for example, means that a new Lehman Brothers-type shock could spark another global panic.

Shocks may originate in advanced or emerging markets and, combined with unaddressed system vulnerabilities, could lead to a global asset market disruption and a sudden drying up of market liquidity in many asset classes,” the IMF says, warning that some markets appear to be “brittle”.

The IMF goes onto say that the global economy could well get back on a sound footing if certain things happen, including a successful re balancing of growth in China, to safeguarding against market illiquidity in financial markets. Here in the EU, the Capital Markets Union is a response to that but it is still in negotiation.

According to the IMF report, the world barely survived the last financial crisis and in failing to put robust measures in place to prevent another, we are still left very, very vulnerable.

Oh, dear! Batten down the hatches!


How marketers really leverage personal data

Following the latest ruling from the European Court of Justice that struck down a data-sharing pact between the US and EU, mega-data holders such as Facebook and Google have ended up in a sort of legal limbo.

Big data impacts personal financial health

Big data impacts personal financial health

But this legal limbo probably won’t take too long to resolve. Already, a new data-sharing agreement between the EU and US is currently under negotiation and to top it all off, with TTIP and ISDS on the horizon to create the largest and wealthiest free trade area in the world, data has not gone away.

So let’s take a quick look at how data is used to give marketers an edge across the US and Canada:

  1. Banks and credit unions use credit data to target those they want to market to while excluding those with poor credit histories from the very best deals.
  2. Employers – even here in Ireland, if you have a bad credit rating, this can preclude you from certain jobs.
  3. Insurers – across the US, insurers are increasingly using personal credit data to tailor offers and exclude those with especially poor credit scores. It seems there is a link between bad credit and poor driving habits!
  4. Landlords – yes, they also use credit data to evaluate prospective tenants.
  5. Hospitals – even hospitals have gotten in on the act. Some run credit checks to evaluate who gets admitted! Pay your bills or don’t get ill!

The rise of automated credit scoring algorithms has made the evaluation of who we are and how we deal with money a 2-second process as companies such as Fair Isaacs, Experian, Equifax and Trans Union whittle our life story into a 3-digit summation; the personal credit score. We have literally become bits of ourselves.

Data matters a lot. This latest salvo from the ECJ will not be the last and with so much at stake, it’s only a matter of time before the marketers negotiate a new set of rules.

Finally, here in Ireland, the new Central Credit Register will replace the current Irish Credit Bureau. Expected to be up and running in the next year or so, it will introduce greater use of credit scoring to evaluate us.

Data is simply too powerful to be left in the hands of the courts.

A most dysfunctional Irish property market

The latest house price report showing a surge in property prices in areas outside of Dublin but stagnant in the capital makes for interesting reporting.



What the report does not address is how dysfunctional the Dublin property market is and how unaffordable it is becoming.

Beginning in 2011, property investors were given a Capital Acquisition Tax (CAT) boost if they purchased by the end of 2014 and then held the property for seven years. The measure was an overnight success; attracting property investors en-masse and boosting property prices, especially in the capital.

Then, just as the tax boon for investors ended in 2014, new, highly restrictive lending rules were introduced making it much more difficult for would-be first time buyers to buy a home.

Investors 1, first time buyers 0

Today, across the developed world, credit is a key component of how we finance our everyday needs, including purchasing a car, paying for college and buying a home.

But mortgage lending in Ireland has become highly restrictive and highly selective. Despite the upsurge in general advertising for mortgages, mortgage lending levels are only slightly ahead of the levels of 40 years earlier. For example, for all of 2014, just over 20,000 mortgages were drawn down. Compare this to 1974 and 1975 where some 18,000 and 21,000 mortgages were drawn respectively.

A plea by the global payments giant, PayPal last just last week should serve as warning of how dysfunctional the property market in Ireland is becoming; it sent a request to current staff asking for volunteers to make rooms available to new hires.

And it not just PayPal. A lack of housing opportunities is increasingly being cited as a primary factor for emigrants against returning back to Ireland.

Cities across the western world are now focusing more than ever on housing affordability. In New York, London, housing affordability is driving new policies to ensure that teachers, nurses and fire-fighters that are needed to ensure those cities grow are able to afford living there. It’s high time that a big push is initiated here in Ireland before it is again too late!  In the end, it’s the cost of paying for a home that matters, whether one buys or rents is secondary and the cost of housing here is still surging uncontrollably!

Irish property prices rise in August

In the month of August, Irish residential property prices rose by 2.3% nationwide.  Residential property prices remained up 9.5% on an annual basis. This is according to the latest house price statistics released today by the Central Statistics Office.

Irish Property Prices are increasing

In Dublin, residential property prices rose by 2.8% in August.  Dublin residential property prices were 8.2% higher than in August 2014.  Some experts attribute it apparent slightly lower rate of recovery to the fact that a far higher percentage of Dublin area properties are disproportionally impacted by the latest mortgage lending restrictions introduced at the start of the year.

Dublin house prices rose by 3.0% in August whilst Dublin apartment prices increased by 0.3%.  However, it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series.

Outside of Dublin residential property prices rose by 1.9% in August.   Prices were up 10.8% compared with August 2014.

Overall Decline

At national level residential property prices were 35.4% lower than their peak level in 2007.  Dublin house prices were 34.4% lower than their peak, Dublin apartment prices were 40.4% lower than their peak and Dublin residential property prices overall were  36.2% lower than their highest level.  Outside of Dublin residential property prices were 38.7% lower than their highest level in 2007.

EU Capital Markets Union

The Capital Markets Union (CMU) is a plan of the European Commission to mobilise capital in Europe. It will channel it to all companies, including SMEs, and infrastructure projects that need it to expand and create jobs. By linking savings with growth, it will offer new opportunities for savers and investors.

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Deeper and more integrated capital markets will lower the cost of funding and make the financial system more resilient. All 28 Member States of the EU will benefit from building a true single market for capital.

In a nutshell, the development of CMU is projected to lead to stronger capital markets will complement Europe’s strong tradition of bank financing, and will:

  • Unlock more investment from the EU and the rest of the world;
  • Better connect financing to investment projects across the EU;
  • Make the financial system more stable;
  • Deepen financial integration and increase competition.

The Capital Markets Union is a new frontier of Europe’s single market. Its creation is a key element of theInvestment Plan announced by the Juncker Commission in November 2014.

The challenges

  • Investment in Europe remains heavily reliant on banks
  • Significant differences in financing conditions between Member States exist
  • There are differing rules and market practices for products like securitised instruments or private placements
  • Shareholders and buyers of corporate debt rarely go beyond their national borders when they invest
  • Many SMEs still have limited access to finance.

The objectives

  • Develop a more diversified financial system complementing bank financing with deep and developed capital markets
  • Unlock the capital around Europe which is currently frozen and put it to work for the economy, giving savers more investment choices and offering businesses a greater choice of funding at lower costs
  • Establish a genuine single capital market in the EU where investors are able to invest their funds without hindrance across borders and businesses can raise the required funds.

Want to cut the cost of bank fees, read this!

Since the peak of the credit crunch in late 2008, the primary means of generating revenue and profits at banks has been the introduction of a raft of fees and charges. This has resulted in a decrease in banking convenience and a rise in costly banking services for all.

101 smart money tips

101 smart money tips

And while banks have variously introduced some limited means of avoiding fees, this is only possible by keeping a chunk of cash on deposit with the bank, something that is not possible for lots of families up and down the country.

Following are the range of fees and charges that banks do impose as well the limits that banks have set which result in fees are not charged.

 Comparison of Bank Charges in Ireland

All the main banks in Ireland now have some sort of transaction or admin fees  on current accounts.  There are still ways to avoid bank charges  – so here is a comparison of the various current account charges so you can work out which is the cheapest bank for you and where you can  get Free Banking.

Cheapest and easiest to avoid – PTSB & Ulster Bank 
The PTSB current account has a €12 quarterly account maintenance fee  but –  if you lodge at least €1500 every month you will not be charged the  fee. Ulster Bank charge  €4 per month maintenance fee – to avoid this fee you need to keep an account  balance of at least €3000 .

EBS Moneymanager – Cheapest Bank Account for low usage
EBS don’t currently charge any admin fees. They charge 30c for an ATM withdrawal or for a cash withdrawal in a branch . If you lodge at least €1,500 – or keep a balance of at least €500 they will not charge for the first 5 ATM withdrawals per month. EBS don’t currently charge for any other transactions.

AIB  – Higher Transaction Fees where it still possible to avoid.

AIB  charge the following amounts for transactions on current accounts.
Automated Transactions (Direct Debit/ Standing Orders)  20c.
ATM withdrawals  35c
Machine Lodgements 35c
Cheque Processing 39c
Debit Card Transaction  20c
Over the Counter Transaction  39c
They will also charge an admin fee of €4.50 per quarter.
All the above fees can be avoided at AIB by keeping a minimum of €2500 in the account at all times . Going below €2500 at any time in a quarter will result in charges being applied for the whole quarter.

Bank of Ireland – Sorry, but their €5 quarterly charge is unavoidable!
Bank of Ireland now charge all current account holders €5 per quarter . This charge cannot be avoided. On top of this – unless you keep at least €3000 in the account you will be charged transaction fees too. (But note that the bank currently does not apply fees on Golden Years, Graduate, 3rd Level student or 2nd Level student current accounts)
BOI Transaction fees
Automated Transactions (Direct Debit/ Standing Orders)  10c.
ATM withdrawals  25c
Machine Lodgements 25c
Debit Card Purchase Fee  10c
Over the Counter Transaction  60c
Cheque Processing Fee (per cheque) 60c

KBC – minimum €6 a quarter charge  (unavoidable).
Any customers whose daily balance goes below €2000 will also be charged an extra  30c for each ATM  transaction and  30 cent per cheque lodged in the quarter.

OK, so let’s assume you have a level of pretty normal banking activity and DO NOT keep the required monthly balances, how much would banking cost? For this comparison, I have assumed for the following activity levels:

Cheques Lodged 1
Direct Debits/ Standing Orders : 6
Debit Card Purchases :  45
ATM withdrawals  :  12
Counter transactions 2

(You can adjust for your own personal activity levels to reach your typical monthly banking activity).

Assuming the conditions for avoiding fees were not met…

AIB would charge the most – at €51.21 a quarter (€204.84 a year)
BOI is close behind at €34.70 per quarter (€138.80 a year)
KBC would charge €17.70 for the quarter (€70.80 a year)
EBS would charge €12.60 for the quarter. (€50.40 a year)
Ulster Bank would charge €12 for the quarter. (€48 a year)
PTSB would charge €12 for the quarter (€48 a year)

Comparison of banks current account fees IF  the balance is kept above the  relevant  limit.

EBS  (€500 limit)  Fee €6.30 per Quarter for ATM transactions (first 5 free)  (€25.20 a year)

KBC (€2000 limit)   – Fee €6 per quarter or €24 a year
BOI (€3000 limit)  : Fee €5 per quarter or €20 a year

Ulster Bank (€3000 Limit)  :  Zero
 (€1500 limit)  Zero
AIB (€2500 limit) : Fee  – Zero

So – it is still possible to get free banking at PTSB , AIB and Ulster Bank if you can manage to lodge a certain amount or keep your account balance above their limits.
Be careful with AIB because a fall in your balance to just  €2499 for just one day could end up costing you over €50 for one  quarter. (based on sample transactions above).

Other charges of note:

Replacing lost or damaged card:

AIB €0

BoI €8 (even for damaged card)

EBS €0 (but €5 for thereafter)

KBC €6


UB €0

Charged for Duplicate Statements (per page)

AIB €3.00

BoI €3.80

EBS €5.00

KBC €2.54

PTSB €2.50

UB €3.81

TIPS and Good Practice to eliminating bank fees:

  1. Make sure monthly repayments reach their destination on time
  2. Stop paying by cheque
  3. Keep sufficient balances in your bank account
  4. Forget loyalty and be prepared to switch – keep an eye other bank offers.
  5. Avoid unnecessary queries – yes, they charge for that…so look out!
  6. Avoid expensive ATM withdrawal fees when abroad – these can really add up!
  7. Avoid your bank account going into the red – banks charge a bundle.
  8. Keep good records – banks really know how to charge when it comes to providing duplicate copies of documents you already have, so try avoid losing them, in the end, it will be your personal account that will take the hit.
  9. Don’t lose your plastic – it’ really expensive to get a replacement card (never mind the hassle of filling out all those forms) so be careful…you’ll get your replacement card but you’ll lose out financially.

Frank Conway is founder of, the financial literacy website.

Data provided by to complete this report.

Banks (still) behaving badly!

Tom Hayes paid a heavy price for his manipulation of Libor (London Inter-Bank Offered Rate, a benchmark rate used to set how much banks charge for finance). Sentenced to 14 years in prison, the former Citigroup and UBS trader was became the first person to be convicted by a British jury of rigging Libor rates. Since Mr. Hayes was charged with the crime, banks have collectively been fined billions for their part in what has become an industry-wide rate rigging scandal.

Mr. Hayes paid a heavy price for his libor rigging role

Mr. Hayes paid a heavy price for his Libor rigging role

But rate rigging is just one in a list of practices at banking institutions that have come to light since the global financial meltdown of 2008 and the ensuing great recession.

Across the globe, banks failed massively. Some went to the wall but many were saved through painful and expensive public bailouts costing billions. Here in Ireland, the €64Billion price tag resulted in much needed social programmes being eliminated along with dramatic cuts in schooling, healthcare, policing and capital investment.

Additionally, the Irish state itself was undermined to such a degree by bank losses, it required a costly bailout by the IMF / ECB / EU which citizens will be paying for years to come.

But instead of acknowledging the debt owed by banks to the citizens of Ireland, it turns out they have moved in the opposite direction by kicking dirt in the faces of those they should be grateful to.

Over the course of the last 12 months, a series of disturbing reports have come to light that underscore how little appears to have changed in the critical thinking at banks and within their banking cultures.

Permanent TSB (The ‘we did nothing wrong’ bank).

Top of the list for bad practice is Permanent TSB (PTSB). It failed spectacularly to inform a cohort of its customers of their right to revert to valuable and low cost tracker mortgages once their fixed term interest rates expired. In doing so, the bank’s actions resulted in some customers losing their homes as a result of higher monthly repayments (which they should not been liable for in the first place). But it was the sheer determination of the bank to deny its customers what was rightfully their (lower borrowing costs) through the courts which underlines bank thinking. Despite being told that its actions were wrong by the Financial Services Ombudsman (FSO), PTSB persisted to the highest court in the land only ending its actions once the court ruled against it.

AIB (The ‘we charge you twice’ bank)

In August, Allied Irish Bank announced that up to 111,000 customers are to receive letter informing them that they may have been wrongly paying for fraud protection insurance even though they were already covered.

Bank of Ireland (The ‘we are right…or are we?’ bank).

Earlier this summer, Bank of Ireland decided it would be a good idea to solicit existing mortgage customers to switch to a fixed rate loan. The only problem was that in doing so, it was soliciting a cohort of mortgage customers whose repayments couldn’t be reduced as they were already the beneficiaries of rock-bottom tracker deals. But Bank of Ireland persisted anyway…even flaunting Central Bank disclosure rules in the process and insisting it did nothing wrong when it got caught in the act and the matter became public. Eventually, through the actions of Charlie Weston of the Irish Independent, Bank of Ireland marketing and management were forced into an embarrassing climb-down and public apology.

Profit yes…but not at any cost!

Reading between the lines, it is easy to detect a culture of confusion within banking. In Bank of Ireland, Permanent TSB and to a lesser extent, AIB, it seems that bankers are struggling to adapt to the new order. Perhaps in the past, they may have been powerful enough to push their way to a favourable resolution but today, that is no longer the case and bank culture appears to be confused as to how they can reconcile the gaps in what they want to do and what they must do.

Brand value matters

While value for money is still the major motivation of consumers, ethical business practice is also increasingly important. Here in Ireland, trust of banking brands is rock bottom while those of more ethical brands, including the Credit Union movement are tops. Increasingly, younger generations demand greater social responsibility from brands as they evaluate whether or not they want to become customers of those brands. And it is not just the brand value of financial services. Only this week, German carmaker Volkswagen has been rocked by the discovery that it fraudulently manipulated emissions results. Globally, brands that deliberately act dishonestly and ignore consumer this trend will pay a steep price.

Frank Conway is founder of MoneyWhizz, the financial literacy initiative for students


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