10/4/2013: IMHO Submission on the Review of Code of Conduct on Mortgages Arrears

The Irish Mortgage Holders Organisation Ltd.,
www.mortgageholders.ie
Not for profit organisation.

Submission on the review of code of conduct on mortgage arrears consultation paper CP 63

Irish Mortgage Holders Organisation, April 9th 2013.

Attention: Mr. Bernard Sherridan, Central Bank of Ireland.



Dear Mr Sheridan,

We would like to thank you and your team for meeting us recently about issues and concerns we have at the treatment by banks of Mortgage Holders.


We are very concerned by the statements made by Mr. Elderfield at the launch of the “targets” (set by government and the Central Bank) for banks, with respect to dealing with those in arrears as well as comments surrounding the changing of the Code Of Conduct on mortgage arrears to allow banks to take swifter action against mortgage holders.

It is our view that the process of mortgages arrears resolution is being facilitated in an unsupervised and unstructured way, without due regard to the need for transparency and openness which would be consistent with the best practices for arrears resolution and consumer protection. The process – as outlined to-date – leaves the mortgagees fully exposed to banks putting their own objectives and strategies ahead of the needs of the Irish economy, society and borrowers, and provides a large deficit in consumer protection.

We would like to make the following specific points regarding the review of the code of conduct on mortgage arrears notwithstanding the fact that it may already be predetermined as demonstrated by Mr. Elderfield’s comments as referenced above.


Legal standing:

In the first instance and reluctantly we have to raise the issue of the legality of the Code Of Conduct. This issue has been discussed behind closed doors for some time now and it is an issue of the utmost importance as the legal status of the code of conduct on mortgage arrears is by no means certain. We wish to reaffirm our concerns about the legality of the code which we expressed originally in our email to Governor Honohan last month.

A number of recent high court cases refer to this issue including Irish Life and Permanent v Duff where Justice Hogan raised “the somewhat troublesome issue of the precise legal status of the code of conduct”. Justice Hogan followed recent high court precedent in the Fitzell case and warned The question, for example, of what constitutes a “reasonable effort” on the part of the lender does not easily lend itself to judicial analysis by readily recognisable legal criteria. How, for example, are “reasonable efforts” to be measured and ascertained? If, moreover, non-compliance with the Code resulted in the courts declining to make orders for possession to which (as here) the lenders were otherwise apparently justified in seeking and obtaining, there would be a risk that by promulgating the Code and giving it a status that it did not otherwise legally merit, the courts would, in effect, be permitting the Central Bank unconstitutionally to change the law in this fashion’.

The Code itself has no specific legislative status. It is neither a piece of primary legislation in the form of an act of the Oireachtas nor a secondary piece of legislation in the form of a ministerial regulation issued by the Minister for Finance. The Code is not even stated to be admissible in legal proceedings. It is a Code issued under the terms of Section 117 of the Central Bank Act 1989 and therefore lenders who infringe its terms may be subject to the Central Bank’s Administrative Sanctions Procedure. This is an internal process that allows the Bank to control the conduct of and helps to define its regulatory relationship with financial service providers, but it is not one that a consumer as a borrower has any involvement in. This we believe is a matter of extreme urgency that needs addressing.


Right of Appeal:

Section 49 & 52 as proposed allows for a lender to have 3 senior staff act as an appeals board. This is completely unacceptable and allows for no independent oversight. The appeal process must be fully detached from the banks or banking sector representative institutions and vested with an independent authority acting to protect the interests of all parties involved in a dispute. The process must be made explicitly transparent and any asymmetries in representation during the dispute that may arise due to (a) nature of the processes that lead to the appeal, and (b) resources available to the parties prior to and during the appeal should be removed. In practical terms, this requires provisioning for the independent and fully funded counsel for borrowers who cannot afford such professional help, and an appeals board that is fully operationally and membership-wise independent from both borrowers and lenders.


Moratorium:

The proposed and current code is flawed in not being prescriptive in defining the periods of time over which the moratorium clock is ticking. No time is given for gathering of financial information or indeed an exchange of offers between the lender and the borrower. This will become a significant issue when the legislation is introduced to reverse the Dunne Judgement, which will lead to a significant rise in repossession applications. Lenders can initiate delays in corresponding with borrowers, as they have done on many occasions to-date, and such periods of delays will account for time eaten into a moratorium period. Borrowers, however, are not accorded similar powers. Again in the absence of prescriptive process and recording of times borrowers can be seriously and unfairly disadvantaged by losing time that is taken off them ahead of potential repossession proceedings.

Provision 37 proposes ‘Prior to completing the full assessment of the borrower’s standard financial statement, a lender may put a temporary arrangement in place where a delay in putting an arrangement in place will exacerbate a borrower’s arrears or pre-arrears situation. Such a temporary arrangement should not last for more than three months. Any subsequent arrangement should be based on a full assessment of the standard financial statement’.

This provision should state that the duration of this temporary arrangement does not count for the purposes of the 12 month moratorium on repossession proceedings. Similarly, Provision 57 should state in relation to the twelve month moratorium that ‘the twelve month period does not include any time period where a proposal for an alternative repayment arrangement is being negotiated’.


Unsolicited Contact by Lenders with Borrowers:

The Central Bank “themed inspections” as to the banks adherence to the previous rule of no more that 3 unsolicited contacts in one month was typical of light touch supervision. The lenders seem to have
had significant influence in this proposal and the Central Bank seem to have accepted the industry’s lobby position on this. In addition the Central Bank gave advance notice to banks before their “inspection”.

‘Feedback from industry would indicate that the current requirements, particularly the limit of three successful contacts, are preventing lenders from making contact and engaging with borrowers and are therefore impeding the consideration and resolution of borrower’s cases. The Central Bank does not believe that this is in the best interests of borrowers’.

There are no provisions for the engagement with mortgage holders in this feedback system. Similarly, there are no explicit, transparent and enforceable provisions to ensure that lenders engagements with the borrowers will be “proportionate and not excessive”. There are no data disclosure provisions relating to inspections and any remediation measures applied to institutions violating code of conduct.

The new unlimited contacts must not be “aggressive or intimidating”. Once again, how is it proposed to ensure this will be the case? How will it be proven that all attempts to contact the borrower have been made and that these attempts have been made within the confines of the Code-permitted procedures? The removal of this limited protection of mortgage holders is a significant regressive step in consumer protection and has left the borrowers unprotected against potential abuses by the banks.

Debt collectors acting on behalf of lenders are still unregulated within the existent structure and under the proposed code. How does this code cover their activities or can they adopt any means they deem appropriate to recover monies?

The Central Bank will have failed to provide symmetric protection of the interests of the borrowers and the lenders unless it allows for explicit, enforceable and transparent safeguards to protect many vulnerable people who are in arrears and will be set upon by lenders who have been given a free rein.


Unsustainability: 

Many actions taken by the bank to repossess property are predicated on a decision by a lender that a loan underlying the property is unsustainable. The Code should include prescriptive rules defining what is sustainable and what is not sustainable. This may involve some sort of expenditure guidelines. These rules and guidelines should be transparent, public, enforceable and compulsory for all banks, and applicable to all borrowers.


Trackers:

It is vital that provision 12 (d) is not changed unless there is a clear system for borrowers to seek advice to ensure that any removal off a tracker is of benefit to the borrower. Such advice should be delivered on a professional basis and borrowers in need of funding for procuring such advice should have access to such funding. Page 4 of the consultation paper suggests that the removal off a tracker might have merit if in the interest of the borrower. This determination cannot be solely in the remit of the lender nor can it be left subject to the appeal system that incorporates explicit conflict of interest between the appeals process and the bank interests per note above.


Engagement:

Our experience, confirmed by the experience of other organisations working on behalf of the borrowers in distress, is that lenders do not respond in a timely manner to borrowers proposals or engagements, which is unacceptable. What happens to a lender who does not engage, who does the borrower appeal or complain to, other than the bank, which is alleged to engage in the abuse of the system?

Engagement by lenders with borrowers can be painfully slow, tedious and difficult leaving the borrower exhausted, their financial resources significantly reduced and without a resolution. There needs to be a clear code of conduct enforcement by the central bank on lenders for their behaviour and engagement and such enforcement should be transparent, effective, verifiable and not based on an ad hoc system of inspections, criteria and judgements.


Borrower representation and advice:

Even in normally functioning bankruptcy regimes around the world, those in debt are at a significant disadvantage compared to the might of creditors. They face corporate strength and power that can crush any debtor financially, emotionally, socially and psychologically. Observed by passive regulators, as in Ireland, compounded by the insolvency regime that is both under the current statutes and in its ‘reformed’ reincarnation nothing short of draconian, leaves the debtor in great peril.

When this financial crisis happened it was the citizen who suffered where the regulated entities and regulators enjoyed protected pay, conditions and functionality. Now, the very same citizen is facing the immense power of the state backing the already significant powers of the banks when it comes to the personal debts.

Bankers have a Banking Federation that represents them. Bankers are also availing of the weaknesses in the Irish competition laws to sustain and even consolidate their market powers at the expense of the taxpayers. They discuss issues and present their views publicly and to the government rather effectively and are assisted by a receptive media. They tend to be in sync with government announcements and findings and have direct access to the Social Partnership process and all other avenues of policy formation.

Debtors lack any statutory or institutional power. They need assistance and protection, care and support. This is best achieved by a coming together of advocates and organisations that provide services and assistance to debtors. Organisations and bodies such as MABS, The Irish Mortgage Holders Organisation, Flac, Phoenix Project and others are providing exceptionally effective and professional services to debtors usually on the basis of voluntary engagement of experts and ordinary citizens, and in the majority of cases, with no cost to the state. These and other organisations have a combined knowledge, experience and passion of their volunteers to help those is debt.

Mabs has been effectively assisting debtors for the last few decades and they have experience and a national foot print from where services and supports could be head quartered.

Yet, even with these organisations behind them, Irish debtors do not have the resources needed to deal with aggressive and disruptive creditors. With many commentators and practitioners expressing concerns and uncertainty as to how the new personal insolvency act will work there is a need to address the imbalance that exists today between debtors and lenders, as well as prevent the exacerbation of this imbalance threatened by the new legislation.

The new Insolvency regime will add additional hurdles for debtors, allowing vultures prey on the hundreds of thousands of households saddled with excessive debts, while providing little certainty to the debtor or any chances for a renewal to the economy.

Successive governments have chosen to ignore the one constant support debtors have had which is Mabs, in favour of diluting their effectiveness and giving banks and creditors a strengthened hand. Successive governments have also opted to ignore all other organisations currently working on the frontlines of the debt crisis. Despite the governments’ best efforts these organisations continued to offer a better balance and chance for debtors to be represented and protected effectively. These organisations deserve to be recognised as the de facto debtors’ representatives and be allowed to fund professional provision of services to debtors by linking arrears and insolvency resolution savings delivered to the economy at large via their efforts to the resources available to them to achieve such savings.

The insolvency bill raises a serious question of how those deeply in debt will be able to afford professional representation to assist them deal with their debt in favour of those with cash flow who can avail of professional services. This will promote a two tiered system leaving the most vulnerable to fend for themselves in unchartered waters full of predatory creditors and commercial service providers.

What would be helpful to debtors in the years ahead would be a number of organisations that compete to provide a full suite of services to debtors including legal, financial, negotiation, mental health, conveyancing and creditor payment services. These organisations should be modelled around Mabs, with Mabs established on a stand alone basis with an independent Board filled with experienced directors. A Board with a strategic plan that addresses the needs of debtors in the years to come.

Mabs is currently funded from the department of social protection to the tune of EUR18,5 million per annum. This funding could be directed towards the new organisation and additional funding could be raised by charging creditors as is done in many other jurisdictions. Many consumer credit counselling services agree voluntary payment arrangements with creditors on behalf of debtors and facilitate the cash transactions for a fee. A truly independent and well-resourced Mabs can act as a coordinator and supervisor over other organisations that compete with each other for representation of debtors in the
process of developing systemic resolution to the debtor arrears or insolvency.

Given the disproportionate powers granted to the banks by the new legislation, existent debtors’- representing organisations will undoubtedly try their best to help but they are not adequately funded to achieve significant scale and scope of their operations to fully function as representatives of families and people in difficulty. Indeed, majority of them are not funded at all. There is an urgent need to consolidate these organisations’ efforts, provide them with proper supervision and supports, and allow them to raise resources to deliver meaningful and effective change.


Yours sincerely,
David Hall
Dr. Constantin Gurdgiev
Directors
Irish Mortgage Holders Organisation.
Dublin, Ireland
April 9, 2013

THE IRISH MORTGAGE HOLDERS ORGANISATION LIMITED is Registered in Ireland No: 517549 Directors: Arthur Mullan, David Hall, Lucy Cronin, Tracy Mullan, Constantin Gurdgiev

10/4/2013: EU Commission on debt-overhang in Europe

A new paper on the effects of debt and deleveraging in Europe was published by the EU Commission. The paper can be accessed here.

Some nice charts summarising the debt overhang in the real economy (households and non-financial corporates):

Gross level relative to GDP, Irish households are 3rd most indebted in the euro area by 2011 measure. However, adjusting for GDP/GNP gap puts us at the top position, well ahead of Cyprus and even ahead of the EU27 'leader' - Denmark.

Now, much is usually being said about Irish net debts being lower due to immense wealth accumulated by the households. Table above shows that, actually, that is not true. We rank second from the top. Interest burden has declined, but it remains the third highest in the euro area.

Now to non-financial corporations:

 Irish corporates are second most indebted (after Luxembourg) in the EU and adjusting for GDP/GNP gap, the difference to the third most-indebted country is even more dramatic than the chart above indicates. Irish corporates debt rose in 2008-2011, rather dramatically - marking the highest increase in the euro area.

Detailed decomposition:

Again, adjusting for GDP/GNP gap, Irish economy is the most indebted in the euro area and the EU when measured relative to overall economy size (note: Luxembourg comparatives are wholly meaningless due to massive presence of brass-plates operations in the economy).

More fun charts:

Again, Ireland is in top first (corporates ex-Luxembourg) or second (households) positions.

Deleveraging household debt overhang will be extremely painful for Ireland:

And although asset valuations suggest the pain will be milder, in reality, one has to consider the fact that Irish household assets valuations are not exactly (a) fully reflective of real extent of price contractions in the housing sector, and (b) liquid.

 Here's EU Commission view:
"as regards households capacity to repay (figure 12), Ireland, Spain, Estonia, the Netherlands, Latvia, Denmark, the United Kingdom and, to some extent, Cyprus are amongst those that experienced a rapid increase in household indebtedness before the crisis. Despite the varying starting position in terms of household debt, the information content of the level dimension also points to the same set of countries as potentially prone to suffer from deleveraging pressures, on top of Portugal and Sweden. Ireland, Latvia and Estonia also appear as subject to high  pressures when considering actual leverage as well as its build-up (figure 13)".

And on non-financial corporates deleveraging:
"on the firms' side, there is also a clear positive relationship between the  accumulation and the level factors when considering the capacity to repay (figure 14). Countries like Belgium, Ireland, Spain, Cyprus, Portugal and Bulgaria stand out as presenting vulnerabilities related to their firm's indebtedness. This snapshot is highly nuanced when looking at firm's asset side (see figure 15). Belgium and Cyprus present a healthier picture while firms in countries like Greece, Italy, Slovenia and Latvia appear as subject to higher pressures. As a robustness check, this exercise was also run with consolidated data and the results are consistent but for the case of Belgium, where the relevance of intra-company loans calls for further qualifications when assessing non-financial corporates debt sustainability"

Using more sophisticated analysis, the Commission paper concludes that:
"The following countries can be identified as more prone to face deleveraging pressures in the household and non-financial corporation sectors: Cyprus, Denmark, Spain, Ireland, the Netherlands, Portugal, Estonia, Latvia, Slovakia, Sweden and the United Kingdom on the household side and Belgium, Bulgaria, Cyprus, Greece, Spain, Hungary, Ireland,  Italy, Portugal, Estonia, Latvia, Slovenia, Sweden and the United Kingdom on the corporate side."

Of all countries listed above only Ireland, Cyprus, Spain, Portugal, Estonia, Latvia, Sweden and the UK fall into both groups, but only Ireland falls into extreme scenarios of debt sustainability in both categories:

In EU Commission calculations (see link above), Ireland has the greatest gap to sustainability (35.2%) when it comes to debt overhang in the entire euro area, and second highest in the EU.

10/4/2013: Broader measures of unemployment in Ireland: 2012

Ireland's broader unemployment rates per CSO and adding State Training Programmes participants are as follows:

• PLS1 indicator is unemployed persons plus discouraged workers as a percentage of the Labour Force plus discouraged workers as of Q4 2012: 14.9%
• PLS2 indicator is unemployed persons plus Potential Additional Labour Force as a percentage of the Labour Force plus Potential Additional Labour Force as of Q4 2012: 16.1%
• PLS3 indicator is unemployed persons plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training as a percentage of the Labour Force plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training as of Q4 2012: 18.2%
• PLS4 indicator is unemployed persons plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training plus part-time underemployed persons as a percentage of the Labour Force plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training as of Q4 2012: 24.6%
• PLS$ indicator including those on State Training Programmes as of Q4 2012: 28.4%

And three charts with dynamics:

Now, y/y changes in percentage points change:

• PLS1: -0.7 ppt
• PLS2: -0.6 ppt
• PLS3: -0.2 ppt
• PLS4: -0.2 ppt
• PLS4 and State Training Programmes participants: +0.98 ppt

So one thing is pretty clear: the broader the measure of unemployment we take, the lower is the rate of decline y/y and the smaller is the rate of decline relative to peak. 

8/4/2013: New Vehicles Registrations: Q1 2013

Q1 data for vehicles licensing for Ireland is out today. CSO provides good insight and data on these here.

Per CSO data:

• Q1 2013 saw 49,591 new and old vehicles licensed for the first time which represents a decline of 9.1% y/y and marks the lowest Q1 number of registrations since 1995. Compared to peak Q1 registrations, Q1 2013 numbers come in at -60.8%.
• In Q1 2013 there were 36,286 new vehicles licensed in the state, down 14.3% y/y and down 65.5% on peak. Number of new vehicles registrations in Q1 2013 was the lowest since 1995.
• In Q1 2013 there were 31,002 new private cars licensed in Ireland, down 14.1% y/y and 62.1% below the peak. Number of new private cars licensed for the first time in the state is now running at the lowest level since 1995.

Chart below summarises Q1 data for 1965-present:

In other words, all three series are now running below their historical (1965-2013) average (more specifically -3.51% for all vehicles licensed for the first time, -13.0% for new vehicles and -7.0% for new private cars).

7/4/2013: Irish Services Activity Index - February 2013

Irish Services activity fell in February 2013 per latest CSO data, marking second consecutive month of decline. In February 2013, Irish services index dropped 1.03% m/m and was down 0.45% y/y. The index 3mo MA is now at 106.43, only slightly ahead of 106.07 in 3mo period through November 2012, and still ahead of 105.43 3mo MA through February 2012. The same dynamics are repeated at the 6mo MA level.

Largest m/m declines were recorded in Wholesale Trade (-7.17% m/m and down 10.71% y/y), Accommodation & Food Services (-1.89% m/m and down 0.69% y/y). Largest m/m increases were in Administrative & Support Services (+2.95% m/m and up 15.74% y/y) and in Professional, Scientific & Technical Activities (+1.68% m/m and 2.02% y/y). 

In annualised terms, largest increases were recorded in Administrative & Support Services (+15.74% y/y), Accommodation Services (+6.92% y/y) and Transport & Storage (+5.61%).

One interesting point in terms of longer range analysis:

As chart above shows, the PMI data for Services Activity continues to bear no relations to the actual Services Activity Index measurements. Recall that in January and February, Services Activity Index posted two consecutive declines in activity. Over the same months, PMI for Services posted robust growth signals at 56.8 in january and 53.6 in February.

6/4/2013: Part-time & Casual Employment Supports in Ireland

Let's do some more numbers crunching on Irish Live Register for Q1 2013.

In Q1 2012 official Live Register declined 9,902 on Q1 2012 (-2.26%) and down 14,936 on Q1 2011 (-3.37%). Sounds like some achievement. 

Alas, of the above numbers:

• Of the 9,902 decline on Q1 2012, the decline was just 7,154 when we take into the account state training programmes (-1.38%) and there was a rise of 1,181 (+1.34%) in the numbers who claim Live Register supports while being in casual and part-time employment (more on this below). Thus, the numbers of those fully dependent on Live Register have fallen only 8,335 (-1.94%) on Q1 2012.
• Of 14,936 decline on Q1 2011 (-3.37%), there was actually an increase in those claiming supports of 3,217 (+0.63%) when we take into the account state training programmes, and there was a rise of 4,352 (+5.13%) in the numbers who claim Live Register supports while being in casual and part-time employment (more on this below). Thus, the numbers of those fully dependent on Live Register have fallen only 1,135 (-0.27%) on Q1 2012.

Now, some would remark that it is better when people are part-time or casually employed, then when they are fully dependent on Live Register supports. I shall, of course, agree with such a statement. However, let's look at what has been happening with casual and part-time employment numbers over time.

• In 2002-2007 monthly volatility(measured by standard deviation) in the numbers on Live Register who were in casual and part-time employment stood at 1,031. This has risen to 3,979 for the period of 2010-present. In other words, overall casual and part-time employment might have declined significantly in terms of stability of income it offers and, thus reliance on Live Register. This can be due to different quality of skills and occupations for people singing onto Live Register with casual and part-time employment, or it might be due to changes in Live Register supports' eligibility, or both.
• Of all categories of Live Register signees, volatility of numbers on Live Register has risen only  for part-time and casual workers over 2010-present compared to 2002-2007.2
• For the Live Register inclusive of the state training programmes participants, volatility has actually fallen over the above periods, driven by declines in volatility for the numbers of signees who are fully reliant on Live Register supports.

To see the deterioration in the quality of casual and part-time employment linked to Live Register participation, consider the chart below:

The chart clearly shows dramatic increase in seasonality of the numbers of those on Live Register in casual and part-time employment for the end of Q2-beginning of Q3 periods since January 2010 as compared to previous years (2002-2007). You can see that the same effect does not appear in the numbers of signees fully dependent on Live Register supports:

6/4/2013: 80 years to deflate unemployment crisis in Ireland?

Continuing with the Live Register data theme: in the first post I covered broader long-term trends in the LR, with the second post looking at some sub-trends relating to nationality of Live Register signees. Here: a quick note on the size of the problem overall.

Total number of persons (officially) on the Live Register declined 2.07% y/y in March, following a steeper decline of 2.40% in February. Compared to March 2011, current reading is down 3.65%.

Thus, March 2013 reading was 165.8% ahead of the 2004-2007 average, 36.1% ahead of 2008-2009 average and is 3.38% below 2010-present average. Taking Q1 2013 average, the Live Register (again, this is official count, excluding those on State training programmes) was up 1.76% on Q4 2012, down 2.26% on Q1 2012 and down 3.37% on Q1 2011.

For the adjusted Live Register (accounting for state training programmes participation), Q1 2013 q/q rate of increase in the Live Register was 1.53% and y/y rate of decrease was -1.38%.

Let me remind you the size of the problem overall:

At the above annual rates of decline (based on Q1 2013 data), it will take 

• 12.5 years from now to reach 2008-2009 average Live Register levels (which would be consistent with unemployment supports at the levels well above those observed in the 1980s and 1990s) and 
• 40.5 years to reach 2004-2007 average or 37 years to reach 2000-2007 average.

If you want a really scary number, using y/y change in Q1 2013 in Adjusted Live Register numbers, it will take us 81 years from today to reduce Adjusted Live Register counts to 2000-2007 average level. As a robustness check, the number will be 79 years were we to use Q4 2012 annual rate of decline.

Clearly, the 'turnaround' being signaled by the Live Register is simply not enough to deal with the current problem of unemployment and equally clearly, at current rates of economic 'growth' we either need to raise the speed of economic activity expansion by a factor of 10 or carry out some drastic measures on reforming our unemployment supports in order to see significant reductions in Live Register any time soon.

6/4/2013: Irish Live Register by Nationality: Some Trends

Yesterday, I blogged about Live Register data on overall levels of unemployment supports in Ireland. Today - few charts summing up Live Register trends by nationality.

Total number of persons (officially) on the Live Register declined 2.07% y/y in March, following a steeper decline of 2.40% in February. Compared to March 2011, current reading is down 3.65%.

Meanwhile, the number of Irish Nationals on Live Register fell 1.89% y/y in March, following a decline of 2.39% in February. Current reading stands 3.68% below March 2011 and is down 10.68% on the crisis-period peak. Q1 2013 posted an increase of 1.43% on Q4 2012 and is down 2.21% on Q1 2012 and down 3.45% on Q1 2011.

The number of Non-Irish Nationals on Live Register declined at stronger 2.86% y/y in March than for Irish Nationals. larger decline of 2.45% was recorded for Non-Nationals in February 2013 as well. However, compared to March 2011, current reading is down 3.50% against the comparable period decline of 3.68% for the nationals. Q1 2013 reading for non-Nationals was 3.31% ahead of Q4 2012 - a sharper increase than for Nationals. Q1 2013 reading was down 2.50% for non-Nationals compared to Q1 2012, which represents a sharper decline than for Nationals. Compared to Q1 2011, however, Q1 2013 reading is down 3.03% for non-Nationals against 3.45% for Nationals.

In relative terms, Irish Nationals accounted for 82.16% of the Live Register in March 2013 against 82.01% in march 2012, while for non-Nationals the same ratios were 17.84% in Q1 2013 against 17.99% in Q1 2012. Chart below illustrates:

With small scale changes, there is no to-date reversal in the flat trend in relative shares of two groups in total Live Register numbers that was established around mid-2009 and that corresponds to higher share of Live Register captured by non-Nationals and lower share captured by Nationals. You can clearly see the overall flat trend.

In dynamic terms, chart below illustrates time trends in Live Register presence of three core groups: EU15 (ex-Ireland), EU12 (Accession States) and non-EU migrants.

Share of the EU15 (ex-Ireland) migrants of the total Live Register count fell to 4.8% in March 2013 from 4.87% in March 2012. Over the same time, share of EU12 (Accession States) migrants rose from 9.91% to 9.94%, while share of non-EU migrants declined from 3.21% to 3.10%.

Again, quite interesting dynamics in the above chart. For EU12 Accession States, strong seasonality (and these are already seasonally adjusted stats) shows rises and falls in temporary employment in agriculture and retail sectors, but overall trend since mid-2010 is flat. In contrast, EU15 ex-Ireland trend is that of a decline in Live Register presence. Live Register numbers for non-EU nationals is basically flat since late 2007 and shows no elevation due to crisis. In other words, EU12 nationals number on the Live Register were a strongest driver of Live Register participation increases amongst non-nationals during the crisis and now are changing roughly in line with Live Register changes overall. EU15 ex-Ireland numbers have declined relative to overall Live Register, and non-EU nationals numbers have fallen over the period 2006-2008 and then remained steady in line with overall Live Register trend.

5/4/2013: Live Register March 2013

In light of the recent statement by the IMF about Ireland's broader measure of unemployment, let's ask two other simple questions:

1. How many people in Ireland receive unemployment supports? 
2. What percentage of the workforce in Ireland receives unemployment supports?

Answer in two charts based on latest CSO data:

Q1:

A1: In March 2013, there were 425,088 individuals on Live Register and in February 2013 (the latest for which this data is available) 83,421 individuals engaged in state-sponsored training programmes that receive Live Register supports, but are not counted officially as being on Live Register. Thus total number of those in receipt of unemployment supports in Ireland is 508,509 individuals.

This means that while Live Register official numbers have declined 2.065% y/y in March, total number of Live Register supports recipients has declined only 1.355% on March 2012.

To be exactly precise on this, take February 2013 figures alone: in February 2013, total number of those in receipt of Live Register supports was 512,297 which was a decrease in y/y terms of 1.45%, against the official Live Register decrease reported of 2.40%.


Q2:

A2: Using Q4 2012 data for labour force participation (reported via QNHS with a lag compared to Live Register), 27.29% of Irish labour force were in receipt of Live Register assistance in March 2013. 

Again, the data is reported with different lags, so for exact comparative we have to go to December 2012 when 24.23% of Irish labour force were in receipt of Live Register assistance.

Oh, as a bonus, here's a historical chart showing Live Register supports numbers for Ireland since 1967:

4/4/2013: IMF Analysis of Recent Personal Insolvency Reforms in Europe

In the previous post, I covered in 4 charts (via IMF research paper) the extent of the European debt crisis (link: http://trueeconomics.blogspot.com/2013/04/442013-real-debt-european-crisis-in-4.html?spref=tw ). Here, based on the same source, proposed solutions for dealing with the household debt crisis.


Per IMF:

"A number of European countries have introduced or refined personal insolvency regimes to achieve orderly resolution of the debt overhang over time." Note that here, "personal insolvency law may also cover natural persons who are engaged in business activities (traders or merchants)", which is of course something unaddressed explicitly in Irish reforms despite the fact that current system of insolvency effectively spells an end to the careers of many professionals and businessmen and businesswomen.

"For example, Estonia, Iceland, Italy, Latvia, Lithuania, and Poland adopted or amended the personal insolvency law. The Irish Parliament recently adopted an entirely new personal insolvency law to, inter alia; shorten the discharge period from 12 years to 3 years subject to certain conditions. [The bill also allows the court to require repayments for up to five years in the bankruptcy process.]

Here's a very interesting bit: "The German government is also considering a reform of the personal insolvency regime that includes a shortening of the
discharge period. [The proposal envisages to reduce the discharge period from six years to three years provided that at least 25 percent of all debt must be repaid by an individual debtor]." Now, again, interestingly, Irish reforms provide for no set bounds for repayment, thus implying that there is no set limit resolution to the post-bankruptcy liability.

"In designing such regimes, these countries have faced a number of challenges. First, unlike corporate insolvency, there is no established international best practice at all in this area, especially with regard to the treatment of residential mortgages in insolvency proceedings. Second, as individuals are involved, the design of the law is inevitably driven by social policy considerations; these include the goal to reinvigorate individual productive potential in the mainstream economy and to reduce the social costs of leaving debtors in a state of perpetual debt distress. [Note: this is obviously not a core objective for the Irish reform, as it provides virtually no protection to the borrower during the voluntary arrangements period prior to bankruptcy.] Third, the law needs to keep an appropriate balance between maintaining credit discipline and affording financially responsible debtors a fresh start. Finally, the design of the law needs to take into account institutional infrastructure that is critical to the predictable and transparent implementation of the law, including the availability and quality of judges and trustees, administrative capacity, accounting, and valuation systems. [Note: in the Irish reforms case, none of these objectives are met and in fact some are directly violated by the reforms.]"

"A number of basic design features for an economically efficient personal insolvency law have emerged from the early cross-country experience:

• Allocate risks among parties in a fair and equitable manner; [Not delivered in the Irish case at all]
• Provide a fresh start through discharge of financially responsible individuals from the liabilities at the end of insolvency proceedings (typically after 3-5 years); [Provided in the Irish reforms]
• Establish appropriate filing criteria to make insolvency procedures accessible to individual debtors while minimizing abuse; [Irish reforms maximise potential for abuse in pre-insolvency processes of so-called voluntary arrangements by ensuring the banks have asymmetric veto power over arrangements, the banks have sole power of determination of terms and conditions for voluntary arrangements workout period, the banks control and own arbitration process, the banks are not compelled to transparently disclose their solutions and conditions for accessing these solutions, etc].
• Impose automatic and temporary stay on enforcement actions with adequate safeguards of creditor interests; [This is contradicted by the stated Government intention to speed up forced foreclosures as a part of restructuring of the banks mortgages books]
• Set repayment terms that accurately reflect the debtor’s capacity to repay to ensure an effective fresh start; and [Note: it is hard to imagine how this can be achieved in the environment of Irish reforms as outlined in the bullet point 3 above]
• Recognize foreign proceedings and enable cross-border cooperation to avoid bankruptcy tourism. [It is unclear how Irish reforms can reduce incentives to avail of the UK system given the conditions for insolvency in Ireland involve up to 6 years of voluntary work-out plus insolvency process, against 12 months in the UK].

What's happening beyond the above menu?

"The unprecedented challenge of excessive mortgage debt has prompted some European countries to introduce special legislation. [Norway, when facing its own banking crisis and recession in the early 1990s, adopted the Debt Reorganization Act in 1993 to provide debt relief to debtors who are unable to meet their obligations for a period of time. The law provides for voluntary debt settlement and compulsory debt settlement (e.g., reduction of principal of a residential mortgage to 110 percent of the market value of the residence). Now, wait, we were told that such measures (also deployed in Iceland) have never been tried and would lead to a wholesale collapse of the economy...] "

"Faced with wide-scale household mortgage distress in the aftermath of the recent crisis and the bursting of the real estate bubble, Greece, Spain and Portugal have introduced special legislation to address unsustainable residential mortgage debt burdens on households while limiting adverse effects on banks’ balance sheets and minimizing moral hazard."

All of these regimes differ in several respects:

1. "...While the Spanish regime allows financing institutions to opt into the scheme [Once a financial institution opts in, it must implement for at least two years a Code of Good Practices which provides for measures aimed at achieving a viable mortgage restructuring for debtors covered by the regime., banks’ participation is mandatory for Greece and Portugal]. 
2. ... Spain and Portugal allow mortgage debtors, subject to certain conditions and as a last resort, to transfer the mortgaged property title to the bank (or a government agency in Portugal) and obtain cancellation of the mortgage debt (up to the assessed value of the residence in Portugal). [Under the Spanish regime, the transfer of the property title and the cancellation of the debt can only happen after it has been proven that neither restructuring of the debt nor application of a partial release is viable.] Greece, on the other hand, allows the court to grant a full discharge of the mortgage debt if the debtor repays up to 85 percent of the commercial value of the principal residence determined by the court over up to 20 years. It is yet too early to assess the effectiveness of the Spain and Portugal regimes, but the Greek authorities are revisiting their framework due to its low rate of successful restructuring to date."

"A number of countries have adopted measures to facilitate out of court settlement for distressed mortgages. For example, Iceland, Ireland, and Latvia adopted voluntary guidelines or codes of conduct that provide guidance on mortgage restructurings for borrowers in financial distress. In 2012, Portugal introduced voluntary out of court guidelines for banks to restructure household debt including residential mortgages more generally with the assistance of debt mediation facilities. Estonia adopted a law effective in April 2011 aimed at supporting the out of court restructuring of debt obligation, including mortgages, of natural persons facing financial difficulties — although the procedure relies heavily on court input. To reduce the burden on the court system, the personal insolvency law recently adopted by the Irish Parliament introduces three non-judicial debt settlement procedures for household debt including a personal insolvency arrangement for settlement of secured debt up to €3 million and unsecured debt (no limit) over six to seven years. The effectiveness of these approaches in tackling mortgage distress remains to be seen."

4/4/2013: Real Debt: European Crisis in 4 charts

Some interesting charts from Liu, Yan and Rosenberg, Christoph B., World Economic Outlook, April 2013. IMF Working Paper No. 13/44. Available at SSRN: http://ssrn.com/abstract=2229653

Chart 1 below details the extent of the debt overhang in a number of countries:

Charts 2 and 3 outline the problem relative to financial assets available to offset the debt (theoretical offset, obviously):

Non-performing loans problem...

Quite telling, with no commentary needed, imo.

4/4/2013: Irish Planning Permissions 2012 data

Per data released on March 22 by CSO, Irish Planning Permissions for Construction have continued to collapse in 2012. Full year data shows that:

• In 2012 total number of all types of planning permissions issued in the state stood at 14,407 - an all-time record low (with records starting in 1992), down 9.91% on 2011. 2010-2011 rate of contraction was 15.11% and 2009-2010 rate of decline was 27.64%, so naturally for such steep drops in previous years, the rate of annual declines is moderating. 
• From the pre-crisis peak, number of planning permissions is now down 76.90%
• Planning permissions for dwellings fell to 3,643 in 2012, down 23.58%, having fallen 24.89% in 2010-2011 and 38.85% in 2009-2010. Compared to peak, the permissions are down 86.76% to a new historical low.
• Planning permissions for other new construction rose in 2012 to 3,407 from 2,964 in 2011, a rate of increase of 14.95% y/y that follows declines of 7.52% in 2010-2011 and 29.01% in 2009-2010. Relative to peak, 2012 level of permissions for other new construction are down 82.4% against absolute minimum reached in 2011 when these were down 84.72% relative to peak.

In square footage terms, planning permissions issued

• Fell 21.56% y/y for all types of new construction (these are now down 86.67% on peak, hitting a new historical low);
• Fell 39.48% y/y for dwellings (these are now down 90.89% on peak, hitting a new historical low);
• Fell 7.44% y/y for other types of new construction (these are now down 86.78% on peak, hitting new historical low);
• Rose 0.52% for extensions (these are now down 68.87% on peak, having hit the bottom at -73.41% on the peak in 2011).

At certain point in time (soon, one assumes given the rates of decline on peak already delivered), a broom shed construction somewhere in West Meath will qualify as an uplift in the market....