Risk of credit card default in Ireland intensifies

US consumers are bearing a personal debt burden in excess of €1,732 billion and the IMF estimates that over €240 billion of this will not be repaid.  The credit crisis there started with sub-prime mortgages then moved to mainstream mortgages, car loans and, most recently, to credit card debt.

There has been an increase in US credit card debt default as unemployment there rises to over 9%.  The incidence of credit card debt default in the States typically mirrored their unemployment level.  The personal debt default trend in Europe is also deteriorating but has not been as severe as in the US.

The ratio of consumer debt to income has been rising to about 140% in the US.  It hovered around the 90% mark in the last recession.

This begs the question – what is happening in Ireland?  Irish politicians usually attempt to put the best possible spin on a glaringly adverse trend, with remarks such as “the rate of deterioration has slowed”.  It is true that the level of personal credit card debt in Ireland has declined as consumer confidence has waned and retail sales levels have collapsed by over 20% in the case of the high street and by over 60% in the case of vehicles.  However, the number unemployed has risen dramatically and if defaults by Irish credit card users were to mirror the American experience, credit cards providers will be seeing a growth of over 100% in irrecoverable debts, as the following table illustrates:

End Feb	Personal credit card debt	Number unemployed	Unemployment Rate	Debt default risk
2009	€889.5M	222,800	10.2%	€88.95M
2008	€1,092.6M	109,400	4.9%	€53.53M
2007	€1,008.1M	98,100	4.5%	€45.36M
2006	€870.9M	88,200	4.4%	€38.31M

 

The Central Statistics Office reported on 25 June that employment in Ireland had fallen by 7.5% in 2009 to 1,965,000 persons.  Full-time employment dropped by 176,200 in the past year.  The decline in the Irish labour market is being attributed to a decline in participation by 46,000 persons.  There is also a demographic aspect.  The Irish  labour force has grown through net inward migration which reached a peak in early 2006 when the labour force growth was over 100,000 persons and 70,000 of this was accounted for by immigrants.  There is now a lower level of net inward migration.

Business Exposure to Indebted Consumers’

Businesses are being obliged to pay much greater attention to the risks associated with customers dependent on credit and how to manage exposure to this.   Three benchmarks to keep track of include the ratio of credit sales to cash sales, gross profit and operating income.  The objective is to moderate the consequences of any change to a customer’s credit position.  Studies have demonstrated that credit card sales are more volatile as a consequence of changes in credit limits; transactions fees that can rise as defaults rise and these are borne by traders.  If a credit card processor should go out of business the risk accruing to traders will increase.  If the proportion of credit card users who default that a particular business does business with becomes disproportionate the risk borne by the trader increases.

It would be clearly absurd to abandon credit card sales but it is important to consistently monitor associated risk and volatility.

Moral hazard of nationalising Anglo Irish Bank

The response of many prominent Fianna Fáil politicians to the result of the elections last Friday was to plead for more effective communication of Government actions. The saga of Anglo Irish Bank must provide a specimen illustration of ineffective communication.

It was nationalised on January 15^th, less than a month after the abrupt resignation of former Chairman, Seán FitzPatrick, fellow director, Lar Bradshaw who has been the Government appointed director of the Dublin Docklands Development Authority, David Drumm former Group Chief Executive, William McAteer, Group Financial Director and Chief Risk Officer, to mention but a few. McAteer is a former partner of PricewaterhouseCoopers. The current chairman of the nationalised bank was managing partner of that firm for a number of years. But the Government has failed to educate and convince the public that maintaining Anglo is in the national interest.

John McManus, has written a very compelling article in today’s edition of The Irish Times that argues the time has come to shut Anglo Irish Bank for good and the argument that it is too costly to close it is false.

No State money was invested since nationalisation but the begging bowl is out now. When the 6-month report to 31 March was issued on 29 May there was an immediate demand for €4 billion of additional capital. It was also signalled that further losses of €3.5 billion are anticipated. Anglo had assets of €101 million when it was nationalised. But the results at 31 Mar have diminished to €88.5 billion in a matter of 75 days since nationalisation.

The nation's capacity to bail out zombie banks is not infinite, nor is there much faith in their capacity to redeem themselves without extensive changes at the top. The National Pension Reserve Fund was valued at €15.5 billion on 31 March, having lost 30.4% of its value in the previous year. €7 billion of this has been invested in AIB and Bank of Ireland and if €4 billion is to be immediately committed to Anglo and a further demand for €3.5 billion is lurking in the shadows, the nation's sovereign wealth will amount to a mere €500 million.

The incidence of moral hazard is never far away when a fairy grandmother emerges to bail out an errant entity, and the former discipline of the stock market no longer prevails. It has emerged that Anglo made loans of €175 million to 10 directors and that €31 million of these are impaired. Would this impairment arise if the State was not involved and the stock market had to be impressed by the prowess of the business?

Apart from FitzPatrick who owes €106 million, Bradshaw, Drumm and McAteer the former directors were Tom Browne, Fintan Drury, Noel Harwerth, Anne Heraty, Michael Jacob, Gary McGann, Ned Sullivan, Declan Quilligan and Pat Whelan.  The former board received emoluments of €11.5 million in 2008, a slight reduction on the €12.9 million doled out in 2007.  But these far-sighted people decided that, had they remained, fees for non-executive directors would have been reduced by 20%!

This success of nationalisation is predicated on maximising the collection of outstanding liabilities. What signal is conveyed by a high incidence of impairment in the directors' loan account? There should be no directors loans whatsoever outstanding in a nationalised company.

The immediate call on State support of €4 billion immediately, is apparently to be made before the investigation of the Garda Fraud Squad and Office of the Director of Corporate Enforcement is completed. Impaired loans amount to €10.7 billion and a further €12.9 billion are deemed, at this stage, to be 'past due, but not impaired'. But they could be against this background. Loans of over €300 million, provide by Anglo to its own customers to buy Anglo shares, are now impaired and await the pleasure of the Irish taxpayer.

The cost of running Anglo Irish Bank, now a State enterprise is exorbitant. The average salary for the 1,753 employees for six months was €48,488 (equivalent to €96,976 per annum). A comparison with those public entities that engage with Anglo reveals that the average salary at the Department of Finance in 2009 will be €58,601, while the average salary of staff in the Office of the Director of Public Prosecutions is anticipated to be €64,946.

The Minister for Finance advised that nationalisation would mean "drawing a line under past activities". As the Minister is the only shareholder, why was it even necessary to engage a public relations firm in connection with the publication of the first interim statement since nationalisation? If the intention is to signal the drawing of a boundary with life under the ancient regime, why would the new board of directors and not be bold enough to 'go for change' rather than choose Drury Communications, a public relations firm established by Fintan Drury?  Drury was a former director of Anglo Irish Bank until June 27 2008. He was paid €85,000 in 2008 as a retainer to attend 4 board meetings and 6 meetings of the Anglo Risk and Compliance Committee and 2 meetings of the Nomination and Succession Committee.  Surely there is some due out of a staff of 1,753 that could coherently articulate what is happening, or have all those with these qualities already resigned?

The Government has not done enough to convince the public of the systemic importance of either Anglo Irish Bank or Irish Nationwide Building Society. The McManus article suggests that since it is most unlikely to redeem its reputation. Customer funding has dropped from €47.8 billion on 30 September to €34.1 billion on 31 March – driven by “a market wide aversion to risk”. But is also reflects the decrease of €7.3 billion of customer deposits received from Bowler’s Irish Life Assurance Company that was designed to hoodwink stakeholder at the end of the last financial year – 30 September 2008. 

Customer lending, to existing customers, increased fractionally from €71 million to €72.3 million and €700 million of this concerned capitalised interest and the roll-up of other interest outstanding.  Basically it is a matter of endemic stagnation combined with a ruined reputation and an open-ended drain on public funds.

Ireland’s credit rating was reduced on June 8th to AA negative by Standard & Poor’s on account of the fiscal cost of weakening bank sector asset quality.

Anglo Irish Bank -Taxpayer: ‘open your wallet’!

The publication of the latest 6-month results from recently nationalised Anglo Irish Bank, to 31 March 2009, have been described as ‘very disappointing’  by the Minister for Finance.   Chairman, Donal O’Connor, says they are a reflection of trading conditions that have been ‘very challenging’ and a funding environment that is ‘extremely challenging’.  All of this is now to be ‘very challenging’ for the Irish taxpayer who will be asked to immediately fork out €4 billion in additional capital out of ‘very disappointing’ Irish tax revenues in 2009 – not anticipated to surpass €34 billion.

Anglo has incurred a €4.1 billion loss including a specific impairment charges of €3.7 billion and collective charges of €400 million.  But there will be more, much more, perhaps as much as €3.5 billion more.  These calls on public resources have absolute precedence over all others, including special needs education, medical cards for older citizens because Anglo Irish Bank is of ‘systemic importance’  Citizens’ are not systemically important in this republic.  They are expendable pariahs’, apart from their capacity to sustain Ireland’s crony capitalists and the herd of politicians who feed of them.  The comments and supplications of economists employed by Irish banks’, brokers and representative bodies – reveal the insight of eunuchs with possibly a junior certificate grasp of economics and an overwhelming sense of their own self-importance.

It is particularly distressing to observe that a €31 million impairment charge relates to loans to directors of Anglo Irish Bank, including €8 million granted on ‘non-recourse’  terms but renewed on ‘full-recourse’ terms.  Directors’ loans total €175 million at 31 March 2009 before the impairment split between 10 directors, none of whom held office at 31 March 2209.  There are also loans of €7 million due from two senior managers.  Directors’ deposits at €20 million are €7 million less than on 31 March 2008.  The risk management processes at Anglo Irish Bank were as effective as splashing after shave on a skunk in order to eliminate foul odours.

The €175 million directors’ loan figure includes €106 million due from the former chairman, ‘Seánie’ FitzPatrick.  He owed €83.3 million on 30 September 2008 and €119.8 million on 31 March 2008.

Total loans outstanding increased slightly to €72.3 billion.  The proportion of this classified as ‘good’, ‘satisfactory’, ‘lower quality, but not impaired’ is €48.6 billion, compared to €68.44 billion on 30 September 2008.

Those that are ‘past due, but not impaired’ are €12.9 billion and, of great concern to taxpayers, the proportion of the loan book that is impaired is €10.7 billion.  The combined sum, €23.6 billion compares to €2.53 billion just six months earlier.

The are also some interesting changes in staff levels and remuneration following the disposal of Anglo’s Swiss and Austrian private banking businesses:

 

Anglo Irish Bank	6-Months to 31 March 2009	6-Months to 30 September 2008
Staff remuneration	€85,000,000	€114,000,000
Staff numbers	1,753	1,922
Average pay for half-year	€48,488	€59,313

 

When restated on an annual basis, the average pay at Anglo Irish Bank is €97,776, now funded by increased government borrowing.

Irish Life and Permanent board: should they be endorsed for anther year of brilliant stewardship?

It is outrageous and unconscionable that the board of a bank that has presided over appalling performance that has squandered shareholder wealth and mugged the taxpayers of Ireland for critical support to sustain the business, should even consider seeking a renewed manadate. But that is precisely what is to happen at Irish Life & Permanent Plc.

99% of the 135,484 shareholders in Irish Life & Permanent Plc (IL&P) are holders of 5,000, or fewer, ordinary shares but they only control 21% of the total equity. All shareholders will have an opportunity to have their voice heard at their version of Dance Hall Q's and Hucklebuck Shoes, also known as the AGM, on 15th May at the RDS and voice their pained reaction to:

• An 86% collapse in share price



• Abandoned dividends



• The rogue deposit in Anglo Irish Bank after the Government bank guarantee covering deposits, senior unsecured debt and asset-covered securities was announced



• Losses of €122 million arising from transactions with Lehman Brothers and an Icelandic bank
  
  


• Customers unable to obtain personal or business credit
  

A share price of €11.89 meant that the value of IL&P at the start of 2008 was €3.28 billion. A share price of €1.60 at the end of 2008 meant the group was worth €443 million, a drop of over 86%. The corresponding drop in share value at Bank of Ireland and AIB in 2008 was greater. The appetite for shares in Irish financial institutions is severely impaired by the ambiguity connected to their extravagant property loans.

The calamitous drop in wealth and absence of income is devastating for so many but the implosion of pension funds is crucifying a huge number of pensioners whose providence was meant to equip them to be wholly independent members of what is now referred to as the coping class. But it was the €7.3 billion deposit in Anglo Irish Bank at the end of September 2008 by Irish Life Assurance Plc, apparently without the sanction of the board of IL&P, that has fatally destroyed the reputation of this group, which was once hailed as an emblem of providence and prudence. They must have all been fast asleep in their showband bus after a late night gig in Claremorris and the roadies decided it was better not to disturb them!

This AGM is to take place without any explanation of this transaction and it defies credibility that the existing board members, with one exception, are seeking election on a platform of astute, unrelentless, brilliant but light-touch, vicarious stewardship. Wow!

Many are curious as to how a modest-sized institution, which IL&P is, could be in a position to invest such an enormous sum outside its business. The core capital of Irish Life & Permanent is of the order of €4 billion. Could this have been compromised by this transaction?

Cash balances at 31 December 2007 were €253 million but dropped to €200 million at the end of 2008. IL&P was more depndent on debt funding in 2008 than previously. It had to raise €1 billion through an internal transaction with Irish Life Assurance to support its own bank in the middle of 2008. Irish Life Investment Managers that none of its clients assets were utilised in the Anglo Irish transaction. How could the board not have been made aware of what was going on by the chief risk officer both in the context of scale and context?

If IL&P did not have access to cash resources of €7.3 billion was cash provided through another Irish bank and, if so, which one?

If the transaction did not involve cash changing hands but was based on some form of IOU, does this introduce a fraudulent consideration with a possible criminal case to be answered?

Are the incumbent board members motivated by narcissism? Perhaps the prospect of sharing close to €1 million in fees to attend 9 meetings cannot be disregarded. But a dispassionate observer might opine that this particular showband ought to have performed The Hucklebuck for the last time and that an encore was unnecessary, given that the curtain hem of credibility is already dropping close to floor level.

One of those seeking the trust of the shareholders is former Financial Regulator, Liam O'Reilly one of whose other sinecures is chairman of the Chartered Accountants Regulatory Board. The bean counters are investigating the role of former finance director, Peter Fitzpatrick, in the Anglo Irish Bank transaction. Will we see the cronnies tripping each other up?

There are occasions when the reputation of an entity is so compromised that the prospects of redeeming it without a change of personnel is even less promising than the prospects of Leitrim winning the Sam Maguire Cup. I don't even think that if Gillian were to don a Tina Turner wig and belt out a rendering of Simply the Best would change the mood of angry shareholders. Her eforts, I’m afraid, would be in vain, if the institutional cronies fail to hunt in a pack.

Overcharging at AIB - 'my personal experience'

Mr Eugene McErlean, former Group Internal Auditor of AIB Plc, from 1997 to 2002 presented to the Oireachtas Joint Committee on Economic Regulatory Affairs yesterday, March 24th. He told the Committee that the Financial Regulator knew about the overcharging of customers in AIB in 2001 and conducted an investigation in this in 2002 but failed to protect customers. He described how €65 million was liable to be paid as restitution to AIB customers who had been overcharged. He also related how a branch manager charged a customer for playing golf for 3 hours’ management time and how the overcharging regime never involved large individual sums so customers were never really in a position to argue. That is until they overcharged me!

When it comes to bank overcharging my antennae is particularly sharp when the subject is AIB Bank. My own experience predates the inauguration of the Irish Financial Regulator. I started a £14,000 20-year mortgage with AIB in 1978 that was fully discharged on schedule and with no missed payments. I recall one February day in 1999 looking at my AIB current account bank statement on the internet and being horrified to discover a debit for a £50 ‘Mortgage Closure Fee’. I instantly called the account officer at the Bankcentre branch in Ballsbridge where my account was maintained. I told this person outright that I was not paying this charge. She advised me that “everybody pays this charge” to which I again responded that “I am not”.

The branch manager then came on the line. I had never met him and I had the impression that he was busily scanning my account history on a computer before he began to converse with me. When he did so I said “you know why I’m on the line. I am not paying this charge”. He responded that I had “operated a very disciplined account” which was the case and still is, to which I replied “yes, so disciplined that the bank never has to spend as much as 32 pence on a stamp to recover a mortgage instalment over the previous 20 years, a period when interest rates were so high that the Government had to subsidise them. You have had this account for 25 years and you can have it for a further 25 seconds while you’re making up your mind about this charge”. He immediately took the only course open to him and dropped the charge.

This incident coincided with the attendance of former Taoiseach, Charles Haughey, at The Moriarty Tribunal and an examination of his relationship with AIB. He owed AIB over £1 million in 1979 when he was elected to the office of Taoiseach.. Haughey had received £750,000 from an unidentified source to help defray this debt and he apparently offered to arrange a £10 million deposit from a source in the Middle East in exchange for offsetting the balance of the debt. But Haughey never repaid a sum of £110,000, on which there was to have been no interest charged, as an element of an overall settlement. Mr Justice Moriarty found that AIB had settled a £500,000 overdraft owing by Haughey shortly after he became Taoiseach on favourable terms and that AIB had shown extraordinary deference to Charles Haughey in their dealings with him. Haughey, it appeared warranted special treatment because he was, as AIB would see it, a KBI (key business influencer). It also coincided with the announcement by AIB of record profits of £800 million+ for 1998.

My fingers were dancing with rage and I decided to write to the Chief Executive of AIB, Tom Mulcahy. The gist of what I said to him was that I was not a KBI but I would consider myself an LLP (loyal little peasant). I stated that this charge was immoral and that I would welcome a debate with him on one of the talk shows on RTE Radio 1; that if he had any balls he would have sent me a case of wine to thank me for my trouble-free business over 25 years rather than imposing this awful immoral charge. Three days later a 6-bottle case of wine arrived at my home from Mitchells Wine Shop, then located under the old railway arches in Harcourt Street!

The upshot is that:

• The charge was instantly removed from my account
  
• The charge, as then defined, was eliminated from AIB’s charge tariff
  
• The charge was one of those rogue charges similar to those described by Mr McErlean in his evidence on 24 March 2009, ten years later.

What Would Warren Buffett Make of Anglo Irish Bank?

Warren E. Buffett is a greatly admired icon of the American business world. He was born in August 1930 in Omaha, Nebraska. He is ranked 2nd on The 2009 Billionaire List published by Forbes with a net worth of $37 billion, having been the richest billionaire in 2008, when his wealth amounted to $62 billion. He founded Berkshire Hathaway Inc in 1964. He has not increased his annual salary at Berkshire Hathaway beyond $100,000 (€78,000) in 28 years. Apart from salary, his overall compensation amounts to $491,000 (€384,000) but he will not be paid a bonus this year. He has also lived in his present home for over 50 years. He is still the Chairman of the Board and around 31,000 shareholders are expected to attend the company’s annual general meeting on Saturday, 2nd May in Omaha, an event that extends over a weekend and offers those attending the opportunity of an extensive discounted shopping spree at a wide range of Berkshire Hathaway consumer businesses!

Berkshire Hathaway investment interests are far reaching. They include the utility sector, insurance, manufacturing and retailing, finance and financial products and a wide range of investments in companies such as Coca Cola, American Express Company, Johnson and Johnson, Proctor & Gamble, sanofi-aventis, Swiss Re, Wal-Mart, The Washington Post and Tesco.

Buffet’s has very focused priorities:

• He ensures that they maintain substantial liquid resources, commits to modest short-term obligations and has diverse sources of earnings and cash



• He strives to ensure that each business has a robust basis (‘moats’) of competitive advantage



• He develops operating managers who deliver exceptional results
  

Despite his accomplishments, not everything he was invested in has been rewarding. The past year has seen his wealth drop by 40% as a consequence of the fall in value of the companies he has invested in. Most of the Berkshire businesses were adversely affected by the economic developments last year but between 1965 and 2008 they achieved a compound annual increase of 20.3%, or an overall gain of 362,319% since 1964.

He invested $244 million on shares in two Irish banks in 2008 as they appeared cheap to him. But by the end of 2008 he had incurred an 89% loss on these, a development he describes as an ‘unforced error’ on his part.

Anglo Irish Bank was nationalised by the Irish Government on 21 January last on account of its systemic importance to the Irish financial system. Its former chairman and founder, Mr. Sean FitzPatrick, resigned on 18 December 2008 when it was disclosed that loans amounting to €87 million were not reflected in the accounts of Anglo Irish Bank and were hidden from stakeholder scrutiny at Irish Nationwide Building Society. While FitzPatrick maintains that this was a legal, if not transparent series of transactions, they would be unlike to pass muster with Buffett. Furthermore, the €1 million bonus and the 12% salary increase for 2008 paid to Michael Fingleton, the chief executive of Irish Nationwide Building Society is likely to be as much of an affront to Buffett as it is to Irish citizens.

The latest balance sheet of Anglo Irish Banks (at 30 Sep 2008), reflects €2,233,000,000 (€2.23 billion) invested in derivative financial instruments. Derivatives are financial contracts whose value is determined by an underlying value such as that of an asset, a commodity, a mortgage or even the movement of an index, such as an interest rate or the FX rate attaching to a particular currency. They are supposed to mitigate the risk of a change in the value of the underlying assets and that activity is hedging. The notional value of a derivative, based on the nominal value of the various assets underlying it, is not recorded on the balance sheet of the business owning it - but the market value is.

Buffett is scathing about structured derivative and describes them as ‘dangerous’ because they have dramatically increased the leverage and, therefore, the risks inherent in the financial system. It is almost impossible for investors to understand and analyze large businesses with substantial amounts of derivatives. He is likely to have similarly sceptical about securitized assets and leveraged funds.

An ordinary share can be bought or sold within days with one party obtaining cash and the other the corresponding security. There is no enduring counterparty risk which means that problems cannot fester. Rapid settlement is the vital to the integrity of the stock market.

But structured derivative contracts often go unsettled for years, or even decades and counterparties can build huge claims against each other. Paper assets and liabilities are hard to completely accurately assess; yet, in the case of Anglo Irish Banks, they are an important element of it financial profile.

A complex web of mutual dependence has developed amongst financial institutions with receivables and payables becoming concentrated among a small number of dealers who maybe excessively leveraged in other ways too. Buffett says that such participants “seeking to dodge trouble face the same problem as someone seeking to avoid venereal disease. It is not whom you sleep with, but also who they sleep with” that is the issue. The current financial crisis has demonstrated that only companies that can ‘infect’ a neighbourhood are attracting US government support and intervention.

Buffet believes that the chief executives of many large businesses were incapable of managing them because of the complexity of the derivatives those businesses are involved with. He doesn’t believe that any mechanism can provide sufficient transparency to describe or regulate derivatives or for auditors to audit them. He cites the collapse of Fannie Mae, Freddie Mac and Bear Sterns to support his opinion.

Buffett might also be curious to know if there is a connection between the Anglo Golden 10 that were provided with loans by Anglo Irish Bank to buy its shares outside normal market structures last year and those borrowers who owe the Bank more than €500 million. He might ask if this is the case were any covenants and obligations attaching to these loans broken at any time. If so what impact could this have had in persuading them to become involved in this Anglo loans for shares episode?

Banking Salaries in Ireland and Elsewhere

When the Governor of the Central Bank, John Hurley, appeared before the Oireachtas Committee on Economic Regulatory Affairs on Tuesday, 10th March, he explained that the public exhortations of the Central Bank that highlighted risks to financial stability in Ireland from August 2007 were “not as effective as they might have been and they did not lead to a sufficient or timely change in behaviour”.

The Central Bank of Ireland's share of the paid up capital of the European Central Bank since January 2009 is 1.1107%. As a member of the European system of central banks it has no direct influence over interest rate determination but maintains responsibility for monetary policy functions and economic analysis - but there seems to be little attention to the latter, judging by the behaviour of the Irish banks and Mr. Hurley's comments.

The Committee were reminded that the Governor is paid an annual salary of €348,000, a figure that reflects the voluntary reduction taken by the Governor last October from the €368,000 that he had hitherto been paid.

It is interesting to compare the salary for this position with those whose influence on global economic affairs is absolutely pivotal and whose utterances and nuances hugely impact the world investment climate and the effectiveness of economic recovery initiatives.

The U.S. Federal Reserve System consists of 12 federal reserve banks located in major cities throughout the United States supported by the Federal Reserve Board based in Washington DC. The System as a whole employs almost 20,000 persons and the Board employs 2,053 persons. The annual salary of the Chairman of the Federal Reserve Board, Mr. Ber Bernanke, is $191,300 (€150,000), and was approved by the US Congress in February 2008.

The President of the European Central Bank, M Jean-Claude Trichet, oversees a staff of 1,499 persons and was paid €351,816 last year. He is also provided with a residence, in lieu of a residential allowance, but his salary is subject to EU tax, pension, medical and accident insurance deductions.

The Oireachtas Committee observed that the Canadian banking system “had operated quite well with prudential supervision of a high standard”. The Bank of Canada Governor, Mr David Dodge, whose 7-year term concluded on 31st January, was paid a salary scale the maximum point of which was CAN$407.900 (€250,000).

The Central Bank was founded in 1943 and Mr. Hurley is the 9th governor. He and seven of his predecessors formerly held the position of Secretary General of the Department of Finance. The exception was Mr. Maurice Moynihan, co-drafter of the 1937 Constitution and formerly Secretary of the Department of the Taoiseach.

The salary of the governor is therefore influenced by the salary of the Secretary General of the Department of Finance. This was set at €303,000 on 14th September 2007 by the Review Body on Higher Remuneration in the Public Sector, in its 7th general review, a figure that may have been reduced voluntarily by the current incumbent.