# Ross Maguire: "Bank bashing has gone too far in Ireland"



## Brendan Burgess (10 Jun 2019)

A good article in the Irish Times 

* Rage feeds populism but is not a policy and is incapable of providing a solution                *


_Bank and fund bashing are a national pastime in Ireland (and to some extent deservedly so) but this has now developed a whiff of populism especially as it becomes associated with the challenge of homelessness.


The three ingredients are present.


The identified problem is forced repossessions. But while there have been some repossessions, there is nothing like the tsunami predicted. By international comparison there are very few repossessions here and Irish borrowers are the most protected in the world. This is not going to change.


Banks, so-called vulture funds and those identified as “vulture lovers” are blamed._




There is no analysis here. When we blame banks, who are we talking about? We don’t mean the teller or the director of human resources or the shareholder or the depositor. In this context “banks” and “bankers” are almost meaningless terms.


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## noproblem (10 Jun 2019)

The big problem lies within what's written above. In the banking sector no one ever emerges as being the one in charge, the one who signs off, who makes that final decision, who accepts that the book stops at his/her door. If my business fails, I fail, i'm gone, end of. Maybe taking responsibility might help with peoples perception of "them". I do hate calling anyone by the term Them but by their behaviour they've earned the term.


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## mathepac (10 Jun 2019)

They've copied the political/public service model where no one individual is ever responsible for anything. All decision are made anonymously by committee or external 3rd parties or dictated by "industry best practice" The buck never stops with any one individual or group and any publicly-funded (Séan & Síle *always* pay) "independent inquiry" into alleged wrong-doing will drag on for years will conclude nothing.


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## NoRegretsCoyote (10 Jun 2019)

mathepac said:


> They've copied the political/public service model where no one individual is ever responsible for anything.



That's pretty much the case in any large private organisation too.

Shareholders generally do not like firms in mature industries being run on the whim of a CEO.

BTW, the banks with the most concentrated power (INBS, Anglo) made (proportionately) much greater losses than AIB/BoI etc where decision-making was less centralised.


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## Andy836 (10 Jun 2019)

noproblem said:


> The big problem lies within what's written above. In the banking sector no one ever emerges as being the one in charge, the one who signs off, who makes that final decision, who accepts that the book stops at his/her door. If my business fails, I fail, i'm gone, end of. Maybe taking responsibility might help with peoples perception of "them". I do hate calling anyone by the term Them but by their behaviour they've earned the term.



That's just not true and really reinforces the point the author was making.

Virtually all the shareholders were wiped out apart for some tiny value retained by BOI shareholders because they avoided full nationalization.
Apart from BOI the CEO's and senior management were pretty much all shown the door. Same for the boards.


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## Leo (10 Jun 2019)

NoRegretsCoyote said:


> That's pretty much the case in any large private organisation too.



Pretty much any organisation of any scale really. Who would work in an environment where they could be hung out to dry in public for a mistake or poor decision? To be successful, companies need to operate as a cohesive organisation, not a collection of individuals.


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## Purple (10 Jun 2019)

Leo said:


> Who would work in an environment where they could be hung out to dry in public for a mistake or poor decision *and had a pay cap which was lower than their international counterparts*?


I added a bit


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## Seagull (10 Jun 2019)

Andy836 said:


> That's just not true and really reinforces the point the author was making.
> 
> Virtually all the shareholders were wiped out apart for some tiny value retained by BOI shareholders because they avoided full nationalization.
> Apart from BOI the CEO's and senior management were pretty much all shown the door. Same for the boards.


The bank boards were basically left with the choice of declaring themselves dishonest or incompetent. If they knew what was happening and allowed it, they were dishonest. If they didn't know what was happening, then they were incompetent. I know that's simplifying matters.


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## Andy836 (10 Jun 2019)

Purple said:


> I added a bit



Well, it's not like they're actually competing in those markets.

A half mill for a CEO job in AIB or BOI seems fine. Neither bank is going to do anything world beating now and the top roles will largely just be stepping stones for jucier gigs elsewhere. I don't really think the public, nor their shareholders, want the banks doing anything exotic.


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## noproblem (10 Jun 2019)

Andy836 said:


> That's just not true and really reinforces the point the author was making.
> 
> Virtually all the shareholders were wiped out apart for some tiny value retained by BOI shareholders because they avoided full nationalization.
> Apart from BOI the CEO's and senior management were pretty much all shown the door. Same for the boards.


Shown the door by who? you might like to inform us who was fired?  Who was fined for incompetence, who accepted the responsibility? We all know the few who were taped and jailed, that few  took the flak for the big boys Just when it all went belly up the goverment had done a deal with the banks on their criminality in the out of state deposit account debacle and stuck the account holders with the bill thereby not releasing BIG NAMES in political and Banking circles who were well involved, some RIP now. They now want big salaries back again and they're putting it out there in the public domain to measure peoples outrage. Will we ever learn in this country, ever?


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## NoRegretsCoyote (10 Jun 2019)

Andy836 said:


> A half mill for a CEO job in AIB or BOI seems fine.



I dunno, what's standard for a business with 10k employees and a €100bn balance sheet?

There are 2.5k people in banking industry in the EU paid >€1m.


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## NoRegretsCoyote (10 Jun 2019)

noproblem said:


> Shown the door by who? you might like to inform us who was fired?  Who was fined for incompetence, who accepted the responsibility?



Pretty much all the boards of AIB, INBS, Anglo and PTSB were turned over in the 18 months or so following the guarantee. All the CEOs bar BoI's were shown the door too.

Three or four bankers have been jailed (not sure after appeals).

This is all public knowledge.


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## noproblem (10 Jun 2019)

NoRegretsCoyote said:


> Pretty much all the boards of AIB, INBS, Anglo and PTSB were turned over in the 18 months or so following the guarantee. All the CEOs bar BoI's were shown the door too.
> 
> Three or four bankers have been jailed (not sure after appeals).
> 
> This is all public knowledge.


You really should read what i've written. Who was FIRED, who Fired them, who accepted responsibility? That's just part of what I  wrote in response to the article. Read it, then answer.


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## Leo (11 Jun 2019)

noproblem said:


> Who was FIRED,



Firing people is a dangerous, and often very costly affair. In the private company I work for, they pay off incompetent people to leave, it works out way cheaper than the alternative.


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## mathepac (11 Jun 2019)

NoRegretsCoyote said:


> Shareholders generally do not like firms in mature industries being run on the whim of a CEO.


I don't remember anyone, least of all me, suggesting that.


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## mathepac (11 Jun 2019)

Seagull said:


> I know that's simplifying matters.


In retrospect quite a number have proven themselves to be both dishonest *and* incompetent.


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## mathepac (11 Jun 2019)

Andy836 said:


> Virtually all the shareholders were wiped out


So what, such is the nature of gambling, sometimes you win, sometimes you lose. Shareholders have opportnities to change boards at AGMs or EGMs; if their boards lose their money then why does the ordinary tax-payer always pay? We're still paying insurance levies for failed insurance companies. Gallagher, PMPA, ICI anyone? RSA had the decency to pump a few quid in from head office after the books in the Irish operation appeared to have been cooked.


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## NoRegretsCoyote (11 Jun 2019)

mathepac said:


> I don't remember anyone, least of all me, suggesting that.




My point is that decision-making in banks was so layered (with dozens of people involved) that no one person was individually responsible.


There were a few cases of misreporting at Irish banks but these were responsible for a very small % of the overall losses.


Banks lost a lot of money by lending money that would never be repaid. Being bad at your job is not a crime.


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## Andy836 (12 Jun 2019)

mathepac said:


> So what, such is the nature of gambling, sometimes you win, sometimes you lose. Shareholders have opportnities to change boards at AGMs or EGMs; if their boards lose their money then why does the ordinary tax-payer always pay? We're still paying insurance levies for failed insurance companies. Gallagher, PMPA, ICI anyone? RSA had the decency to pump a few quid in from head office after the books in the Irish operation appeared to have been cooked.



Perhaps its the new format but you should still be able to see that my response was a direct response to the quoted post of NoProblem.

NoProblem complained that if his business went bust, he'd b wiped out, he'd loose his job, he takes responsibility. I was simply pointing out that the Banks senior management & boards nearly all lost their jobs and the shareholders were wiped out - which is the same thing.

Why does the taxpayer always pick up the tab? Well, because the taxpayers respresentatives are too scared of presiding over a financial disaster - say Quinn Insurance is permitted to go bust - they'd a lot of policy holders. There would have been lots of claims against them. If the insurer is bust and not supported then those policy holders will become liable for the claims against them. Politicians don't want to deal with that - one motorist making another motorist bankrupt because an insurance company failed. Sure there's even an insurance industry sponsored fund for scumbags who drive without insurance. Exact same with the Banks, no Irish politician was going to preside over depositors not getting their money back.


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## Andy836 (12 Jun 2019)

NoRegretsCoyote said:


> I dunno, what's standard for a business with 10k employees and a €100bn balance sheet?
> 
> There are 2.5k people in banking industry in the EU paid >€1m.



True, but AIB or BOI are not doing anything earth shattering.
I presume the bulk of those being paid over €1mm in the EU are in Investment Banking rather than vanilla mortgage banking.
And there's plenty of people to take on the role at that level even if they may depart shortly thereafter. Until they're no longer partly state owned the CEO positions are really only caretaker positions.


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## noproblem (12 Jun 2019)

Makes me smile really when you see a man coming into the top of the Irish banking system from down under with the approval of the Irish Minister of Finance, although  he's the subject of possible incompetence in his own country.  Pay them peanuts and you'll get monkeys, pay them with extra peanuts and you're fairly sure to get bigger monkeys with more intricate tricks. Didn't have to go searching around the world to find someone like that.


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## NoRegretsCoyote (12 Jun 2019)

Andy836 said:


> True, but AIB or BOI are not doing anything earth shattering.
> I presume the bulk of those being paid over €1mm in the EU are in Investment Banking rather than vanilla mortgage banking.



I don't do anything earth-shattering but I'm still paid the market rate for my job. If I wasn't I'd probably look elsewhere.

BoI and AIB are top 100 by balance sheet in the EU from what I can tell, yet CEOs are probably not even in the top 3000 best-paid bankers.


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## Bronte (12 Jun 2019)

NoRegretsCoyote said:


> My point is that decision-making in banks was so layered (with dozens of people involved) that no one person was individually responsible.
> 
> 
> There were a few cases of misreporting at Irish banks but these were responsible for a very small % of the overall losses.
> ...


My husband worked in a job involved contracts worth millions. If he was bad at his job he would have been fired. That’s called being fired for being bad at your job. We’ve seen people fired after relocation abroad with their families. Being given 10 minutes to pick up their stuff from their desk, supervised by security and brought to the door.


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## Bronte (12 Jun 2019)

Andy836 said:


> True, but AIB or BOI are not doing anything earth shattering.
> I presume the bulk of those being paid over €1mm in the EU are in Investment Banking rather than vanilla mortgage banking.
> And there's plenty of people to take on the role at that level even if they may depart shortly thereafter. Until they're no longer partly state owned the CEO positions are really only caretaker positions.


If they’re so underpaid isn’t it odd why they aren't moving en masse to better paid jobs.


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## NoRegretsCoyote (13 Jun 2019)

Bronte said:


> If they’re so underpaid isn’t it odd why they aren't moving en masse to better paid jobs.



AIB have recently lost a CEO and CFO to (presumably) better paid jobs.


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## Dazzler123 (13 Jun 2019)

To those persons looking for people to be fired for incompetence theres a few reasons as to why this never happened.  The bad underwriting decisions need to be looked in the context of the information at the time. They may not have appeared to be bad decisions at the time.  

Aldo i suspect people have been fired or quietly moved on, but its just that you never heard. For example i know of a head of compliance who was moved on in the wake of the tracker scandal in one particular pillar bank, before the scandal broke in a big way.  The reason for the move was a commonly known secret.

Also, as stated above...underwriting decisions are made with seversl layers of oversight. No one person in general is responsible for any one decision. 

Finally...bad underwriting decisions are not gross negligence or sackable offences and so it would be very difficult to fire someone if they followed internal procedures and made a juddhement call only


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## Andy836 (13 Jun 2019)

NoRegretsCoyote said:


> AIB have recently lost a CEO and CFO to (presumably) better paid jobs.



They lost their last two CEOs - David Duffy, before Byrne, went to Clydesdale - his salary in Clyesdale was more than GBP 2mm per annun in 2016 & 2017.


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## Andy836 (13 Jun 2019)

NoRegretsCoyote said:


> I don't do anything earth-shattering but I'm still paid the market rate for my job. If I wasn't I'd probably look elsewhere.
> 
> BoI and AIB are top 100 by balance sheet in the EU from what I can tell, yet CEOs are probably not even in the top 3000 best-paid bankers.



That's not entirely true is it. 

If you were given the opportunity to take on a job, which would pay the bills but might be slightly less than what you could potentially earn now, but you know that after 3 or 4 years you'll be then able to compete for jobs paying 4x the salary, you would take it. 

Basically, these CEO roles are like internships - great for the CV & great for building your network/raising your profile. Its a short term investment for a long term gain.


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## NoRegretsCoyote (13 Jun 2019)

Andy836 said:


> Basically, these CEO roles are like internships - great for the CV & great for building your network/raising your profile. Its a short term investment for a long term gain.



Pre-pay cap, can you give me an example of an Irish bank CEO that moved on to a better-paying job afterward?


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## Andy836 (13 Jun 2019)

NoRegretsCoyote said:


> Pre-pay cap, can you give me an example of an Irish bank CEO that moved on to a better-paying job afterward?



No i can't. Because they were being paid a small fortune to compete in an expanding credit market so they were being paid enough to stay.

They are not now competing in anything other than mortgages and even in that market there doesn't appear to be much competition.

I don't have a problem with the CEO's & CFO's moving on after a couple of years.


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## NoRegretsCoyote (13 Jun 2019)

Andy836 said:


> Basically, these CEO roles are like internships - great for the CV & great for building your network/raising your profile. Its a short term investment for a long term gain.






NoRegretsCoyote said:


> Pre-pay cap, can you give me an example of an Irish bank CEO that moved on to a better-paying job afterward?






Andy836 said:


> No i can't.




You claim that an Irish bank CEO is a stepping stone to a bigger job, yet can't cite any examples of where this happened before there was a pay cap.

I'm not convinced that AIB bank shareholders (ie, you and me) are best served by someone with their eye on the door.

I'm out.


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## AlbacoreA (13 Jun 2019)

Brendan Burgess said:


> ...
> There is no analysis here. When we blame banks, who are we talking about? We don’t mean the teller or the director of human resources or the shareholder or the depositor. In this context “banks” and “bankers” are almost meaningless terms.



Ask a vague question get a vague answer. 

Banks constantly make odd business decisions. 
They often choose to make life very hard for their customers which seems to give the bank a less than optimum return. 
Even encouraging customers to switch banks to get a better deal.


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## Andy836 (13 Jun 2019)

NoRegretsCoyote said:


> You claim that an Irish bank CEO is a stepping stone to a bigger job, yet can't cite any examples of where this happened before there was a pay cap.
> 
> I'm not convinced that AIB bank shareholders (ie, you and me) are best served by someone with their eye on the door.
> 
> I'm out.



You seem to have gotten this all backwards.

Pre GFC the AIB & BOI CEO roles were real leadership roles. They were tasked with expanding the balance sheets and successfully did so and picked up market rate remuneration packages - until of course when they didn't.

Post GFC these CEO positions are effectively internships as they are not really tasked with growing their balance sheets as they are not doing much if any high risk business  - as there's no appetite for them to do so from their largest shareholder (the Govt/State).

As for current shareholders being better served by someone with a long term view, perhaps but I'm not convinced. As I see it investors are happy with the CEO simply being "a safe pair of hands". So it's effectively just a yield play for shareholders. There's no growth multiple attributed to AIB or BOI - they both trade at <1,0x book value.


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