Government Paid PWC €4.95 Million for Advice on Banks

The Irish state paid Price Waterhouse Coopers €4.95 million for advice and professional services in relation to the banking crisis.

PWC were commissioned after the state guarantee was put in place to assess the balance sheets of the covered banks. As I have noted here before, PWC finished their fieldwork in December 2008 and concluded in relation to Anglo:

Under the PwC highest stress scenario, Anglo’s core equity and tier 1 ratios are projected to exceed regulatory minima (Tier 1 – 4%) at 30 September 2010 after taking account of operating profits and stressed impairments … We used an independent firm of property valuers (Jones Lang LaSalle) to value a sample of 160 properties held as security in relation to the top 20 land & development exposures on Anglo’s books as identified in our Phase II review and report. The results of this work indicated that impairment charges over the period FY09 to FY11 would fall in a range between the two PwC impairment scenarios but closer PwC’s lower impairment scenario.

Can we ask for our €5 million back?

38 replies on “Government Paid PWC €4.95 Million for Advice on Banks”

Can we even have the PWC report published?

The one Mr. Lenihan didn’t bother to read. It can’t be all that sensitive now that we know the banks are bust, can it?

I see in Sweden they are talking about taking the auditor of a failed bank to court…

The Nyberg inquiry needs to deal, not just with banks and regulators, but also with auditors, advisers and rating agencies. Who signed off? What were the bond ratings as the balloon went up?

Let’s look at the valuers for a change. Many of the entities that were offering strong valuations of balance sheets’ assets are now involved in NAMA and not offering anything like their original estimates. The prime €100 million site is now looking a sheepish €5 million. Regarding the PWC report on Anglo, which turned into terrible fiction, it is not unreasonable for the taxpayer to want an analytical explanation as to how it could have been so off the mark.

Small country. Too much nepotism and professional incestuous.

Given the history of PwC’s Irish State gigs, it’s hard not to wonder if PwC delivered exactly what the government wanted from them.

This is going to seem like terribly small beer. I’m sure someone will correct me if I’m wrong, but doesn’t NAMA’s budget for fees and advice to its horde of parasites run to c. €5m PER WEEK – FOR THE NEXT 10 YEARS??

More Greek than Greece

Brady Bonds For the Eurozone
Simon Johnson and Peter Boone

“Ireland’s banks financed their rapid growth by borrowing from other European banks, so the health of Europe’s financial system has become entwined with the survival of these insolvent banks. It is no surprise that the ECB is now Ireland’s largest creditor – through buying up its government bonds. In the latest data (through the end of August), despite being two-thirds the size, Ireland received more ECB financing than Greece – totaling 75% of Irish GNP and growing rapidly.”

Every kleptocracy has rules else it would have no cohesion. Economics could study and render these rules.

The payment to minor actors who support the ostensible patent government is probably one of them. It can buy time in which to reorganize and regain the trust of the duped upon whom they prey. The PTB of the kleptocracy, who clearly are not the patent government, given their incompetence and venality, should be ascertained. Chow and Lie is merely an accomplice of one of the PTB. Given the disparity in power, the nearest neighbour has significant unpreceived positive and perceived negative influence as a part of TPTB. So too, the erstwhile state religion. Also Rome. Any billionaires who want to involve themselves. The attendees at bilderberg.

All of these are TPTB. Some are moderately democratic. Many most definitely are not. They also do not share a love of free markets! Many control their market with an iron fist. France dealt with these various influences and still struggles against them. Italy is more clearly involved in this struggle. Belgium? Corruption thrives in these circumstances as do secrets and lies. Machiavelli and Sun Tzu are still relevant and implemented by those who can and dare!

That OK, Karl?

They are a parisitic organization and killing the host is never a good idea for a parasite!

Almost two years after the event, the people who paid for it are told the cost.
Of course it’s only a minor cost from the €16bn annual public procurement black hole!

Some of you may have heard this story! A shepherd was herding his flock in a remote pasture when suddenly a brand-new BMW advanced out of the dust cloud towards him. The driver, a young man in an Armani suit, Gucci shoes, Ray Ban sunglasses and YSL tie, leaned out the window and asked the shepherd… “If I tell you exactly how many sheep you have in your flock, will you give me one?” The shepherd looked at the man, obviously a yuppie, then looked at his peacefully grazing flock and calmly answered “sure”.

The yuppie parked his car, whipped out his IBM ThinkPad and connected it to an iPhone, then he surfed to a NASA page on the internet where he called up a GPS satellite navigation system, scanned the area, and then opened up a database and an Excel spreadsheet with complex formulas. He sent an email on his Blackberry and, after a few minutes, received a response. Finally, he prints out a 130-page report on his miniaturized printer then turns to the shepherd and says, “You have exactly 1586 sheep. “That’s correct; take one of the sheep.” said the shepherd. He watches the young man select one of the animals and bundle it into his car.

Then the shepherd says: “If I can tell you exactly what your business is, will you give me back my animal?”, “OK, why not.” answered the young man. “Clearly, you are a consultant,” said the shepherd. “That’s correct,” says the yuppie, “but how did you guess that?” “Very simple,” answers the shepherd. “You turned up here although nobody called you. You want to get paid for an answer I already knew, to a question I never asked, and you don’t know crap about my business…… Now give me back my dog.”

@ colm mccarthy

The C&AG report has a reminder of Bord Snip.

There are more Constitutional, Ministerial and Judicial Office-Holders pensioners (598) than currently working in the category (404) and the net cost of funding an additional year’s pension is 62% of salary.

NAMA paid PwC €2.45m for “secondment fees” in the period up to 31/3/2010 according to the first NAMA quarterly accounts. No tendering process there for fees which will dwarf what many on the valuation and legal due diligence panels will receive this year.

In December 2008 Donal O’Connor was appointed as chairman of Anglo Irish bank, replacing Sean Fitzpatrick, having joined the Board of Anglo Irish Bank in June 2008.
Prior to that Mr. O’Connor was chairman of the Dublin Docklands Development Authority (DDDA) which paid €413million for the Glass bottle plant, a site that is currently valued at less than €60million.

Mr. O’Connor was a Senior Partner of PricewaterhouseCoopers in Ireland from 1995 until 2007.
He is also a former Director of the Irish Auditing and Accounting Supervisory Authority.

It was Mr.Dick Roche, the then Minster for the Environment, Heritage and Local Government who appointed Mr. Donal O’Connor as Chairperson of the Dublin Docklands Development Authority in May 2007.

A statement by current Euro Minister Dick Roche in last Saturday’s Examiner newspaper is to be applauded ………
“US criminal investigations into the role that ratings agencies played in the economic crisis were praised by Europe Minister Dick Roche, who said he personally would support similar steps being taken in Europe.”

The wider issue is that NAMA has morphed into a great,big new trough of moolah for the same gang of extenal ‘professionals’ who cheerled the whole schemozzle in the first place.Any entity that was not already part of the golden circle was not given a real chance in the so-called bidding process to provide services.
The party continues for some….nothing changes

@ colm mccarthy

The Nyberg inquiry has very narrow terms of reference, which are “to examine corporate governance and risk management in each of the banks covered by the Government’s guarantee for the six-year period from January 2003 to January last year.”
Minister Lenihan has previously stated the committee would finish its investigation into the banking crisis by the end of October and would report to the Dáil by November 4th.

Minister Pat Carey indicated on radio, last Sunday morning, that Minister Lenihan has appointed Rob Wright, a former Canadian deputy minister for finance to undertake investigations of our bankers.
This is not entirely correct, as Mr. Wright is to act as chairman of an independent review group to assess the performance of the Department of Finance over the past 10 years and not to undertake any serious investigation of our bankers.
The terms of reference state that ‘the independent review group will undertake a comprehensive evaluation of the systems, structures and processes of the Department of Finance relating to those elements of budgetary, economic, financial and public service management that are relevant to its role.’

It would not be in the public interest to wait for a change of government in order for serious investigations of our bankers to begin, as that might indicate to the general public that a cover-up has been in existence, right under the noses of the Central Bank Governor and the Financial Regulator.

On the “independent” review – will they be seeking submissions, in an open and transparent way?

I want an investigation into our borrowers. Surely there is some gross deficiency in the education system that results in so many people thinking they can make money on this small island?

Come on, folks. Ye’re lathering yerselves into a mighty sweat over some very small stuff. Most consultants will report what they’re expected and required to report by the client who’s paying – and the ToR are usually so tight they can’t do any other. Consultants who might call it as it is won’t get the work – as I know to my cost.

And why this fetish on picking over the corpse? We now have a competent and capable Central Bank Governor and a Financial Regulator so what’s done from now on will be by the book. Everything that happened in the past in terms of policy and regulation was done, utlimately, by the authority of the people – and it is for them to pass judgement at the earliest opportunity. (Though the alternative they are likely to elect doesn’t inspire hope or confidence – but that’s just the inherent factional dysfunctionality most seem happy with.)

And since banking and financial policy and regulation has proven to be so inept, what assurance do we have that these aren’t equally inept in other areas. Or do we have to wait until the wheels start coming off before we realise there is a problem?

The law of negligence isn’t that complicated. The problem with litigation is it is slow, expensive and extremely time consuming. If the Dept of Finance thought there was negligence it may well decide that it simply did not have the capacity to pursue the case.

That is leaving aside possible defences of contributory negligence and all errors and informal communications coming out in the wash. In fact, the DoF might pay another €5m to stay out of it.

With that said, if there is a case to be answered on a narrow issue, such as whether PWC conducted proper analysis of the quality of security or made proper provision for errors in bank estimates, then perhaps that could be pursued.

Of course, PWC might have pointed all this out informally. Furthermore, if it turns out the banks misled PWC then what benefit can be got from expensive litigation suing insolvent banks which we have to bail out? Would we have to advance the banks money to pay their barristers to fight the state?

If it could be shown that individual bankers deliberately misled PWC then it would be worth suing them individually from a political point of view. However, one would nearly have to show fraud to get at their personal assets. In all other cases they probably enjoy an indemnity from the bank!

On a different tack. It is now universal (that includes me) to regard previous Anglo management as reckless saboteurs of our banking system and economy.

But if in Dec ’08 Anglo can receive such a relatively clean sheet from the top auditors and property valuers in the country, can we really accuse them of behaving recklessly, or is this supreme hindsight?

I wonder how much experience the PWC wallahs and the property valuers would have had. Would any of them have remembered the property crash of the early 1970s, for example ? I remember as a kid walking with my uncle somewhere in Wicklow and he pointed out a farm that was valued at £1 million in the early 70s and then the arse fell out the market.

Were the PWC people fixated on the notion that this time was different? How many PWC consultants would be in their 60s? I recently saw an ad on promising all the data you can eat over the past TEN YEARS. Useless if you want to model longer term trends. The older punter tends to have a more balanced view of what can happen.

€4.95 million got the DoF a nicely bound report.

Alternatively, in December 2008, they could have spent €1.80 on the Irish Times and read Morgan Kelly’s article “Better to incinerate €1.5bn than squander it on Anglo Irish Bank”.

“Come on, folks. Ye’re lathering yerselves into a mighty sweat over some very small stuff.”

Ireland has the fifth highest rate of youth suicide in Europe.

Half a million Irish people are currently trying to exist on a handout of €194 per week.

Tens of thousands of Irish families are in danger of losing their family homes.

Yes I suppose all that is “some very small stuff.”

Carrot & stick for an auditor:
Say nice things -> get re-rehired. This is the carrot.
Don’t do due diligence -> get sued and forced to pay compensation. This is the stick.

Interestingly enough, the stick in Ireland seems to have disappeared, which leads to an interesting (im)balance for auditors in deciding what they’ll say they found…..

So the conclusion (to me) seems to be since quality isn’t important the only other criteria for selecting an auditor is cost. I believe some homeless people would do an audit & say “Shure, they’re grand” for a couple of pints…..

@C O’D,

You seem to have missed the thrust of my comments – and are unaware of my comments on other threads. Karl’s initial post is about the payment of almost €5 mn to tame consultants who were expected to – and did – say there was ‘no problem’. There are huge problems that are being neither addressed nor tackled.

Surely the most important thing for an auditor is reputation. In other words if an independant person picks up a set of accounts they can be happy that what they read is the truth if they are signed off by an auditor who is held in high regard by society. PWC and Anglo’s crowd E&Y should be out of business by this logic. I mean surely the law requiring accounts to be audited was designed to protect stakeholders, seems to me the only purpose it serves is to line the pockets of these chancers

I came across this today. It relates to medicine but reminded me of this discussion about auditing.

“Some 10 to 15 percent of all patients either suffer from a delay in making the correct diagnosis or die before the correct diagnosis is made. Misdiagnosis, it turns out, is rarely related to the doctor being misled by technical errors, like a laboratory worker mixing up a blood sample and reporting a result on the wrong patient; rather, the failure to diagnose reflects the unsuspected errors made while trying to understand a patient’s condition.1

These cognitive pitfalls are part of human thinking, biases that cloud logic when we make judgments under conditions of uncertainty and time pressure. Indeed, the cognitive errors common in clinical medicine were initially elucidated by the psychologists Amos Tversky and Daniel Kahneman in their seminal work in the early 1970s.2 At the conference, I reviewed with the residents three principal biases these researchers studied: “anchoring,” where a person overvalues the first data he encounters and so is skewed in his thinking; “availability,” where recent or dramatic cases quickly come to mind and color judgment about the situation at hand; and “attribution,” where stereotypes can prejudice thinking so conclusions arise not from data but from such preconceptions.”

@Paul Hunt – paraphraseing you- everything done in terms of policy and regulation was done by ‘authority of the people’!
Balderdash!Even the TD goons are complaining that the Dail,their forum, is no longer able to direct or influence govt policy and regulatons!
You are confusing the power of the people to assign authority in a voting context with the ability and motivations of those duly assigned to competently deliver on that assigned power.
The politicians plus their advisers and senior administrative people in delivering policy and regulation over the last 10 plus years or so have never sought or considered the views of ‘the people’ – the mess is entirely theirs and theirs alone.

Assessment of the Loan book as in all Banks was done by reference to International Auditing Standard 39 issued by the International Accounting Standards Board (IASB) and as this was a Rules based assessment you can take it that it was done exactly by the Rule Book to come up with the Impairment figures to make an assessment .

& how was the processes verified?

The documented process was then compared with a representative sample of loans. Either the processes were followed and flawed (& maybe the auditors should have picked up on this?) or the bank was very lucky (?) when it came to the samples

There is a typo on my post the reference should be to International “Accounting” Standard 39. I was just pointing out that when something is Rule based it is easier to justify than when subjective assessments are made. The valuations by the Valuers would have been part of the Impairment review and as they were done in mid 2008 when values were down 20% is not the same as now when they are down 60% +.

“We used an independent firm of property valuers – Jones Lang Lasalle – . . .”
Give us a break!

These are ways of entraining perception and used to control persons at and after schooling.

Slavery is related to the ego. Conquering the ego means that many “needs” a la Maslow, are seen as ephemera, enjoyed cautiously and without attachment.

You may know all this already! But watching others so attached to strings pulled by others does not thrill me. Otherwise decent, pleasant, people become cogs in a machine of ponderous stupidity. All because they have no filters on their perceptions and allow concepts implanted as a social being to rule them.

PWC are merely privatized parts of government to which FOI does not apply. FOI has been rejected in many jurisdictions because those who think they are PTB do not want things transparent. Government money should attract the brightest searchlights!

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