QNHS for 2010:Q4

Results from the Quarterly National Household Survey for 2010:Q4 are now available (press release here, full release here.)  The seasonally-adjusted unemployment rate for the quarter rose by one percentage point to 14.7%. This is a percentage point higher than the previously available proxy for the seasonally adjusted rate based on Live Register figures.

I’m not sure what the explanation is for such a large divergence between the QNHS and Live Register series for this quarter. One possible factor is that some people are now reaching the expiry of their benefit eligibility and thus falling off the Live Register while still being unemployed. The different behaviour for 2010:Q4 doesn’t seem to reflect a big drop in the labour force, due to emigration for example, because the decline in the labour force was of a similar magnitude to previous quarters.

New IIEA Blog\Post on Bank Debt

I’d like to flag an excellent new initiative that our readers are likely to find useful. As many of you know, the Institute for International and European Affairs has played a very important role in recent years in promoting debate on European issues. The Institute has now started a blog focusing on European topics which already has a lot of interesting material. I have agreed to contribute some longer pieces there.  They’ve promised to make me some pretty graphs if I ask nicely which might make a nice change sometimes from the no-frills approach we adopt here at the IE blog!

Which brings me back to an issue related to my proposals for a debt-to-equity swap for central bank loans. Some commenters have rightly pointed out that this proposal seems to give up on burden sharing with bondholders. That it does so is just a reflection of the current EU position on this issue. However, this strengthens the case for the EU becoming involved in owning the Irish bank sector: If they want the bondholders paid back so badly, then one can argue that they should contribute some of their own funds to the effort.

But coming back to the European debate on bank debt, I think the EU officials are adopting the wrong approach to dealing with this issue. I also think that the proposals adopted by the European Commission to allow haircuts on bonds that are issued in the future, say after 2013, is unworkable. For a discussion of this and an alternative approach, see this post at the IIEA site.

EU Needs to Share Ownership of the Irish Banks

Here‘s an article I wrote for today’s Irish Times. It argues that a conversion of central bank loans to equity is now the best way to end the banking crisis and avoid a sovereign default.

Jon Ihle on the Stress Tests

It was great to see Jon Ihle, one of Ireland’s best financial journalists, writing in the Sunday Business Post yesterday.    Missing Jon’s weekly insights was one reason to mourn the Tribune’s demise.  

Jon has an informative piece on the coming bank stress tests: see here. 

We are clearly being prepared for some additional bad news on the bank losses, and maybe for once we will be surprised on the downside.   In interpreting the additional capital needs, however, it will be important to distinguish between estimates of additional losses and the new capital required to meet higher capital ratio targets.   

The EU/IMF terms require A baseline capital level of 12 per cent for all banks – far above the normal 8 per cent regulatory level at which Anglo and INBS are being allowed to operate.

But if the stress level is as high as 10.5 per cent – meaning capital could not fall below that point even under dire conditions – bankers expect the baseline level could go as high as 16 per cent, imposing huge recapitalisation costs.

Understanding the IMF – Institutional and Legal Aspects

Details of this guest lecture  by Sean Hagan, General Counsel and Director of the Legal Department at the International Monetary Fund, on March 18 (organised by TCD Law School) are available here.