Sunday, January 11, 2009
Ding Dong the Financial Regulator's Gone
Given that the Financial Regulator lacked the competence to regulate a small soft bowel movement much less the banking industry of a small country, it is about time he resigned. It is a pity it took so long and that he was allowed do such a piss poor job of financial regulation for such a long time.
Sunday, January 4, 2009
Child Abuse Legal Fee Industry
The recent decision by the UK Solicitors Disciplinary Tribunal (http://www.sra.org.uk/sra/news/press/1665.article) to strike off James Rhodes Beresford and Douglas Harold Smith of Beresfords Solicitors, of Doncaster arising from the gross abuse contained in the firm’s handling of compensation claims by sick miners under the Coal Health Compensation exercise is reminiscent of the same double-charging that some Irish solicitor firms made form work done on behalf of claimants for redress under the Residential Institutions Redress Board.
One of the many charges proven against Beresfords was:
However the treatment meted out to Beresfords contrasts with the double-charging practiced by Irish solicitors when handling claims for compensation by former residents of residential institutions. Some of these solicitors have received fours sets of fees for effectively the same work:
The cost of these legal fees alone will easily top €300 million and may be much higher, dwarfing the legal costs of all other tribunals put together as well as being over twice the amount of money paid by the religious orders to cover their costs.
RIRB Solicitor Fees
The top earning solicitors for the years 2003 to 2007 (the last year for which the RIRB has published an annual report) were:
The fees they earned were:
The average cost per case per solicitor was:
The solicitors that have processed the largest number of cases also generally charge the largest average cost. You would imagine that these solicitors would have achieved the economies of loading and scale to drive the average cost per case down. Apparently this is not the case. Does this mean that solicitors are being allowed to charge a percentage of awards achieved rather than payment for work done?
If those solicitors charging greater than the average fee had their fees reduced to the average, the saving would be €10 million.
Commission to Inquire into Child Abuse Legal Fees
This consists of two committees: an Investigation and a Confidential.
The Investigation Committee which operates on an adversarial basis, received about 2,200 complaints of which about 1,700 are live. Because of the gross incompetence of Justice Laffoy in her establishment, organisation and ongoing operation of the Commission, each complaint was effectively organised like a separate High Court case: separate complainant, separate plaintiffs (Regulatory – Department of Education, Regulatory – the Order that ran the institution, and individual – the members of the orders against whom complaints were made). Given that many complainants attended multiple institutions, the average number of plaintiffs per complaint is about 9.
Remember that each complainant and plaintiff is entitled to legal representation and that their costs will be covered by the Commission, i.e. the Government, i.e. the tax payer. The length of time the operation of the commission has dragged on has just increased legal costs.
Internal estimates made by Department of Education civil servants estimate the external legal costs (that is excluding the cost of the barristers working for the Commission) at anywhere between €300 million and €1 billion.
Bear in mind that the average legal bill for Hepatitis C cases was of the order of £30,000 (€38,000). These were much simpler cases with smaller numbers of participants.
Of course Laffoy performed the dual act of escaping from the cock-up she created and being beatified in the process, leaving others to pick up the pieces.
Other Legal Fees
Another point that is being ignored by all parties is the dual billing of legal fees and the failure of all parties to attempt to address it.
And now for some legal background to explain this:
Commission to Inquire into Child Abuse
The relevant section of the COMMISSION TO INQUIRE INTO CHILD ABUSE ACT, 2000 as amended by the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 is:
20.—(1) The Minister may, with the consent of the Minister for Finance and after consultation with the Commission, make a scheme providing for the payment by the Commission to a person who, pursuant to a request of a Committee or a direction attends before a Committee, of a reasonable amount in respect of the expenses incurred by the person in relation to such attendance.
(2) The Minister may, with the consent and after consultation aforesaid, make a scheme amending or revoking a scheme under this section.
(3) The Commission shall carry out a scheme under this section in accordance with its terms.
20A.—(1) The Investigation Committee may representation and allow a person appearing before it to be represented by counsel or solicitor or otherwise.
(2) Subject to subsection (3), the Commission may pay such reasonable costs arising out of the representation referred to in subsection (1) to the person so represented as are agreed between the Commission and that person or, in default of agreement, such costs as may be taxed by a Taxing Master of the High Court.
(3) Where the Chairperson is of the opinion that a person has failed to co-operate with or provide assistance, or has knowingly given false or misleading information, to the Investigation Committee and there are sufficient reasons rendering it equitable to do so, the Chairperson may, on his or her own motion or pursuant to an application by a person appearing before the Investigation Committee, refuse to allow the whole or part of the costs of appearance to such person, and may make an order directing that the whole or part of such costs—
(a) of any person appearing before the Investigation Committee by counsel or solicitor, as may be taxed by a Taxing Master of the High Court in default of agreement, shall be paid to the person by the first-mentioned person, or
(b) incurred by the Investigation Committee, as may be taxed by a Taxing Master of the High Court in default of agreement, shall be paid to the Minister for Finance by the first-mentioned person.
(4) The Commission may pay to a person (other than a person referred to in subsection (2)) who makes discovery of documents pursuant to a direction under section 14(1)(d) appearing before the Investigation Committee by counsel or solicitor such reasonable costs of appearing as may be agreed between the Commission and that person or, in default of agreement, as may be taxed by a Taxing Master of the High Court.
(5) Where, in accordance with this section, expenses or costs are agreed or taxed, the Commission, or, as the case may be, the Taxing Master shall have regard to—
(a) any expenses and costs paid to the person by the Residential Institutions Redress Board, and
(b) any expenses and costs paid to the person by the State in respect of any litigation concerning the same, or substantially the same, acts complained of to the Investigation Committee, for the purpose of ensuring that payment is not made more than once for any matter arising out of such expenses or costs.
The Commission will incur two sets of legal fees:
1. Those by Complainants who are represented by solicitors
2. Those by Respondents who have been named in complaints. There are two types of Respondent: Manager (i.e. the Religious Order that managed the Institution in which the Complainant was resident) and Individual (the person named as the abuser – this can be a member of the Order or a lay person)
Residential Institutions Redress Board
The relevant section of the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 is:
27.—(1) The Board shall pay to an applicant to whom it has made an award (including an award that has been reviewed under section 15) a reasonable amount for expenses incurred by him or her relating to the preparation and presentation of the application as shall be agreed between the Board and the applicant and in default of such agreement such expenses shall be determined by a Taxing Master of the High Court.
(2) The Board shall pay to an applicant who accepts an award (including an award that has been reviewed under section 15) the costs of any proceedings instituted by that applicant and to which the waiver under section 13(6) applies as shall be agreed between the Board and the applicant and in default of such agreement such expenses shall be determined by a Taxing Master of the High Court.
(3) Where expenses or costs are agreed or taxed regard shall be had to any expenses and costs concerning—
(a) the proceedings referred to in subsection (2),or
(b) a submission to the Investigation Committee, for the purpose of ensuring that a payment for an item of such expenses or costs is not made more than once.
(4) In subsection (3) ‘‘Investigation Committee’’ has the meaning assigned to it by the Act of 2000.
The Board will incur legal costs of Applicants who have made an application to the Board and who are represented by a solicitor.
Other Litigation and Other Awards
Section 9/10 of the application form to the RIRB asks the applications if damages by way of a settlement or a court award have been received in respect of the application. However there is no obligation on the part of the applicant to complete this section and there is no checking by the RIRB if the section has not been completed (or even if the section has been completed).
Section 24 of the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 states:
24.—Where an applicant has accepted an award made under section 13 or section 15 and has complied with section 13(6), no cause of action or claim for indemnity and contribution or either of them, whether by third party procedure pursuant to section 27 of the Civil Liability Act, 1961 or otherwise, in any civil proceedings or otherwise, shall lie against the State or a public body if such proceedings arise out of the same, or substantially the same, acts complained of in an application made under this Act and in respect of which the applicant is a party.
However, there is no restriction based past awards or settlements.
If any such award or settlement was made, there will probably have been legal work done by a solicitor that will be reused during the application process.
Joint Handling of Fees
A facility to handle bills submitted to both the Commission and the Board is required to to allow tracking liability and reducing payments for work being charged for twice or three times.
The workload of the Commission and the Board will is being shared. Many of the Complainants to the Commission will also be applicants to the Board. The RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 states the Board will make “a submission to the Investigation Committee, for the purpose of ensuring that a payment for an item of such expenses or costs is not made more than once.”
Conclusion
For the 7,876 cases processed so far by the RIRB, the total legal costs have amounted to €95,915,989.57 at an average cost of €12,178.26 per case.
Assume that the 1,700 live cases before CICA have all come before the RIRB. Assume that the average set of legal fees that will be charged for each of complainant will be €40,000. (This does not include the legal fees of all the other parties involved in a complaint.)
So by rights the legal fees charged for RIRB work on these 1,700 should be reduced because the work has already been done for the CICA. If the RIRB fees were reduced by 50%, this would result in a saving of €10 million.
One of the many charges proven against Beresfords was:
That they failed to give sufficient information to clients about costsand/or the funding of claims generally, contrary to Rule 1 (a), (c), (d) and (e) and/or Rule 15 of the SPR and the Solicitor’s Cost Information and Client Care Code ("the Client Care Code").
However the treatment meted out to Beresfords contrasts with the double-charging practiced by Irish solicitors when handling claims for compensation by former residents of residential institutions. Some of these solicitors have received fours sets of fees for effectively the same work:
- Work done before Commission to Inquire into Child Abuse (CICA)
- Work done before Residential Institutions Redress Board
- Illegeally double-charging of work done before Residential Institutions Redress Board (RIRB)
- Work done when taking case for compensation
The cost of these legal fees alone will easily top €300 million and may be much higher, dwarfing the legal costs of all other tribunals put together as well as being over twice the amount of money paid by the religious orders to cover their costs.
RIRB Solicitor Fees
The top earning solicitors for the years 2003 to 2007 (the last year for which the RIRB has published an annual report) were:
Michael E Hanahoe
Lavelle Coleman
Peter McDonnell & Associates
Murphy English & Co
Hodge Jones & Allen
Margaret Campbell
Madden & Associates
Paul W Tracey
The fees they earned were:
€12,686,356.56
€10,805,131.04
€6,271,877.66
€5,673,409.57
€4,503,085.76
€3,844,980.84
€3,531,004.36
€3,106,815.50
The average cost per case per solicitor was:
€16,825.41
€13,557.25
€8,638.95
€14,183.52
€10,375.77
€11,758.35
€11,849.01
€7,966.19
The solicitors that have processed the largest number of cases also generally charge the largest average cost. You would imagine that these solicitors would have achieved the economies of loading and scale to drive the average cost per case down. Apparently this is not the case. Does this mean that solicitors are being allowed to charge a percentage of awards achieved rather than payment for work done?
If those solicitors charging greater than the average fee had their fees reduced to the average, the saving would be €10 million.
A more detailed analysis can be found here.
Commission to Inquire into Child Abuse Legal Fees
This consists of two committees: an Investigation and a Confidential.
The Investigation Committee which operates on an adversarial basis, received about 2,200 complaints of which about 1,700 are live. Because of the gross incompetence of Justice Laffoy in her establishment, organisation and ongoing operation of the Commission, each complaint was effectively organised like a separate High Court case: separate complainant, separate plaintiffs (Regulatory – Department of Education, Regulatory – the Order that ran the institution, and individual – the members of the orders against whom complaints were made). Given that many complainants attended multiple institutions, the average number of plaintiffs per complaint is about 9.
Remember that each complainant and plaintiff is entitled to legal representation and that their costs will be covered by the Commission, i.e. the Government, i.e. the tax payer. The length of time the operation of the commission has dragged on has just increased legal costs.
Internal estimates made by Department of Education civil servants estimate the external legal costs (that is excluding the cost of the barristers working for the Commission) at anywhere between €300 million and €1 billion.
Bear in mind that the average legal bill for Hepatitis C cases was of the order of £30,000 (€38,000). These were much simpler cases with smaller numbers of participants.
Of course Laffoy performed the dual act of escaping from the cock-up she created and being beatified in the process, leaving others to pick up the pieces.
Other Legal Fees
Another point that is being ignored by all parties is the dual billing of legal fees and the failure of all parties to attempt to address it.
And now for some legal background to explain this:
Commission to Inquire into Child Abuse
The relevant section of the COMMISSION TO INQUIRE INTO CHILD ABUSE ACT, 2000 as amended by the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 is:
20.—(1) The Minister may, with the consent of the Minister for Finance and after consultation with the Commission, make a scheme providing for the payment by the Commission to a person who, pursuant to a request of a Committee or a direction attends before a Committee, of a reasonable amount in respect of the expenses incurred by the person in relation to such attendance.
(2) The Minister may, with the consent and after consultation aforesaid, make a scheme amending or revoking a scheme under this section.
(3) The Commission shall carry out a scheme under this section in accordance with its terms.
20A.—(1) The Investigation Committee may representation and allow a person appearing before it to be represented by counsel or solicitor or otherwise.
(2) Subject to subsection (3), the Commission may pay such reasonable costs arising out of the representation referred to in subsection (1) to the person so represented as are agreed between the Commission and that person or, in default of agreement, such costs as may be taxed by a Taxing Master of the High Court.
(3) Where the Chairperson is of the opinion that a person has failed to co-operate with or provide assistance, or has knowingly given false or misleading information, to the Investigation Committee and there are sufficient reasons rendering it equitable to do so, the Chairperson may, on his or her own motion or pursuant to an application by a person appearing before the Investigation Committee, refuse to allow the whole or part of the costs of appearance to such person, and may make an order directing that the whole or part of such costs—
(a) of any person appearing before the Investigation Committee by counsel or solicitor, as may be taxed by a Taxing Master of the High Court in default of agreement, shall be paid to the person by the first-mentioned person, or
(b) incurred by the Investigation Committee, as may be taxed by a Taxing Master of the High Court in default of agreement, shall be paid to the Minister for Finance by the first-mentioned person.
(4) The Commission may pay to a person (other than a person referred to in subsection (2)) who makes discovery of documents pursuant to a direction under section 14(1)(d) appearing before the Investigation Committee by counsel or solicitor such reasonable costs of appearing as may be agreed between the Commission and that person or, in default of agreement, as may be taxed by a Taxing Master of the High Court.
(5) Where, in accordance with this section, expenses or costs are agreed or taxed, the Commission, or, as the case may be, the Taxing Master shall have regard to—
(a) any expenses and costs paid to the person by the Residential Institutions Redress Board, and
(b) any expenses and costs paid to the person by the State in respect of any litigation concerning the same, or substantially the same, acts complained of to the Investigation Committee, for the purpose of ensuring that payment is not made more than once for any matter arising out of such expenses or costs.
The Commission will incur two sets of legal fees:
1. Those by Complainants who are represented by solicitors
2. Those by Respondents who have been named in complaints. There are two types of Respondent: Manager (i.e. the Religious Order that managed the Institution in which the Complainant was resident) and Individual (the person named as the abuser – this can be a member of the Order or a lay person)
Residential Institutions Redress Board
The relevant section of the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 is:
27.—(1) The Board shall pay to an applicant to whom it has made an award (including an award that has been reviewed under section 15) a reasonable amount for expenses incurred by him or her relating to the preparation and presentation of the application as shall be agreed between the Board and the applicant and in default of such agreement such expenses shall be determined by a Taxing Master of the High Court.
(2) The Board shall pay to an applicant who accepts an award (including an award that has been reviewed under section 15) the costs of any proceedings instituted by that applicant and to which the waiver under section 13(6) applies as shall be agreed between the Board and the applicant and in default of such agreement such expenses shall be determined by a Taxing Master of the High Court.
(3) Where expenses or costs are agreed or taxed regard shall be had to any expenses and costs concerning—
(a) the proceedings referred to in subsection (2),or
(b) a submission to the Investigation Committee, for the purpose of ensuring that a payment for an item of such expenses or costs is not made more than once.
(4) In subsection (3) ‘‘Investigation Committee’’ has the meaning assigned to it by the Act of 2000.
The Board will incur legal costs of Applicants who have made an application to the Board and who are represented by a solicitor.
Other Litigation and Other Awards
Section 9/10 of the application form to the RIRB asks the applications if damages by way of a settlement or a court award have been received in respect of the application. However there is no obligation on the part of the applicant to complete this section and there is no checking by the RIRB if the section has not been completed (or even if the section has been completed).
Section 24 of the RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 states:
24.—Where an applicant has accepted an award made under section 13 or section 15 and has complied with section 13(6), no cause of action or claim for indemnity and contribution or either of them, whether by third party procedure pursuant to section 27 of the Civil Liability Act, 1961 or otherwise, in any civil proceedings or otherwise, shall lie against the State or a public body if such proceedings arise out of the same, or substantially the same, acts complained of in an application made under this Act and in respect of which the applicant is a party.
However, there is no restriction based past awards or settlements.
If any such award or settlement was made, there will probably have been legal work done by a solicitor that will be reused during the application process.
Joint Handling of Fees
A facility to handle bills submitted to both the Commission and the Board is required to to allow tracking liability and reducing payments for work being charged for twice or three times.
The workload of the Commission and the Board will is being shared. Many of the Complainants to the Commission will also be applicants to the Board. The RESIDENTIAL INSTITUTIONS REDRESS ACT, 2002 states the Board will make “a submission to the Investigation Committee, for the purpose of ensuring that a payment for an item of such expenses or costs is not made more than once.”
Conclusion
For the 7,876 cases processed so far by the RIRB, the total legal costs have amounted to €95,915,989.57 at an average cost of €12,178.26 per case.
Assume that the 1,700 live cases before CICA have all come before the RIRB. Assume that the average set of legal fees that will be charged for each of complainant will be €40,000. (This does not include the legal fees of all the other parties involved in a complaint.)
So by rights the legal fees charged for RIRB work on these 1,700 should be reduced because the work has already been done for the CICA. If the RIRB fees were reduced by 50%, this would result in a saving of €10 million.
This is on top of the other €10 million that could be saved by more rigorously questioning legal fees charged by solicitors.
Saturday, January 3, 2009
Irish Fucking Health Service Once Again
The state of the Irish health service and the incompetence of its staff can be illustrated by this tragic story:
http://www.irishtimes.com/newspaper/ireland/2009/0103/1230842386932.html
THE FAMILY of a woman who collapsed and died while
waiting for a bed in the accident and emergency department of the Mater hospital has engaged the services of a pathologist, an inquest heard yesterday Beverly Seville-Doyle (39) of Priory Walk, Manor Grove, Whitehall Road, Dublin, left her chair in the AE department of the Mater on the morning of January 15th, 2008, to use the toilet.
Minutes later she collapsed and medical staff, who rushed to her aid, found the woman, who had diabetes, in a deeply unconscious state. Efforts to resuscitate the mother of three continued for an hour but, despite all efforts, she was pronounced dead.
Yesterday, the solicitor for Mrs Seville-Doyle's family, Damien Tansey, told Dublin City Coroner's court the family had instructed his firm to engage the services of a pathologist.
He told the inquest the pathologist commissioned by
the Coroner's Office to carry out an independent autopsy was an employee of the Mater hospital and was not "an independent witness".
Dublin city coroner Dr Brian Farrell disputed this and said a pathologist carrying out coroners' autopsies is required to be independent, give evidence under oath and give true evidence.
When the inquest opened in December, pathologist Dr Michelle Harrison, who supervised a postmortem on the deceased, said Mrs Seville-Doyle had suffered a sudden cardiac death secondary to enlargement of the heart muscle tissue in a patient with diabetes and high blood pressure. This is disputed by the family.
She also found the deceased had small clots in her lungs, which were not large enough to cause death. Mrs Seville-Doyle presented at the Mater two weeks before her death with severe chest pain.
Giving evidence yesterday, Dr Kate Douglas said Mrs Seville-Doyle presented at the AE department of the Mater at 11.21am on December 29th, 2007, complaining of left-sided chest pain. She said the deceased described this as intermittent, dull, non-pleuritic pain with no associated featured such as shortness of breath, coughing or sputum production.
She also complained of nausea and general lethargy for
two days prior to her presentation, she said.
Mrs Seville-Doyle underwent a number of investigations at the facility, including a chest X-ray, an electrocardiogram, full blood count and arterial blood gas reading, all of which were unremarkable.
Tests revealed she had a urinary tract infection, for which Mrs Seville-Doyle was prescribed antibiotics.
A D-dimer test, which if elevated can indicate clotting problems such as a deep vein thrombosis, was mildly elevated at 313, but Dr Douglas said swelling at the injection site where Mrs Seville-Doyle injected insulin and her infection could also account for the increase.
Questioned by Mr Tansey, Dr Douglas agreed yesterday that
Mrs Seville-Doyle was overall a patient at high risk of a pulmonary embolism (a blood clot in the lungs), but that when she saw her on December 29th, she was not concerned about a cardiac event or a pulmonary embolism, and felt that, clinically, Mrs Seville-Doyle's chest pain was most likely musculoskeletal in origin. Dr Douglas said Mrs Seville-Doyle was at low risk of a pulmonary embolism when she saw her in December.
Dr Douglas said there were no objective findings that supported a diagnosis of a pulmonary embolism, such as changes in the electrocardiogram.
Mrs Seville-Doyle was discharged with antibiotics and pain medication and advised to return if she experienced further pain.
The coroner said he would need to make sure all the facts were before the inquest before "we can assume whether the D-dimer test is as significant as you believe it to be". He adjourned the inquest until a date in January.
A further two days have been set aside in February.
From this, we see that the relevant symptomatic and diagnostic information relating to Mrs Seville-Doyle’s symptoms were:
- left-sided chest pain
- nausea
- general lethargy
- female
- age 39
- diabetes
- high blood pressure
So I decided to check the diagnosis given by the not so competent Dr Kate Douglas against some online diagnostic tools. A fair test? Why not? Why should doctors arrogate to themselves the right to diagnose medical conditions but not accompany this with the requisite competence and effectiveness? Why should the opinions of doctors not be questioned?
The results from these online tools were:
http://www.myelectronicmd.com
Angina Pectoris
Pericarditis
Myocardial Infarction
http://symptoms.webmd.com/symptomchecker
Seek medical attention immediately
http://www.easydiagnosis.com/
Coronary Disease or Heart Attack 55%
http://www.nhsdirect.nhs.uk
Seek emergency help immediately - ring 999 and ask for an ambulance
http://familydoctor.org/online/famdocen/home/tools/symptom.html
EMERGENCY. CALL AN AMBULANCE RIGHT AWAY.
They all got it right. A valid test? I believe so.
So, we can replace Dr Kate Douglas and all the other incompetent staff with a laptop and a broadband connection. We can coattail on the medical infrastructure in other countries for free and get a better service. We can save money and get a better service.
National Consumer Agency Petrol and Diesel Price Analysis
The National Consumer Agency (“putting consumers first”) has published a report on diesel and petrol prices – see Investigation into Petrol and Diesel Price Movements 19 December 2008 http://www.nca.ie/eng/Research_Zone/Reports/Investigation_into_petrol_and_diesel_prices.html.
This turgid document has completely failed to identify and analyse the correct and relevant information to draw a correct conclusion on retail diesel and petrol prices.
The report is an example of detail used to hide an absence of relevance and a failure to grasp the details involved.
The NCA analysis was performed over a very limited four week interval and fails to take a longer term view on petrol and diesel price movements. They failed to identify trends in buy and sell prices of petrol and diesel. As a result the NCA failed to reach the correct conclusion.
There is little evidence to suggest unwarranted delays in the passing on of wholesale price changes to the consumer at the pump.
If this were correct there would be little variability in the margins being achieved by retailers. This is not the case. For a more detailed and relevant analysis, see the following Irish Diesel and Petrol Price Analysis December 2008.
For substantial intervals, buy price falls have clearly not been passed on in the form of reduced sell prices. Price increases are however passed on quickly. Price reductions are passed on slowly if at all. There have been long intervals when falls in the cost price have not been matched by falls in the price charged.
This clearly demonstrates the inadequacy of the analysis performed by the National Consumer Agency. This is an example of the quality of work of Irish civil servants.
Putting consumers first my arse.
This turgid document has completely failed to identify and analyse the correct and relevant information to draw a correct conclusion on retail diesel and petrol prices.
The report is an example of detail used to hide an absence of relevance and a failure to grasp the details involved.
The NCA analysis was performed over a very limited four week interval and fails to take a longer term view on petrol and diesel price movements. They failed to identify trends in buy and sell prices of petrol and diesel. As a result the NCA failed to reach the correct conclusion.
There is little evidence to suggest unwarranted delays in the passing on of wholesale price changes to the consumer at the pump.
If this were correct there would be little variability in the margins being achieved by retailers. This is not the case. For a more detailed and relevant analysis, see the following Irish Diesel and Petrol Price Analysis December 2008.
For substantial intervals, buy price falls have clearly not been passed on in the form of reduced sell prices. Price increases are however passed on quickly. Price reductions are passed on slowly if at all. There have been long intervals when falls in the cost price have not been matched by falls in the price charged.
This clearly demonstrates the inadequacy of the analysis performed by the National Consumer Agency. This is an example of the quality of work of Irish civil servants.
Putting consumers first my arse.
Sunday, November 30, 2008
What Ever Happened to Basel II
Basel II, the invention of the Bank for International Settlements (www.bis.org), and more correctly entitled International Convergence of Capital Measurement and Capital Standards: a Revised Framework, has so clearly and substantially failed.
And yet this has received almost no publicity. The Banks fucked up. As did the Financial Regulator and the Central Bank.
For those of you who are interested Basel II was intended to ensure that banks made provision for risks more effective and sensitive. The original report is available here. It is quite readable with a little effort, even for a non-banking person. It included a detailed frame work for all types of risk: operational risk, credit risk and market risk. It was intended to manage what is called “regulatory capital” . The capital ratio is the percentage of a bank's capital to its risk-weighted assets (RWA). Weights are defined by risk-sensitivity ratios detailed in the Basel II document. The core idea of risk-weighted assets is a move away from having a static requirement for capital adequacy. The approach is intended to be more flexible and is based on the riskiness of a bank's assets. So loans of various types have different risks. Loans secured by a letter of credit would be weighted riskier than a mortgage loan that is secured with collateral, assuming that the collateral had a realisable value. In calculating risk the assumed value of such collateral is reduced by what is called a haircut based on its volatility.
Irish financial institutions spent between €1 billion and €2 billion on implementing Basel II. The lower number is derived from the pure costs – software licences, consulting fees, additional hardware and other direct costs. The higher value would include an allowance for the time of personnel of the institutions working on its implementation.
For consulting and software companies – Accenture, BearingPoint, IBM, SAP, SAS and so on, Basel II represented a sloshing, lumbering gravy train. It was a fee-earning bonanza along the lines of the Year 2000 problem. These companies parasitised and devoured the floundering corpses of the institutions while the institutions accepted the huge costs.
And all for absolutely nothing.
Basel II is based a "three pillars" concept:
1. Minimum capital adequacy requirement to handle risk
2. Supervisory review by the appropriate regulator
3. Market disclosure and discipline
It failed in all three:
1. Not enough capital to handle actual risk
2. Incompetent regulator that could not or did not understand or act upon the inadequate information being made available
3. A market that failed to examine the incorrect information being presented and the schemes to avoid capital adequacy
At a very high level, the basic structure of Basel II is:
And yet this has received almost no publicity. The Banks fucked up. As did the Financial Regulator and the Central Bank.
For those of you who are interested Basel II was intended to ensure that banks made provision for risks more effective and sensitive. The original report is available here. It is quite readable with a little effort, even for a non-banking person. It included a detailed frame work for all types of risk: operational risk, credit risk and market risk. It was intended to manage what is called “regulatory capital” . The capital ratio is the percentage of a bank's capital to its risk-weighted assets (RWA). Weights are defined by risk-sensitivity ratios detailed in the Basel II document. The core idea of risk-weighted assets is a move away from having a static requirement for capital adequacy. The approach is intended to be more flexible and is based on the riskiness of a bank's assets. So loans of various types have different risks. Loans secured by a letter of credit would be weighted riskier than a mortgage loan that is secured with collateral, assuming that the collateral had a realisable value. In calculating risk the assumed value of such collateral is reduced by what is called a haircut based on its volatility.
Irish financial institutions spent between €1 billion and €2 billion on implementing Basel II. The lower number is derived from the pure costs – software licences, consulting fees, additional hardware and other direct costs. The higher value would include an allowance for the time of personnel of the institutions working on its implementation.
For consulting and software companies – Accenture, BearingPoint, IBM, SAP, SAS and so on, Basel II represented a sloshing, lumbering gravy train. It was a fee-earning bonanza along the lines of the Year 2000 problem. These companies parasitised and devoured the floundering corpses of the institutions while the institutions accepted the huge costs.
And all for absolutely nothing.
Basel II is based a "three pillars" concept:
1. Minimum capital adequacy requirement to handle risk
2. Supervisory review by the appropriate regulator
3. Market disclosure and discipline
It failed in all three:
1. Not enough capital to handle actual risk
2. Incompetent regulator that could not or did not understand or act upon the inadequate information being made available
3. A market that failed to examine the incorrect information being presented and the schemes to avoid capital adequacy
At a very high level, the basic structure of Basel II is:
For example, under the Foundation Internal Rating-Based Calculation Approach for calculating Credit Risks banks are required to use regulator's prescribed LGD (Loss Given Default) parameters required for calculating the RWA (Risk Weighted Asset). Then total required capital is calculated as a fixed percentage of the estimated RWA. It is all very simple, if implemented, measured, monitored, reported on and understood correctly.
Banks estimate the PD (Probability of Default) for loans.
They also calculate Exposure at Default (EAD) or the extent to which a bank may be exposed in the event of a default.
It is a wonderfully complex framework that should be flawless in its structure and execution.
For example, for some details on how AIB approached the implementation of Basel II, see here.
What about all the commercial lending so extravagantly and incontinently indulged in by backs. This is called HVCRE or High-Volatility Commercial Real Estate
Paragraphs 227 and 228 of the BIS Basel II report contains the following:
Banks estimate the PD (Probability of Default) for loans.
They also calculate Exposure at Default (EAD) or the extent to which a bank may be exposed in the event of a default.
It is a wonderfully complex framework that should be flawless in its structure and execution.
For example, for some details on how AIB approached the implementation of Basel II, see here.
What about all the commercial lending so extravagantly and incontinently indulged in by backs. This is called HVCRE or High-Volatility Commercial Real Estate
Paragraphs 227 and 228 of the BIS Basel II report contains the following:
227. High-volatility commercial real estate (HVCRE) lending is the financing of commercial real estate that exhibits higher loss rate volatility (i.e. higher asset correlation) compared to other types of SL (specialised lending). HVCRE includes:
Commercial real estate exposures secured by properties of types that are categorised by the national supervisor as sharing higher volatilities in portfolio default rates;
Loans financing any of the land acquisition, development and
construction (ADC) phases for properties of those types in such jurisdictions; and
Loans financing ADC of any other properties where the source of repayment at origination of the exposure is either the future uncertain sale of the property or cash flows whose source of repayment is substantially uncertain (e.g. the property has not yet been leased to the occupancy rate prevailing in that geographic market for that type of commercial real estate), unless the borrower has substantial equity at risk. Commercial ADC loans exempted from treatment as HVCRE loans on the basis of certainty of repayment of borrower equity are, however, ineligible for the additional reductions for SL exposures described in paragraph 277.
228. Where supervisors categorise certain types of commercial real estate exposures as HVCRE in their jurisdictions, they are required to make public such determinations. Other supervisors need to ensure that such treatment is then applied equally to banks under their supervision when making such HVCRE loans in that jurisdiction.
Duh. Where was the regulator when all the HVCRE lending was taking place that has so endangered Irish banks? Where were the banks' risk departments? Will anyone take responsibility? Will they fuck?
Never Trust a Barrister
Once again, we are seeing the results of appointing a barrister to a senior ministerial role.
Barristers are sole traders. They do not operate in teams. Barristers work on highly technical and specific aspects of problems in a rareified environment. They do no see a problem from initial definition to final resolution. Once the specific problem has been resolved they move on to the next problem without having to deal with the consequences of its implementation. Barristers are also not held accountable or responsible for their failures. They get paid anyway, irrespective of whether they win or lose a case. In the case of a loss, they might get paid less but still they get paid.
In 2004, Michael the Mouth McDowell made the comment that that gangland murders were on the decline and their activities represented “the last sting of the dying wasp” and presided over a substantial increase in crime, especially murder and manslaughter:
2004 – 45 or 1.11 per 100,000 of population
2005 – 65 or 1.57 per 100,000 of population
2005 – 67 or 1.58 per 100,000 of population
Now Brian Lenihan is demonstrating his incompetence in handling major issues. He is raising taxes when the rest of the world is reducing them. He is failing to demonstrate any leadership in handling the issue of bank capitalisation.
Barristers are sole traders. They do not operate in teams. Barristers work on highly technical and specific aspects of problems in a rareified environment. They do no see a problem from initial definition to final resolution. Once the specific problem has been resolved they move on to the next problem without having to deal with the consequences of its implementation. Barristers are also not held accountable or responsible for their failures. They get paid anyway, irrespective of whether they win or lose a case. In the case of a loss, they might get paid less but still they get paid.
In 2004, Michael the Mouth McDowell made the comment that that gangland murders were on the decline and their activities represented “the last sting of the dying wasp” and presided over a substantial increase in crime, especially murder and manslaughter:
2004 – 45 or 1.11 per 100,000 of population
2005 – 65 or 1.57 per 100,000 of population
2005 – 67 or 1.58 per 100,000 of population
Now Brian Lenihan is demonstrating his incompetence in handling major issues. He is raising taxes when the rest of the world is reducing them. He is failing to demonstrate any leadership in handling the issue of bank capitalisation.
Misoxenia
I have to say that the use of xenophobia to mean hatred of foreigners annoys me. The word means fear of strangers or foreigners. There is a need for a separate word to describe hatred of foreigners for which I propose misoxenic.
So there. Pendantic moi? Non, bien sur.
So there. Pendantic moi? Non, bien sur.
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