ICS Building Society RIP 1864 – 2014

After 150 years the Irish Civil Service building society (known as ICS and a subsidiary of Bank of Ireland) is set to close. The letter delivered to the intermediary channel is on the left.

ICS started before the formation of the State and was subsumed into Bank of Ireland in the mid 1980’s.

The relationship with mortgage brokers was long standing, although in recent years there were a few developments which caused it to lose market share.

ICS first took brokers away from Bank of Ireland in c. 2009, previous to this brokers could deal with either a local branch (we dealt with now closed Westmoreland St. branch) or via ICS.

Then they reduced procurement fees, lastly they engaged in ‘dual pricing’ where it was cheaper to go to BOI than to ICS. All of these things were perhaps justified in the view of ICS but it didn’t mean people would then borrow from them and these things combined lead to less broker support …

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The Criminal Justice (Money Laundering & Terrorist Financing) Bill 2009

The Main Purpose of the Bill is to:

•Identify and verify the identity of their customer and of any assets ultimate beneficial owner, and to monitor their business relationship with the customer; •Report suspicions of money laundering or terrorist financing to the public authorities, usually, the national financial intelligence unit; •Take supporting measures, such as ensuring proper training of the personnel and the establishment of appropriate internal preventive policies and procedures.

The 2009/Bill/Act will be applicable to Intermediaries – investment, mortgage and insurance and other investment/insurance businesses which are regulated by the Financial Regulator.  Going forward the term “Designated Body” will be replaced by the term “Designated persons”

The changes which the new Act will bring are:

•“Designated Persons” will be required to perform customer due diligence on a risk based approach. There will be 3 types of customer due diligence depending on the circumstances, (1) Simplified (2) Standard (3) Enhanced identification

•The following products are exempted from the requirements in relation to Customer Due Diligence: – Life Assurance policies with an Annual premium of not more than € 1000 …

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What do banks want when you apply for a mortgage?

Sometimes I ask the folks in the office about the questions they are asked by clients they are dealing with at the time, often it will result in comments like ‘the usual’… ‘How much can I borrow? What’s the best rate etc.’ and while that is true, another question often asked is one that is implied but not directly a question.

‘What do banks want from me when I am making a mortgage application?’

The answer, in the sense of principles, is that that they are looking for a way of determining your ability to repay a debt, some mathematics is used, some gut instinct often plays a part too, qualitative is mixed with quantitative.

Banks use different general mortgage calculators and these use your financial information to give different brackets of lending outcomes. In looking at your p60 they try to establish a year on year figure for your earnings, if you got a raise in the interim (if you did recently you are a rarity!) then …

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The numbness of the bottom

When bad news stops having an effect then it is a sign that we may be approaching the bottom, if that bottom is an L shape or a U shape is down to how the crisis continues to pan out. However, the acceleration of the decline has been so rapid that unlike the depression, we are seeing wealth wiped out much faster, in the late 20’s early 30’s the drop in the Dow went from 343 to 71 over the course of three years, today the Dow went from 14,000 to 6,900 in just over a year. That same 50% drop took more than a year and a half from 29′ to 31′ (the crisis accelerated after that). However, an important difference between now and then is that the state sponsored institutions didn’t exist, such as state supported medical care and social welfare.

Bearing this in mind what can we determine of the near term future? For a start, bad news is no longer effecting share prices the way they normally would, a …

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Some past market performance figures

Naturally past economic cycles don’t tell us exactly what will happen in the future, but as Mark Twain once said ‘history doesn’t repeat itself but it does rhyme’. And for that reason it is worth looking at some key figures from the past, showing that often the gains in bull markets are all found at the cusp of a bear market.

The stock market generally reacts before consumers and the real economy do and equally it will generally see recovery before them as well. Taking a view of the 20th century markets we can see the following:

In the recession of 1926 to 1927 the market increased by 41%. The years of 1933 to 1937 saw some of the most impressive gains ever in the S&P 500. The eight month recession of 1945 saw markets rise 19.5%, the eleven month recession of 1948-49 saw the markets go up 15.2%. Again in 1953-1954 the ten month recession ended with a market that rose 24.2%.

Any reader will note that much of these ‘gains’ did …

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