The National Treasury Management Agency (NTMA) has withdrawn Davy’s ability to act as the prime broker of Irish government bonds, to an unprecedented extent as the state’s largest stockbroker deals with fallout from a fine from the Central Bank and reprimand for violating market rules.
The NTMA board of directors “made its decision based on its assessment of the very serious conclusions regarding the company which were made by the Central Bank of Ireland last week and following the engagement with investors in Irish government debt in recent days, “the agency said. Monday afternoon.
Davy was the only Irish firm among the top 15 government bond traders recognized by the NTMA, and should have found buyers for the government debt, with the NTMA seeking to raise up to € 1.5 billion in a bond auction Thursday. .
Primary traders typically break even when they best handle regular auctions, but are likely to incur significant costs to handle larger bond sales, or what are known as syndicated bond trades. . Davy is said to have collected around 4.5 million euros in fees for being one of six managers of these deals in three major bond sales since the start of 2020, thanks to which NTMA has raised nearly 16 billion euros. , due to the need for government funds to cope. the skyrocketing costs of the Covid-19 pandemic.
“One of the main concerns of the NTMA is to maintain Ireland’s reputation as a sovereign issuer in the bond market and the orderly functioning of the Irish government debt market,” the agency said.
“Against this background, NTMA believes that the behavior described in the Central Bank’s findings is significantly below the standards expected of market counterparties, peers and colleagues in the bond market and is potentially damaging to Ireland’s reputation. as a sovereign issuer. “
The central bank fined Davy € 4.1million and sharply berated the company last Tuesday for breaking market rules in the 2014 deal where 16 Davy employees were looking to make a profit taking the other side of a bond transaction involving a client in 2014 – without him or the company’s compliance team.
Davy CEO Brian McKiernan, VP Kyran McLaughlin and head of bonds Barry Nangle resigned over the weekend as Davy struggled to contain the biggest crisis in its 95-year history.
The Irish Times reported last week that the three along with former CEO Tony Garry and former head of institutional actions David Smith were part of Davy’s group of 16 employees.
Davy on Saturday appointed Bernard Byrne, former CEO of AIB, interim CEO. Mr. Byrne joined the brokerage two years ago.