Anglo plans to create 'bad bank' and then trade under new name
ANGLO Irish Bank plans to create a massive "bad bank" and re-invent itself as a business lender, according to an internal email.
The restructuring plans, which were drawn up by Anglo senior management and their advisers KPMG, will be formally submitted to the European Commission on Monday which now has the ultimate say over the future of the bank. The proposal was drawn up following extensive consultation between Anglo Irish management and the Department of Finance.
Anglo Irish wants to create an internal bad bank dubbed the "Old Anglo". This bank will manage tens of billions of euro worth of bad loans which will not be transferred to the National Asset Management Agency (NAMA), according to sources who have seen an internal email sent to employees yesterday.
The rest of the bank will focus on lending to small and medium-sized businesses, possibly under a different name but dubbed "New Anglo" internally.
The entire plan is likely to be scrutinised by the European Commission in immense detail over the next six months.
The commission will take account of other plans within the Irish market, such as the possible merger between EBS and Irish Nationwide mooted earlier this week, before coming to a conclusion about the viability of Anglo Irish.
The bank will have to submit a plan for how it can be wound down if the commission decides that Anglo does not have a realistic prospect of putting the restructure into practice.
Anglo Irish, which said earlier this month that it is seeking 230 redundancies this year and a further 230 next year, plans to transfer €28bn of assets to NAMA. This will leave the bank with loans which were once worth around €46bn.
"Old Anglo", which will warehouse the bank's outstanding loans, will probably control the vast bulk of Anglo's existing loans which means it will be more than half the size of NAMA which has assets that were once worth €77bn.
The plan resembles bailouts on the Continent which often involve so-called good banks and bad banks within one organisation. It also resembles some elements of Fine Gael's plans for a recovery bank.
Sources said the KPMG proposals are probably the cheapest way of managing the bank because it should require a lower capital requirement than other plans. Finance Minister Brian Lenihan has previously argued that the bank should not be wound up because the State would be responsible for €60bn worth of liabilities.
KPMG, which was commissioned by Anglo Irish chief executive Mike Aynsley, also concluded that the bank should remain in business.
- Joe Brennan and Thomas Molloy
Irish Independent
