Bank losses €45bn off mark
THE Government was told on the eve of the banking guarantee that losses across much of the system would only come to €5bn in a worst-case scenario.
PricewaterhouseCoopers (PwC) sent a summary to senior National Treasury Management Agency (NTMA), Central Bank and Department of Finance officials on September 28, 2008, estimating that banks would only have to provide €5bn to cover soured loans, new documents -- released by the Public Accounts Committee -- reveal.
The figures related to Anglo Irish Bank, Irish Nationwide and Irish Life & Permanent.
The cost of banking rescues is now expected to come to €50bn -- and this does not even include the €40bn for the National Asset Management Agency (NAMA).
The bank guarantee scheme was agreed on September 29-30, with more than €440bn in liabilities receiving protection from the State. The latest documents show that officials had very limited knowledge about the banks' books.
PwC said the provision of €5bn would most likely be taken over a three-year period, although if banks were wound down over a gradual period, losses would rise "significantly".
It added that its summary was based on the books being managed aggressively by an experienced property team.
The summary covered Anglo Irish Bank, Irish Nationwide and Irish Life & Permanent.
Together, the three banks were only expecting to put aside €400m in 2009 to cover soured loans. PwC said this was regarded as the "absolute best case".
The documents indicated that Anglo remained in denial about its true financial position, with the bank expecting profits of €1.1bn in 2009.
Irish Nationwide was expecting profits of €170m before taking any property-related hits.
PwC made it clear that it was providing the summary on request from the Financial Regulator. It described its work at that stage as ongoing and "not complete".
The documents also that Anglo Irish was in danger of having a shortfall of €12bn by mid October. The loss of deposits was the crucial factor.