Tuesday 28 February 2017

Banks must update State twice a year on bid to sell €73bn of assets

Laura Noonan

Laura Noonan

THE Government last night revealed plans to publish bi-annual updates on banks' efforts to offload €73bn of assets, as institutions are subjected to an unprecedented level of oversight to ensure the bank restructuring plan remains on track.

Documents published by the Department of Finance last night, which also detail several key deadlines for the banking shake-up for the first time, including the fact that Irish Life & Permanent will be given until the end of October to sell off its life insurance business.

The fullest picture yet of the bank restructuring programme is contained in an update prepared for the European Union and the International Monetary Fund, who are contributing heavily to Ireland's €85bn bailout.



Restructuring

The document echoes the broad tenure of the original memorandum of understanding signed with the EU/IMF late last year but features several new details on how the measures will be implemented.

A major plank of the restructuring is the demand that AIB, EBS, Permanent TBS and Bank of Ireland offload €73bn of assets over the next three years so they can close the gaping hole between their deposits and loans.



  • Banks will be required to set up 'Deleveraging Committees' to oversee asset sales.
  • These committees will have bi-annual targets and will have to report progress to the authorities every six months. If banks don't measure up, the authorities will "use their powers to ensure achievement of the goal" of deleveraging.
  • The banks will also be subject to "close observation" by representatives from the Department of Finance and the Central Bank who will sit on the deleveraging committees.
  • By the end of June, banks will be given specifications on the management and "internal incentive structures" they should employ to ensure "prompt deleveraging" and the best prices.
  • Bi-annual updates on assets sales plus "liquidity indicators" will be published every six months on an aggregate basis.


The four banks also have to boost their capital by a collective €24bn. Last night's document commits the Government to firm deadlines for this for the first time.



  • AIB, EBS and Bank of Ireland must all have their capital in order by "end July".
  • Irish Life & Permanent will be given until "end October" to offer its life assurance business and complete its capital raise.
  • Merger plan for AIB and EBS to be "made available" to bailout partners by "mid May". Legal merger to go through "no later than end September".


On Anglo Irish Bank and Nationwide, the document says they will be wound down in a "timely fashion", with management subject to "strict performance targets" to ensure this happens.

The Government also reveals plans for a shake-up of the way banks are regulated and controlled.

It has promised a "more integrated decision-making and supervision structure" across agencies and departments, while controlling state-owned banks "at arm's length".

The goal is to "prepare the banks for a return to private ownership as soon as possible" the document stresses.

It points out that the Government is determined the restructuring measures will "culminate in a healthy, fully private-owned banking system".

The document also goes on to describe plans to force banks to repay money to the State as soon as they have "stable access" to international funding markets, and heralds a new "Supervision and Enforcement Bill" that will be brought in by the end of July.

Irish Independent

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