Brussels to call the shots on plan
Published 16/01/2010 | 05:00
They descended in their droves on Dublin's Mansion House -- shocked and bewildered, with many clutching shareholder certificates in a bank that was worthless.
An Anglo Irish Bank extraordinary general meeting scheduled for this day last year was supposed to rubber stamp plans for a €1.5bn state bailout. Instead, its shareholders found themselves turning up at a wake, after the Government had announced the previous evening that it was seizing the stricken property lender.
Since then, we have learned why Finance Minister Brian Lenihan felt it was necessary to nationalise the weakest link in the system as further details emerged of former chairman Sean FitzPatrick's hidden loans, as well as damaging revelations over a so-called 'golden circle' having a 10pc stake in Anglo and a controversial €7.5bn deposit from Irish Life & Permanent.
We have also seen the results of a root-and-branch trawl through Anglo's loan book in late 2008 by its former finance director Willie McAteer -- who predicted a worst-case scenario of up to €2.76bn of loans being written off over three years -- crumble under scrutiny.
Government-appointed consultants PricewaterhouseCoopers had come up with a stress-test loss of up to €6bn over two years for the group.
But both were blown out of the water when Anglo unveiled a €4.1bn impairment charge for the six months to March -- virtually wiping out its equity base and necessitating a similar-sized state cash injection.
Since then, there has been a mounting cacophony of voices calling for an orderly wind-down of an institution dubbed by some as a "building society on crack".
"You'd have to wonder why the Government is so dead intent on keeping this bank afloat," said one corporate financier.
He is not alone. Sources close to the Government concede that letting the bank be run down -- in as short a period as possible -- would be a hugely popular, almost cathartic, development for a public tired of scandals at the bank.
But they insist Ireland needs to develop a viable domestic financial services sector again so that it can encourage international investors to support the economy as it seeks to get off its knees.
"It's not as though we have a rush of foreign banks looking to get into the market," said one source. "The reverse is the case. Most of those that are already here would jump at the chance to get out."
Fine Gael leader Enda Kenny said last weekend he believed Anglo would come back to the taxpayer looking for an additional €6bn to keep the show on the road. But he said that if his party took power, it would wind the lender down over a period of seven to 10 years -- and save the State about €3bn in the process.
It is certainly a more favourable outcome than the €60bn bill Taoiseach Brian Cowen insisted last May the taxpayer could be liable for if the bank was liquidated.
But sources familiar with the costing by KPMG and a number of international investment banks of various options for Anglo told the Irish Independent this week the Exchequer could be hit to the tune of €20bn-€30bn if the bank were wound up over five to 10 years.
Meanwhile, the preference of Anglo's new management to split the group into a 'good bank' and 'bad bank' would need a further €4bn-€6bn capital injection, sources said. Anglo is seeking to salvage a viable bank out of the process, capable of repaying the State over time.
The restructuring plan, filed with the European Commission at the end of November, seeks to show that salvaging a 'good bank' out of the wreckage -- a lender to small business, infrastructure and property -- is the only way the State can hold out hope of getting any money back.