Business Irish

Friday 22 September 2017

Central Bank now tightens its grip on IBRC's assets

The Central Bank building in Dame St, Dublin, which was designed by the late architect Sam Stephenson
The Central Bank building in Dame St, Dublin, which was designed by the late architect Sam Stephenson
Donal O'Donovan

Donal O'Donovan

The Central Bank has registered a charge over the assets of IBRC, the former Anglo Irish Bank, despite the bank's debts being guaranteed by the Government.

It is the first time the Central Bank has ever registered such a charge over the assets of a bank.

The legal move means that the Central Bank is at the top of the queue to be repaid if state-owned Irish Bank Resolution Corporation (IBRC) defaults on its debts.

Officials at the Department of Finance said the move is not linked to negotiations with the European Central Bank (ECB) in relation to spreading out the €30bn cost of the Anglo Irish Bank rescue.

They described the move as "housekeeping" by the Central Bank and argued it would benefit the department by minimising any potential claim on the State by the Central Bank in the "highly unlikely" event of a default by the bank.

The bank said was forced to agree to the charge in order to access Central Bank funds, in an announcement made to the stock exchange.

"IBRC was required to grant the Central Bank of Ireland a floating charge over unencumbered assets on its balance sheet to secure exceptional lending from the Central Bank," the statement said.

IBRC and the Central Bank entered into the "Deed of Charge" on October 18, according to the announcement.

Liabilities

"It provides continuing security for the payment, performance and discharge of all sums of money, obligations and liabilities . . . which are now or shall in the future become due, owing or incurred to the Central Bank."

IBRC owed the Central Bank €42bn under so-called "emergency lending" at the end of June, according to the bank's latest set of accounts. The Central Bank is far and away the biggest creditor of the former Anglo Irish Bank.

That debt, however, is already secured on assets held by the Central Bank, including the Anglo Irish Bank "promissory note" -- an IOU from the State to IBRC promising to pay the bank €30bn plus interest over the next decade.

It begs the question why the Central Bank has now moved to tighten its grip on the state-owned institution.

A spokesman for IBRC declined to comment, saying the decision to register a charge was a matter for the Central Bank. A spokesman for the Central Bank also declined to comment.

Irish Independent

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