Economic crisis: Final bill for Anglo may be €33.5bn
Doubts over €11.5bn Central Bank loan
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FRESH doubts have emerged about the taxpayers' final bill for bailing out Anglo Irish Bank after the Department of Finance admitted an €11.5bn loan given to the bank is secured on highly risky property loans.
The Government has already earmarked €22bn for the nationalised bank, but if the €11.5bn loan remains unpaid it would bring the total bill to €33.5bn.
In a parliamentary reply, the department admitted the loan given to Anglo by the Central Bank last year was secured on Anglo's loans to developers -- the first time the department has given any details about the security behind the money.
The department also admitted that the European Central Bank (ECB) could not accept that form of collateral -- forcing the Central Bank here to step in last year to shore up Anglo.
It has also emerged that former Anglo chief Sean FitzPatrick was given several interest-only loans by Anglo, which have contributed to his €110m in debts. He is expected to be declared bankrupt today in the High Court.
Last night, Fine Gael finance spokesman Michael Noonan said he would demand immediate answers from the department about the loan.
"We need to know when it was approved and how much of the loan is backed by development land loans, which, as everyone knows, are not performing in most cases,'' he said.
"We need to know from the minister the method of repayment of this loan and the time period when repayment will take place," he added.
Finance Minister Brian Lenihan insists the money will ultimately be paid back to the Central Bank once the National Asset Management Agency (NAMA) is up and running fully and talks with the EU on Anglo's future conclude.
"There are no plans to write off any part of the principal involved," Mr Lenihan said.
But senior financial experts raised concerns last night about the loan. "The collateral behind this loan seems to be different to that usually accepted by the ECB, which seems curious," said Professor Brian Lucey, a finance lecturer at Trinity College Dublin.
"The ECB is taking even NAMA bonds, so there is a danger this loan hinges on assets that are even worse than the average NAMA loan,'' the professor added. "There is a danger this money won't be repaid."
Asked by the Irish Independent when the deposit was agreed and for what reason, the Central Bank declined to comment, simply saying it was briefly mentioned in Anglo's accounts released in April. Anglo itself refused to comment.
Assistance
The Government said the Central Bank was entitled to provide emergency assistance to banks when it thought it necessary, but the department admitted the €11.5bn deposit was "not part of regular monetary policy operations".
It said the loan was secured on the bank's "customer lending assets", but would not say how much of this was development land.
This week the Central Bank will reveal for the first time how it accounts in its own books for the loan and whether it thinks it will get the money back this year.
For now, the Central Bank would only say the following: "Similar to other central banks, the Central Bank of Ireland can supply exceptional liquidity assistance to institutions, when that is judged necessary.
"This facility is not part of regular monetary policy operations. Any such lending is, of course, collateralised and repayable.''
Anglo is currently proposing to split itself into a 'good bank' and 'bad bank', but needs EU approval.
Last week it emerged that the EU had reservations about an earlier version of this plan, although Anglo said it had re-shaped the proposals radically to gain approval from Brussels.
One of the biggest problems is that Anglo's staff are mainly skilled in property lending, but the EU does not want the bank to build up a major exposure to that sector again.
- Emmet Oliver
Irish Independent
