Friday 26 May 2017

Elderfield to allow slowdown on 'cheap' bank asset sales

Laura Noonan

Laura Noonan

IRISH banks will be allowed to "slow down" the €70bn auction of their surplus assets if the European crisis makes it impossible to get "fair prices" for the taxpayer, Central Bank deputy governor Matthew Elderfield said yesterday.

Bailed-out AIB, Bank of Ireland and Irish Life & Permanent were asked to draw up detailed plans to sell off some €70bn of assets by 2013, after they fell short of March's stress tests.

The banks had sold about €13bn of assets by the end of September. "I think they're going to hit their targets, or getting pretty close to it [in 2011]," Mr Elderfield told broadcaster CNBC yesterday. "The next two years will be more of a challenge.

"Across Europe there's going to be a capital-raising exercise by the EBA [European Banking Authority] -- a lot of banks are going to be selling assets in the market at the same time."

Limit

Mr Elderfield added that while the Irish banks had been given money to fund losses on assets sales, there was a "limit to that". "We'll be prepared to moderate that pace to make sure that the prices are fair ones for the taxpayer," he stressed.

"So far the haircuts [discounts] for deleveraging have come in at the base level [the more benign scenario] and not at the stress level so there's a bit of headroom. If it gets up to the stress level we're prepared to say 'slow down a bit'."

Mr Elderfield said he envisaged a range of buyers, including private equity, hedge funds and other banks. Irish assets, which make up a minority of the overall disposals, will be the "harder ones to sell", he said.

A slower pace of sales is likely to mean the banks will be dependent on last-resort central bank funding for longer. That peaked at almost €170bn in early 2011, but was down below €130bn by October as they were buoyed by cash from assets sales and their July bailouts.

On the overall Irish situation, Mr Elderfield said Ireland had avoided getting "sucked into the vortex of what's happening in other countries" in part because it had made a "major investment" in fixing its banks. "The reputation of Ireland as a place to do business is being established again."

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