Emmet Oliver: The Quinn €2.8bn question has still not been answered
Within days a final bidder to buy Quinn Insurance will be selected.
The bidder will talk about a new culture at Quinn Insurance, brand new investment, better relations with the regulator and enhanced job security for those still working at the company.
The code will be -- this is no longer Sean Quinn's insurance company, this is a new start.
In some respects the slate will be wiped clean. The products sold into the insurance market by Quinn are now priced correctly, in accordance with risk.
The company has curbed (if not eliminated) its disastrous foray into the UK market and links between Quinn Insurance and the wider Quinn Group are gradually being dismantled.
There is also an acceptance that capital adequacy standards must be adhered to by Quinn, just as they are at all other insurers (VHI not withstanding).
While various suitors are still believed to be pursuing Quinn Insurance, it remains almost impossible to see how any one transaction or arrangement can significantly help Sean Quinn and family to pay down the astonishing €2.8bn owed to the State, via Anglo.
Of course, Anglo has taken significant write-downs on the amounts owed by Quinn already, but that doesn't absolve the lender from making all reasonable efforts to recoup the full amount.
In fact the Anglo-led bid for Quinn would seem to involve the State increasing its exposure related to the Quinns, with the NTMA reported to be putting €600m of public money into the insurer to fulfil a solvency requirement demanded by Matthew Elderfield.
Under what risk rules at the NTMA such a move would be possible remains unclear.
Technically of course, the only way the Quinns can pay down the Anglo debt via Quinn Insurance is if they remain as equity holders in Quinn Insurance. That key matter has yet to be clarified.
But even if Anglo gets its hands on Quinn Insurance as the owner and uses the value from that company to pay down the debt, it would have to be done via a trade sale, because reducing the Quinn debt by taking dividends out of Quinn Insurance annually would be a painfully slow and uncertain method for Anglo to get its money back.
Quinn Insurance is not profitable according to its last set of accounts, and soundings from the administrators suggest 2010 will not be profitable either as the company takes a hit for restructuring of €10m.
The other possible route for Quinn to dig himself out of the debt hole is via the wider Quinn Group.
But there it appears that his equity will be wiped out, or if not, any value from the business will be pumped directly into a scheme to pay off the €1.2bn owed to banks and bondholders of that industrial holdings group, rather than going to Quinn and then to Anglo.
Of course, the Quinns have assets of their own to sell and these could realise about €600m.
Either way, the road to debt salvation looks long and arduous. The evidence for that is that Anglo has already put aside a €2.5bn provision opposite the name of Sean Quinn and family.
It seems conservative, but it needs to be considering the sheer scale of the debts the Cavan man has lumbered himself with.
IMF plan for banks fails to clear the first hurdle
As an organisation it is reputed to have the best economic brains in the world. But when it comes to banking, is the IMF really that street smart? Remember the Washington-based organisation hasn't fixed a banking system in western Europe since its establishment in 1945. Its early faltering attempts at fixing Ireland's system appear to be wobbling, badly.
The organisation's Ireland mission chief Ajai Chopra told this reporter in December that getting confidence back in the Irish banks among funders was the key to nursing at least the two main patients back to health. That and deleveraging were the key instruments to be used, we were told.
But nobody told customers, who remain the main funders of banks. In just 12 months over €81bn of deposits have bled from the system. Even the arrival of the EU/IMF mission failed to staunch the flow, even though technically the entire firepower of the European Union is now backstopping the Irish banking system.
This is the sobering, chilling statistic -- Ireland's loan to deposit ratio (a bank's loans divided by the amount of its deposits) now stands at 218pc, disappointingly very close to where it was at the start of the crisis, at 221pc.
Irish banks should be seeking to hit a loan to deposit ratio of about 120pc in an ideal world, with most regional banks in the US at around 113pc for instance. But even Bank of Ireland is stuck with a challenging 160pc ratio as its deposit base gets eaten away.
The deposits that flow out have to be replaced by ECB and Central Bank funds, which in turn makes the Irish banks appear even riskier to outside depositors, who then withdraw their funds, starting the cycle all over again.
On the other side, there is talk of deleveraging. i.e., selling assets. This at least reduces the size of the loan books and brings them into alignment with the deposits the banks do have left.
But so far the IMF team have struggled to find an effective way to do this. One, who is going to buy the assets? AIB can't apparently sell its UK business, its Bulgarian bank stake or its Northern Irish First Trust unit.
Secondly moving them into a state-backed Nama II is hugely problematic. It is hard to believe the transfer wouldn't trigger some kind of write down on the book value of the assets, pushing up the need for capital once again.
If they are being hoarded until bank assets recover value, then the State would be taking on yet another contingent liability, for which it would have to seek protection, as it would be a form of EU state aid.
Of course swapping the mountain of debt and other liabilities the banks have into equity capital would massively short circuit this whole process, but it appears the EU/IMF are determined to take the scenic and most difficult route possible.