Business Irish

Tuesday 6 December 2016

Honohan calls for swift decision on Anglo's future

Governor of Central Bank warns doubts having negative impact on global investors

Published 21/08/2010 | 05:00

Central Bank governor Patrick Honohan rubs his eye during a news conference in Tokyo yesterday where he said the Irish banking system has improved a lot but that high yields on Irish government debt have not dissipated
Central Bank governor Patrick Honohan rubs his eye during a news conference in Tokyo yesterday where he said the Irish banking system has improved a lot but that high yields on Irish government debt have not dissipated

THE future of Anglo Irish Bank must be "finally put to rest very soon", because the uncertainty around it is having a disproportionate impact on international investors, the governor of the Central Bank said yesterday.

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Patrick Honohan told the Japan National Press Club in Tokyo yesterday that he expected the government's guarantee for banks could be phased out in a matter of months rather than years.

Dr Honohan added that he hoped and expected final decisions on Anglo's future would be resolved in a matter of weeks.

"The question is, how much ongoing banking business will any entity being carved out or separated from the troubled remainder of the loan book have?

"It is clear that a carved-out continuing entity would be at most one-fifth of the size of the old bank in risk-weighted asset terms.

"The management's plans are being scrutinised by the European Commission. More importantly, the Government -- which became the shareholder of the bank when it intervened in January of 2009 -- has yet to adjudicate on what option it wants to back."

Dr Honohan said it was too soon to be precise "to the nearest billion" about the final cost of saving Anglo.

"The costs incurred so far would have had to be met regardless of whether Anglo's operations are kept going, or how much of them are kept going," he said.

"We still don't have a final number, and a range of a couple of billion either way has to be tolerated.

"For me, the important thing is that out of hundreds of billions originally guaranteed, it is clear that the range which I gave in my Beijing lecture on Tuesday (€22bn-€25bn) is a manageable one in terms of the public finances," he said.

Delivering on the non-banking parts of the fiscal consolidation is a good deal more important from the point of view of maintaining market confidence, Dr Honohan added.

The governor said he believed investors and ratings agencies would be more convinced of the credibility of the budget-correction process if there was an early announcement of the actual measures that were intended.

"On the other hand, the task of ensuring continued general public acceptability of the measures is a task which only the Government can do, and they may be a better judge of what is the most effective sequencing and timing of their budgetary announcements.

"I look forward to the best balance being struck here between the internal and external communication needs," he said.

International investors did not seem as aware as he would have expected that AIB and Bank of Ireland -- accounting for some three-fifths of the market -- are moving quickly to strong capital positions.

"It is in that context that I have remarked that I would expect to see this scheme phased out within quarters rather than years," Dr Honohan said.

Irish Independent

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