Tuesday 22 August 2017

Honohan to query Neary in probe into banking collapse

Central Bank governor Patrick Honohan. Photo: Bloomberg News
Central Bank governor Patrick Honohan. Photo: Bloomberg News
John Mulligan

John Mulligan

Central Bank governor Patrick Honohan expects additional recapitalisation of the two main Irish banks to happen "very soon" and said that the sums involved would represent a "well-calculated, manageable sum" for the Exchequer.

Appearing before a Joint Oireachtas Finance Committee yesterday, Mr Honohan also said that former financial regulator Patrick Neary as well as former Central Bank governor John Hurley have agreed to be interviewed by him as part of his preliminary inquiry into the banking crisis.

Mr Honohan declined when pressed by committee members to detail the extent of the additional recapitalisation that will be required by the banks or the precise timeline for that cash injection.

However, it is almost certain to take place within the next eight weeks as toxic loans begin to be transferred to the National Asset Management Agency (Nama).

Mr Honohan said while there were some initial reservations that Nama would over-pay for loans, he now believed it would de-risk the banks' balance sheets, improve their liquidity positions, and "set the scene and create the foundations for the recovery of banking".

"The flow of credit will depend on the recovery of confidence of the bankers, and the confidence of the borrowers," he added. He said he was not concerned about Nama's pricing of loans, and that it was not the central issue.

"When this is all over, the central issue . . . will be the working out of those (loans) in the most effective way."



Clarity

Meanwhile, John Corrigan, chief executive of the National Treasury Management Agency (NTMA), said it would take until the end of this year to get sufficient clarity on the rescue of the banks.

The country should avoid too much pessimism about the banks, which would lead to the Government putting in more capital than was needed, he said.

"The concern is that we get ourselves into too pessimistic a mode and end up unnecessarily over-capitalising the banks," he said. He added he was "quietly confident" that there would be greater clarity on how much capital the banks would need once they transfer loans to Nama around the end of March.

Last night, Finance Minister Brian Lenihan said decisions on recapitalisation had to be taken soon but that the taxpayer should remain the last resort.

The Government has already stuffed a combined €11bn into Bank of Ireland, Allied Irish Banks (AIB) and nationalised Anglo Irish Bank.

An eventual merger of EBS and Irish Nationwide will likely result in a requirement for at least €1bn from the taxpayer, while Bank of Ireland and AIB could also require billions more to shore up their balance sheets.

Speaking at the Oireachtas Joint Committee hearing, Mr Honohan said that his investigation of the banking crisis, which extends to the date of the introduction of the Government's bank guarantee in September 2008, was wide-ranging in its scope.

He would examine issues such as parliamentary accountability, and the events at IFSC-headquartered German bank Depfa, the specialist lender that needed to be bailed out with a €35bn loan guarantee by the Berlin government and a group of other lenders.

Mr Honohan's questioning of Mr Neary is unlikely to be a wholly comfortable engagement. Mr Neary resigned from his post last year following a damning report into director loans at Anglo Irish Bank.

Irish Independent

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