Irish Nationwide yet to begin critical restructuring plan
Published 15/03/2010 | 05:00
Irish Nationwide Building Society, which is set to receive up to a €2bn state bailout over the coming months, is understood to have yet to begin a critical state-aid restructuring plan for the European Commission.
Sources said, however, that the issue is likely to top an agenda at a board meeting this week. A spokesperson declined to comment other than to say Irish Nationwide is "completing its planning in accordance with the timetable set down by the Department of Finance".
There had been speculation that Irish Nationwide and EBS Building Society, with which it is in merger talks since last autumn, would be able to present a joint viability plan to Brussels.
However, the Irish Independent has established that both institutions will have to submit separate restructuring plans -- which must show how they can repay the State within five years. If bailed-out institutions cannot prove that they have a viable future, Brussels has made it clear they must outline how they could be wound down over time.
EBS is expected to require up to €400m from the Government as it stomachs discounts relating to about €900m of risky property loans it is transferring to the National Asset Management Agency (NAMA). Irish Nationwide is hiving off 80pc of its €10bn-plus loan book into the State 'bad bank' -- leaving it with about €2bn of residential mortgages and an estimated €5.5bn deposit book.
A spokesman for EBS said a draft of its restructuring plan was "well advanced".
EBS and Irish Nationwide each held extraordinary general meetings for their members last December, paving the way for Finance Minister Brian Lenihan to bail them out by taking special shares in the mutual societies. The shares will give the minister extraordinary powers over both institutions.
The Government will have to start injecting fresh cash into both lenders over the next six to eight weeks, as discounts faced on their first tranches of NAMA-bound loans blow holes in their capital reserves.
Meanwhile, Irish Nationwide chief executive Gerry McGinn has explained to staff within the past week that an original target of reaching a merger agreement with EBS by the end of last month has been missed, largely due to the workload faced by management in relation to NAMA. Mr McGinn described the preparation of documentation for NAMA as a "huge enterprise, absorbing enormous resources".
It is unlikely that negotiations between both sides will hit an advanced stage until next month, when the first of the NAMA transfers have been completed.