Friday 9 December 2016

Minister clears way for gradual shutdown of bank

Laura Noonan in Brussels

Published 07/09/2010 | 05:00

THE Government has cleared the way for a faster resolution to the Anglo Irish Bank debacle by conceding the entire institution should be gradually shut down.

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The revelation came last night after crunch talks between Finance Minister Brian Lenihan and European Commission Competition boss Joaquin Almunia.

Mr Lenihan is also understood to have explored the case for extending several parts of the bank guarantee scheme, including a corporate deposits guarantee that expires this month.

The prospect of a faster resolution for Anglo comes after Mr Lenihan told the commission the Government is open to winding down the entire bank over about 10 years.

Anglo's management had been pushing Europe to allow them keep a small 'good' bank open, while its troubled loans went to a bigger 'bad' bank.

"The commission had doubts about the competition aspects (of the good bank)," said one Brussels source last night.

"If suddenly there's a solution on the table that takes care of those competition issues in a clear-cut way, then obviously we can make a decision on that more quickly."

Financial sources said a faster verdict on Anglo's future could help both the Government and other Irish banks to borrow on international markets.

Uncertainty surrounding Anglo has pushed the cost of government borrowings to record highs, while Anglo's plight has also shaken confidence in other Irish banks, which have tens of billions of debt to refinance this month.

"From a market point of view, the sooner we know (what's happening with Anglo), the better," one source said.

A spokesman for Mr Lenihan refused to disclose the details of the meeting, describing it only as "constructive".

In an interview with RTE before he left for Brussels, Mr Lenihan confirmed the prospect of a total Anglo wind-down was firmly in view.

"For me the imperative is the taxpayer imperative," he stressed. "And if what is best for the country in terms of the risks to the country's solvency, if the best option is a workout over an extended period of time, then so be it."

Paying tribute to the "effort" Anglo management had put into developing the 'good' bank strategy, the minister said a "final decision" would be made "in a matter of weeks".

A spokesperson for Mr Almunia said there was "no timeline" for the EC's decision on Anglo's plan.

Guarantee

The Brussels meetings also included discussions around the controversial bank guarantee schemes, which begin to expire at the end of September.

Both Anglo and AIB have called for the main guarantee scheme to be extended for an extra year, saying the markets are too troubled for Irish banks to survive without the supports.

Mr Lenihan is understood to have relayed these concerns to Brussels, but his spokesman refused to be drawn on the details. The most urgent element is a guarantee for short-term corporate deposits, which expires at the end of September.

Anglo last week warned that €12bn of its deposits would be pulled out imminently if the guarantee is not extended. Market sources said other banks could also lose significant sums.

Political pressure for Anglo's complete shutdown has been mounting since the bank announced first-half losses of €8.2bn and admitted full-year losses could hit a record €15bn.

The rocketing cost of Anglo's bailout -- billed at between €25bn to €35bn -- has also been creating increasing alarm both at home and abroad, but Mr Lenihan insisted the mammoth amount was "manageable".

Uncertainty over Anglo could be more damaging than the final cost Brendan keenan: Page 22

Irish Independent

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