Sunday 23 July 2017

New powers give minister extensive control of banks

Laura Noonan

Laura Noonan

THE Government is introducing sweeping new rules to give the Finance Minister unprecedented control of Ireland's bailed-out banks.

The draconian powers are only intended to last until the end of 2012 but may be extended beyond then if the financial crisis continues, sources confirmed last night.

The powers can be applied to all banks that have used the state guarantee, including privately owned Bank of Ireland and Irish Life & Permanent, and also encompass credit unions.

Under the new measures, the Government will be able to take control of so-called "credit institutions" without the approval of their own shareholders.

This rule is expected to be used over the coming weeks to plough another €4.5bn into AIB, effectively nationalising the institution before the end of the year. The new powers also allow the minister to move banks' deposits around the wider financial system.

This power is expected to be used to move deposits of Anglo Irish Bank and Irish Nationwide to other banks, most likely AIB and Bank of Ireland.

New rules allowing the Government to impose conditions on state aid will be used immediately to prevent the payment of €40m in bonuses by AIB.

The minister may also soon invoke new powers to force losses on so-called subordinate bondholders, the riskiest lenders to Ireland's banks.

This will only be done if the bank involved is unviable and if the subordinate bondholders refuse to accept "voluntary" losses.

The new rules also include a vast array of powers that can be used in the future.

Force

The minister will be able to apply to the courts for a "direction order" that could force a state-supported bank to take certain actions, or prohibit the bank from doing something.

These orders could span anything from forcing banks to sell specific assets to removing bank directors and forcing banks to accept state cash.

The banks would be able to make arguments to the courts before the direction was granted, but crucially shareholders would have no power to veto the court orders.

As things stand, banks are required to put a variety of major decisions, including cash injections, to a general meeting of their shareholders.

Under the new measures, the minister will also be able to parachute a "special manager" into banks which aren't co-operating with their restructuring.

The measures will be debated by the Dail today, but last night opposition politicians were already criticising the rules as "two years too late".

The Government believes that the rules couldn't have been brought in at the start of the crisis since the banking sector was largely privately-owned and couldn't have been so tightly controlled.

Irish Independent

Promoted articles

Also in Business