Irish

Wednesday 23 July 2014

Pressure on to have Anglo debt deal secured by March

Brendan Keenan

Published 22/11/2012|05:00

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THE pressure is on to get a deal on the former Anglo's debts by March, the head of the Department of Finance has said.

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"Europe acknowledged the need to do something at the June summit," Secretary General John Moran said.

But there will be no EU capital for the commercial Irish banks before 2014 – if then – and no early sale of stakes in the "pillar" banks of AIB and Bank of Ireland.

The March deadline for the payment of almost €2bn in interest on the loans used to rescue Anglo "is a moment in time which creates pressure on everybody to find a solution", said Mr Moran.

Restoring the pillar banks to profitability is more important than seeking an early reduction in the €24bn injected into them.

"The banks are not for sale unless the price is right – not even to Europe," Mr Moran said at the annual conference of the Irish Association of Corporate Treasurers.

"In any case, EU capital cannot be provided until the single banking supervisor is in place, and that will be 2014."

ESRI research professor John FitzGerald told the conference that if the pillar banks were restored to profitability, they could be worth 20pc of GDP (€18bn) by 2020.

"They could be sold and the money used to reduce national debt. They should not be sold cheaply before then," he said.

The Government hopes that the bank guarantee can be ended early next year, which means some extension beyond its present expiry date at the end of the year.

If all goes well, the infamous guarantee could be finished by April, Mr Moran said.

Although the State had to put in more than €60bn to keep the guaranteed banks alive, budgets have benefited from large payments from the banks to pay for the guarantee.

"We may not get that money next year and the Budget is being drawn up on that basis, although we might get some payments in the end," Mr Moran said. But he added that the psychological benefits of ending the guarantee would compensate for the loss of income.

"People need to see that things are not getting worse. I think the statistics show that and we will see a relatively quick recovery if we get a turnaround in Europe," he said.

Marc Caron, head of client advisory at Danske Bank, said EU banks would need more than €3 trillion (€3,000bn) of fresh capital to meet new regulations.

Mr Moran told the treasurers that large corporates should lend to the banks, as well as looking for credit from them.

"Retail deposits which left the Irish banks have come back, but the corporate deposits have not," he said.

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