Monday 24 April 2017

Shut or salvation - the choices facing Anglon

Winding-down:

This could be done over a five-year period, or even over a 20-year period, depending on what the EU and the Government opt for.

It involves the bank gradually shrinking as loans are repaid and assets sold off. One benefit is that Anglo could wait for the property market to recover and get a better price as a result.

The challenge is how would Anglo keep hold of its deposits? Would depositors remain with the bank if they knew it was going to close?

Consequently the bank could have major problems funding itself when the markets know it won't be around in the long term.

An immediate closure:

This is regarded as the most dangerous option, causing Anglo to sell its assets into a depressed property market at fire sale prices.

There is also the question of how the bank pays off its bond holders and depositors from its risky loan book.

Closure would also mean no return to the taxpayer, as the proceeds of asset sales are unlikely to be enough to pay for its liabilities.

Good bank/bad bank:

The plan favoured by the bank itself, this tries to carve out a new bank from all the bad loans, which would go into a `bad bank'.

This new so-called `good bank' would eventually be sold and the proceeds returned to the taxpayer.

The problem is how much money would be needed to start the `good bank' and whether Anglo has the expertise to operate in sectors far beyond its property-lending roots.

Irish Independent

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