Government backs split plan
Published 03/06/2010 | 05:00
TAOISEACH Brian Cowen yesterday gave the firmest indication yet that the Government is supporting Anglo Irish Bank's plan to split itself into good and bad banks.
Mr Cowen yesterday said Anglo could be split, with the bad bank to be wound down over time. A further €2bn of taxpayer's money was pumped into the bank this week, pushing the amount provided to it so far to over €14bn.
And Mr Cowen repeated that Anglo may need a further €8bn -- which could see the total spend on the crippled institution climb to above €22bn.
He also said an orderly wind-down of the toxic part of the bank -- which, together with NAMA-bound loans amounts to over 80pc of the institution -- was on the table.
In reality, the so-called good bank, which would eventually be sold off, would make up less than a fifth of Anglo's original €70bn-plus loan portfolio.
The proposals are contained in an Anglo restructuring plan which has been submitted to the European Commission, but Mr Cowen's comments are being seen as an indication that the Government is seriously looking at the plan.
"The bank has proposed splitting into two elements, an asset management company to run down some of its loan book and a bank which will continue to operate as a viable going concern and eventually would be sold back into the market to recoup some value for the State," Mr Cowen told the Dail.
"While work remains to be done on the precise details of the restructuring plan and its implementation, it is seen to provide a superior outcome for the State and the taxpayer and in particular avoids significant additional losses and funding costs that would arise for the State under other scenarios.
"This work is continuing and the queries must be resolved for the agreement and approval of the European Commission.
"That will determine how the bank will be wound down and dealt with," he said.
Details of the plan emerged in recent days -- two months after Finance Minister Brian Lenihan said that "winding up the bank is not and was never a viable option".
But Mr Cowen also painted a doomsday scenario which would cost the State €110bn.
"That would involve a fire sale of assets, €40bn losses and would also mean €70bn having to be found immediately to fund deposits, bond holders and those moneys that have come from the euro system," Mr Cowen said.
Anglo chief executive Mike Aynsely has said the plan was the least costly for taxpayers. "The only upside for the taxpayer is in splitting the bank -- all other options only have downsides to them," he said.