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Saturday 3 December 2016

Kenny says ECB blocked buy-back of bonds

Michael Brennan and Laura Noonan

Published 03/11/2011 | 05:00

TAOISEACH Enda Kenny claimed yesterday that opposition from the European Central Bank prevented the State from buying back Anglo Irish Bank bonds at a cheaper price.

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The controversy over the repayment of €750m to bondholders who loaned money to the now-nationalised bank continued yesterday.

Mr Kenny was questioned about why Anglo had not saved the taxpayer a "fortune" by buying back these senior Anglo bonds when they were trading at 50pc of their value earlier this year.

He said that neither Anglo nor the State had the cash to buy back the bonds. And he highlighted the role of the European Central Bank (ECB), which is providing €110bn of funding to keep our banking system functioning.

"Every single cent that the bank (Anglo) has was on loan from the ECB and to engage in buying back bonds would have involved even more borrowing from the ECB," said Mr Kenny.

"The ECB is not in the business of lending to the State or banks to buy back their own bonds," he told the Dail.

Mr Kenny also told the Dail yesterday that the country "has always paid its way and has always paid its debts".

"I have no intention of turning this country into some kind of sub-Saharan state, by virtue of reckless decisions that might be made," he said.

The Irish Independent understands that the ECB was resistant to lending more money to Anglo for any purpose, since the bank had already gotten unprecedented support of about €40bn.

The ECB is also likely to have been mindful of the fact that buying back the shares would have had the same effect as burning the bank's senior bondholders.

Denounced

This is a policy which the ECB has emphatically denounced because it believes there would be knock-on effects for other European banks who could find it harder to raise cash.

The Department of Finance confirmed the ECB had consistently stated its opposition to "all of the proposals" brought forward by the Government.

Finance Minister Michael Noonan said yesterday that the ECB had never made a threat about "turning off the tap of liquidity in the banking system". But he said he thought there was a risk.

During the general election campaign, the value of the Anglo senior bonds dropped by half because investors were aware of the pledge by Fine Gael to impose losses on them.

And the value of the bonds fell again last June when Mr Noonan announced that he planned to impose losses on these senior bondholders.

Independent Dublin South TD Shane Ross said that the Government could have saved taxpayers a "fortune" by buying back the Anglo senior bonds at cheaper prices.

He said people who had bought the bonds on the market at low prices "have made a profit of nearly 70pc on the back of the Irish taxpayer".

Fianna Fail leader Micheal Martin accused Mr Kenny of misleading the Irish people about imposing losses on bondholders, while Sinn Fein and the United Left Alliance led a walkout from the Dail in protest.

Mr Noonan said that he was concentrating on negotiating with the ECB and EU to reduce the estimated €17bn interest bill on paying for the €30bn wind-down of Anglo.

He said it was more in the interests of the Irish people to "grit our teeth" while repaying the Anglo bondholders because a default "takes us over the cliff" and could lead to Ireland being lumped in with Greece.

Irish Independent

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