Tuesday 6 December 2016

Taxpayers put €210m a week into toxic bank

Anglo chief warns shutdown would cost public even more

Emmet Oliver and Laura Noonan

Published 01/09/2010 | 05:00

TAXPAYERS will have to pump an estimated €210m a week into Anglo Irish Bank for the rest of the year to cover losses that will never be recovered.

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The colossal impact on the economy by the bank was revealed yesterday when Anglo unveiled record six-month losses of €8.2bn.

The startling figures emerged in the bank's half-year results -- the biggest loss in a six-month period by an Irish company.

Anglo chiefs warned a further €6bn loss was likely for the rest of 2010.

Chief executive Mike Aynsley accepted that the losses were "horrendous", but insisted that a very quick wind-down of the bank would cost another €20bn, on top of the €25bn already earmarked for the bailout of the bank.

In an interview with the Irish Independent, Mr Aynsley said the State could not afford an immediate wind-down, saying it would be "just ripping up money for the Irish taxpayer".

Despite growing calls for the bank to be shut down, Finance Minister Brian Lenihan yesterday promised to bring "certainty and finality" to the issue of Anglo in the coming weeks -- but he refused to put a final figure on the cost of bailing it out.

However, the options open to the Government and the EU to avoid a major hit to the taxpayer are extremely limited. Any decision to immediately wind down the bank would have huge implications for our international reputation.

The country is expected to honour all the debts of a mainstream bank and this may not be possible if Anglo was shut down immediately.

Yesterday's results also revealed that:



  • More state cash may be needed, depending on the discount placed on future loans going to NAMA.
  • About €600m of loans that went into NAMA are worthless as they were secured on nothing more than personal guarantees.
  • Deposits of €5.5bn have flowed out of the bank in just six months, with the turnover cut in half.
  • The bank gave €1.1bn of fresh working capital to developers to finish off schemes and developments.
  • It expects to be forced to take over more struggling businesses, like Arnotts, in Ireland, but also in the US.

It also emerged that the bank has started an investigation into potential overcharging of customers on loans given out over a five-year period.

Interest

The bank may owe up to €50m to the customers affected. An incorrect interest rate may have been applied to a large number of loans and customers may be owed between €30m and €50m by the bank, Mr Aynsley revealed.

The loans in question were given out between the late 1990s and July 2004 and Anglo may now have to pay back customers who have been affected.

Anglo Irish Bank also revealed yesterday that a key reason for its opposition to closing the bank down gradually was that leading developers would simply stop repaying their loans.

In his chairman's address, Alan Dukes said a gradual closure plan would "impede'' the bank managing its loan book.

"Borrowers would see you coming,'' said chief financial officer Maarten van Eden.

Meanwhile, it is understood loans given to Sean Quinn and his family are included in the losses announced yesterday.

Irish Independent

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