Fionnan Sheahan: What the parties would do to clear up this mess
Published 01/09/2010 | 05:00
The Cabinet meets today, for the first time since the summer break, with the future of Anglo Irish Bank high on the agenda.
Fianna Fail and the Green Party appear to be at odds over the future of the nationalised bank, with the junior party wanting a faster shutdown.
But the solution to the problem of Anglo, which has already had €22bn invested in it by the taxpayer, is not that simple.
The Irish Independent put the five key questions on Anglo's future to each of the parties to see if they had the answers.
1. How much would your solution to Anglo Irish Bank cost?
Background: None of the options is without a cost, so the debate is academic without figures.
Department of Finance: Up to €25bn, based on best estimates, but losses can change depending on a variety of factors, including NAMA discounts, the performances of borrowers and the economy.
Fine Gael's Michael Noonan: No figure but wants Finance Minister Brian Lenihan to publish the cost of the options. Believes wind-down is less than good bank-bad bank option and estimates that at €38bn.
Labour Party's Joan Burton: No figure as it's difficult to put a figure without sight and access to a breakdown of the bank's figures.
Green Party's Dan Boyle: €25bn, based on the general trends so far.
2. How long would it take to implement this solution?
Background: Estimates vary on how long it would take to shut the bank down and over how long the cost to the taxpayer would be spread.
Department: Not saying but promises a decision on the bank's future within weeks.
Fine Gael: 7-10 years to wind down the bank.
Labour Party: 5-6 years for the bulk, but up to 10 years for the remainder.
Green Party: 4-5 years for wind-down.
3. Would you pay all the depositors their full amounts, including the European Central Bank?
Background: Anglo had customer and inter-bank deposits of €56.5bn on its books at the end of June, including €22bn owned by the Central Bank and European Central Bank.
Department: Yes, the key objective is to minimise the cost of Anglo to the State and protect these deposits.
Fine Gael: Yes.
Labour Party: Yes.
Green Party: Yes.
4. Would you pay all the professional investors and bondholders the full amounts they are owed? If not, how much would you pay?
Background: A key point when estimating the cost of the options is how much of a loss those who lent to the bank would incur.
Department of Finance: Losses already imposed on subordinated bondholders in equity buyback. Notes many of the professional investors are the same investors from whom the State borrows.
Fine Gael: Not promising to pay full amount. Believes €6bn can be saved from negotiating with subordinate bondholders and debt-for-equity swaps with senior bondholders.
Labour Party: Not promising to pay full amount. Negotiated settlement with significant discount on subordinated debt and a markdown on senior debt.
Green Party: Not promising to pay full amount. It depends on the level of investment and negotiations with bondholders.
5. Will your solution have knock-on effects for the ability of other Irish banks to secure investment and deposits and the cost and availability of state borrowing?
Background: Concerns that a wind-down would damage the reputation of the country and the banking system, as well as making it harder to borrow and get investment.
Department: Steps taken by the Government are to ensure the State has a functioning banking system that can meet the needs of creditworthy businesses and individuals.
Fine Gael: No, not any more because the circumstances have changed.
Labour Party: No, a resolution of Anglo would help stop the continual unravelling of banks and State borrowing.
Green Party: Not if it is handled properly, doesn't think it will.