Tuesday 20 February 2018

Anglo told it will never lend another penny

Laura Noonan, Emmet Oliver and Fionnan Sheahan

SCANDAL-hit Anglo Irish Bank has been barred from lending ever again after creating the majority of the country's toxic debts.

Finance Minister Brian Lenihan yesterday confirmed that the nationalised bank would be split in two, with one wing holding deposits and the other managing non-NAMA loans, which will be run down over time.

However, the Government last night admitted it did not know how long it would take to wind down Anglo, or how much it was going to cost taxpayers.

Mr Lenihan ditched Anglo's ambitions to carve a functioning niche lender out of what is left of the bank when it transfers €36bn in property loans to NAMA.

Instead, Anglo's remaining loans of about €38bn will be housed in an asset recovery bank, where they will be worked out over a period of time or sold off, while its deposits will be put into a state-backed bank, which will not lend money.

The "savings bank" will also help provide funds for the asset recovery bank, lessening the immediate burden on the State.

The permanent ban on new lending brings to an end an era of Anglo lending that led to disaster and the nationalisation of the bank in January 2009.

Anglo formed a crucial relationship with key developers, including Bernard McNamara, Treasury Holdings and Derek Quinlan.

Former chief executive David Drumm grew the bank at explosive rates during the boom by aggressively recruiting other customers, such as Sean Quinn.

The ban now means Anglo can only lend to developers in order to complete the last few Celtic Tiger projects.

The Government rejected a plan to set up a new so-called 'good bank'. Instead the new bank will only have deposits, dealing a blow to Anglo management, led by chief executive Mike Aynsley.

But Mr Aynsley last night said he would "roll with the punches" and remain with the embattled institution, despite the collapse of his plans for the bank's future.

The bank boss also revealed that the 'new' plan for Anglo would allow the bank to more vigorously chase borrowers who are not repaying loans.

But jobs may be hit by the plan. Mr Aynsley confirmed the Government's preferred option for Anglo would "absolutely" need fewer people than the proposal management had backed.

Mr Aynsley had teed himself up to run the jettisoned 'good' bank. But the Australian insisted he would "absolutely" be staying on even though the good bank would not be created.

"Myself and all the management team sat down and went through everything," he told the Irish Independent. "I haven't heard anything about anyone thinking of leaving."

The opposition last night criticised the Government for failing to give a clear timetable for the wind-down of Anglo.

But Mr Lenihan gave a stark warning of how a quick shutdown would hit the country.

"The practical reality is that the bank owes €72bn -- the bulk of it to depositors. If we let this go, we let Ireland go," he said. "We cannot contemplate that."

Mr Lenihan denied the compromise plan announced yesterday had been forced on the Coalition by the European Union.

In an obvious dig at those who said the bank could be wound down more quickly, Mr Lenihan said it wasn't possible to "pluck a figure out of the air".


Pressed on how long the wind-down would take, he would only say it was "difficult to see it going beyond 15 years".

The decision on Anglo followed months of discussions and proposals with European Commission chiefs and options put forward by Anglo management.

Mr Lenihan spent two days discussing the future of Anglo with Competition Commissioner Joaquin Almunia and European counterparts.

The final cost of the Anglo split will not be announced until October, the Government said.

The bank last week announced losses of €8.2bn and is forecast to need a bailout of at least €25bn.

Under the Government's plan, to be authorised by the European Commission, the two new banks will also be rebranded.

Fine Gael leader Enda Kenny claimed the Government's banking policy was a disaster. And the party's finance spokesman Michael Noonan said splitting the debt-ridden bank was "a fudge".

"Whatever the total call on the Irish taxpayer is going to be, it's as big today as it was yesterday. There's no relief for the taxpayer."

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