Friday 24 November 2017

Anglo voices concern about plans to phase out guarantees

Boss Aynsley warns of 'consequences for entire system' as he calls for extension until end of 2011

Laura Noonan

Laura Noonan

ANGLO Irish Bank boss Mike Aynsley has added his voice to growing concerns about the phasing out of the bank guarantee schemes, calling for an extension until the end of 2011.

The original bank guarantee scheme -- dubbed the Credit Institutions (Financial Support) Scheme -- is due to expire in September. A second scheme, the Eligible Liabilities Guarantee Scheme, is set to be phased out between September and December.

Both schemes help banks raise money on the international funding markets, since the Irish Government acts as the ultimate underwriter for any issuances.

"If the guarantees are removed before the [financial] system has stabilised, it'll make things very difficult," Mr Aynsley said last night. "The consequences won't just be for Anglo, they'll be for the entire system, in that it will be difficult to raise funds."

Banks that can't raise funds on the commercial markets can turn to the European Central Bank (ECB). "If we're centre-posting the funding system on the ECB, that's not really solving the problem," Mr Aynsley said.

"Frankly, I think they [the two key guarantees] should both be extended until the end of next year."

Mr Aynsley's comments came days after AIB boss Colm Doherty called for a similar extension, warning that removing the guarantee too soon "could have very poor ramifications systemically".

Bank of Ireland, which has successfully raised €2.9bn in recent months, has so far stayed out of the debate, while the Department of Finance has stressed that the guarantee's extension is a European issue.

Ireland's banks have some €70bn worth of debt due to be repaid in September, though the slimmed-down size of their businesses means that not all of the debt will need to be refinanced.

As well as dealing with the €7bn of its debt that has to be repaid in September, Anglo is also hoping for the European Commission's decision on its restructuring plan that month.

"Delays impede the move towards stability and certainty," said Mr Aynsley. "it's better for us to know [the European outcome] sooner rather than later."

Anglo has put forward plans to split itself into an asset run-down company 'Asset Co' and a smaller functioning lender 'Bank Co', as an alternative to winding the bank down.

Issues

"There are still some issues to be worked through but we've had a very good and open dialogue," Mr Aynsley said last night.

Bank Co may have as little as €10bn in assets against an initial "€10bn to €15bn" forecast, with some €25bn going into Asset Co.

Mr Aynsley stressed that it was important to transfer only good quality loans to Bank Co, so the portfolio would not be corrupted.

Anglo is transferring another €36bn worth of loans to the National Assets Management Agency (Nama). Some €1.4bn of that loan book will be transferred across this weekend with another €6.6bn "in the coming weeks", as part of Anglo's Tranche 2 contribution.

The nationalised lender has already transferred €9.3bn of loans in Tranche 1, with a haircut of 54pc applied by Nama. Reliable information on the Tranche 2 discounts won't be available until the entire batch has been transferred.

Irish Independent

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