Business Irish

Saturday 25 November 2017

Even wind-down will leave €30bn bill

Ronald Quinlan

Ronald Quinlan

ANGLO Irish Bank will leave the taxpayer with a bill of at least €30bn, even if the European Commission orders the Government to shut it down, the Sunday Independent has learned.

Detailed analysis conducted by Anglo's management team has concluded that a 'wind-down' of the bank's business over 10 years -- now believed to be the Government's preferred option -- would add another €5bn to the institution's latest bailout estimate of €25bn.

But while the figures of €25bn and €30bn for splitting Anglo into a 'good' and 'bad' bank, or closing it down altogether, are bad enough, they could get even worse.

Informed sources at the state-owned bank have told the Sunday Independent that the current bailout projections are entirely dependent on there being no further decline in the property market, a situation that would see Nama increasing the level of discounts it applies to the remaining €20bn in loans it is due to take from Anglo by the end of this year.

"The €25bn and €30bn figures for splitting the bank or winding it down will go up again if the market goes down . . . €25bn and €30bn are based on Nama applying a discount of 60 to 65 per cent to the remaining loans," an informed source at the bank said.

"If the haircut ends up being 70 per cent, the cost of the bailout will go up by €1bn to €26bn or €31bn. For every five per cent of an additional discount, the bailout cost goes up by another €1bn."

The same source said that a speedy closure of Anglo's business would not lessen the cost to the taxpayer.

"People think you can stop this thing by putting the bank into wind down. You don't.

"The assets still exist, whether they are in a good-bank/bad-bank scenario or in a wind-down. They don't go away. They have to be managed through to their maturity."

While Anglo Irish Bank chief executive Mike Aynsley was reluctant to comment on the figures drawn up by his management team, which are currently under consideration by the EU Commission, he appealed to the members of all political parties to exercise caution in commenting on the bank while the decision on its future was awaited.

Last weekend, Green Party senator Dan Boyle caused consternation in Government when he publicly declared that the junior coalition partner was now in favour of a rapid wind down of Anglo's business.

Mr Aynsley said: "I think in any situation that requires a decision, speculation increases uncertainty, and uncertainty is bad for the markets, and uncertainty -- given the crisis environment that the world is in -- in financial markets, is not a productive thing for the Irish economy.

"So before idle speculation is contemplated publicly, the best interests of this country with regard to the world markets should be considered.

"I have issued an invitation to all of the members of the appropriate Oireachtas committees to attend a presentation by the management of the bank this Tuesday afternoon, at which time we will take all of the interested parties through those numbers," Mr Aynsley added.

Sunday Independent

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