Tuesday 12 December 2017

Honohan calls for extension of guarantee 'by quarters, not years'

Laura Noonan

CENTRAL Bank Governor Patrick Honohan has weighed into the bank guarantee debate, saying any extension of the support should be done in "quarters rather than years".

Prof Honohan's comments come a fortnight after both AIB and Anglo Irish Bank called for the guarantees to be extended until the end of next year to create certainty in the financial market.

But, speaking in Hong Kong yesterday, Prof Honohan hinted his preference for a speedier withdrawal of the supports, which are due to expire between September and December.

"I'm not in a rush to remove the guarantees but I don't want it to be [extended] in a period longer than quarters, rather than years, because if they've done their jobs properly that won't be necessary," he said.

Bank of Ireland last week told the markets that it was preparing to "disengage" from the guarantee scheme over the coming months, in a marked departure from the other banks' tones.

Market sources stress that BoI has already completed a €2.9bn recapitalisation and so faces less financial market risk than the other Irish banks, chiefly AIB and Anglo.

Prof Honohan's Hong Kong appearance is part of a whistle-stop tour of Asia's financial capitals as the Central Bank governor attempts to explain Ireland's economic recovery strategy to international audiences. Speaking in Hong Kong, Prof Honohan addressed growing fears about Ireland's financial position, insisting the €24bn cost of bailing out Anglo was "manageable".

"It's a terrible shock to the system," he said, "it's costly but it's manageable."

Prof Honohan also stressed that plans to recapitalise Anglo were well on track and had little impact on the Government's overall deficit plans, although this year's deficit would surge.

"It's very high deficit measures this year because we're taking the hit; we're acknowledging the losses in the banking system and those losses which are being paid for by the Government have to be included in the deficit," he said. The Hong Kong visit marks the third leg of Prof Honohan's whistlestop tour of Asia's major financial centres, including Singapore, Kuala Lumpur, Beijing and Tokyo.

The Central Bank governor is using the trip to explain Ireland's recovery measures to official monetary institutions and other observers, and will hold private talks with a number of monetary authorities.

Prof Honohan is also hosting two major press conferences, one on Thursday titled 'Ireland and Europe in the Context of the World Economy' and on Friday titled 'Banks & Budgets -- Lessons from Europe'.

The trip comes as international fears over Ireland's financial health continue to drive up the cost of government borrowing. (Additional reporting: Reuters, Bloomberg)

Irish Independent

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