Business Irish

Thursday 19 September 2019

Honohan: No more capital for the banks

Central Bank Governor Patrick Honohan addresses members of Chartered Accountants Ireland in Dublin yesterday
Central Bank Governor Patrick Honohan addresses members of Chartered Accountants Ireland in Dublin yesterday

Laura Noonan

THE Central Bank believes that ploughing billions more into the banking system is too costly and it is now exploring "cheaper" measures to fix the current problems.

The news comes after a week of feverish discussion on further support for Irish banks, with up to €30bn of the country's €80bn bailout believed to have been earmarked to prop them up again.

Central Bank governor Patrick Honohan, said yesterday that pumping in more money to "overcapitalise" the banks was a "costly way to deal with the situation".

"We're trying to think of other ways to lay off risks that would be cheaper," he added.

Those "other ways" are believed to include forcing banks to sell off everything bar their core Irish operations, so they will have less risk on their balance sheets. Policymakers are also weighing up plans to allow banks transfer more of their loans into the National Asset Management Agency (NAMA), which could end up taking on residential mortgages.

Prof Honohan stressed that even if more public money were poured into the banks, that cash should not be added to the existing bailout bill.

Before the latest crisis, the bailout tally stood at €50bn.

"If there are big dollar sums announced in a deal, they will not all be drawn down," Prof Honohan said, pointing out that most of the money would be for "contingent" losses that were not expected to arise.

Prof Honohan added that he hoped any money that was drawn down "could be paid back quickly" if the market recovered and Irish banks were able to borrow on international money markets.

The bailout team from the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission (EC) has been meeting Prof Honohan and his team for several days now.

The Central Bank Governor stressed yesterday that the delegation was "here to help".

"(Despite) the tone and nature of some of the more strident comments (in the media), I detect a huge degree of co-operation," he said.

He also stressed that international experts had not pointed to anything inherently wrong with the plan that Ireland had followed so far.

"I'm not hearing that many people say 'change course'," he said. "They're saying this is pretty big and it's not surprising you haven't got through it."

Admitting Irish efforts had so far failed to reassure the markets on the health of either our banks or the Irish State, Prof Honohan said he hoped "getting the rubber stamp" from the visitors could be a turning point.

"Confidence is key -- confidence in the way the Government is handling the banks is way below (the level of confidence) that is justified," he said.

"Hopefully, getting the rubber stamp from the IMF and the European institutes will bring that confidence back."

Irish Independent

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