Thursday 14 December 2017

Ireland will demand debt deal if Spain can secure agreement

Donal O'Donovan

Donal O'Donovan

IF Spain gets a deal for its banks Ireland wants Europe's bailout funds to take on the cost of dealing with around €20bn of loss-making tracker mortgages and to help ease the €3.6bn annual price of keeping IBRC (the former Anglo Irish Bank) alive, the Dail's Public Accounts Committee heard yesterday.

That is according to John Moran, the new head of the Department of Finance.

He was questioned by TDs about the prospects for Ireland if Spain secures European aid for its banks while avoiding an Irish-style government bailout.

Such a deal for Spain would be a dramatic shift in European policy, after taxpayers here had to shoulder the entire €64bn cost of rescuing Irish banks.

Mr Moran said it is "impossible" to say how quickly Ireland could avail of a change in policy, even if a deal is done for Spain.

But, he said it is important that Irish officials remain close to the talks that are now going on, so that any new policy can be availed of by Ireland.

He outlined two critical issues under negotiation: first, European help in improving the viability of Irish banks by removing "certain low-yielding assets" from their balance sheets.

Second, relieving the debt taken on by the state to rescue the banks, including the €30.8bn Anglo Irish Bank promissory note, he said.

Both issues would have to be dealt with together, possibly by moving the trackers out of banks like AIB and putting them into IBRC.

The greatest concentration of trackers is €17bn of the home loans held by nationalised Permanent TSB. Most of the loans are being fully repaid, but the interest charged to customers is so low that the bank loses money on them.

Shifting these and other low- income assets out of the banks would make the lenders more attractive to potential buyers.

The hoped-for solution would be to get money from Europe to "buy" the loans out of the banks, without landing taxpayers here with the bill.

Experience with the National Asset Management Agency (NAMA) proved that transferring banking assets involves a very fine balancing act.

NAMA bought loans from the main banks at a discount to reflect the reality of what the loans were worth, but the process forced banks to admit huge losses that ultimately had to be paid for by taxpayers.

Irish Independent

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