Up to €50bn of loans and other assets may have to be moved out of the Irish banking system so it can shrink to sustainable levels, the National Treasury Management Agency (NTMA) indicated yesterday.
NTMA's chief banking adviser Michael Torpey said a new structure -- yet to be officially agreed -- would "park" loans that were not "core" to the Irish banking system on a interim basis. They would be sold in time, but not in fire-sale conditions, he added.
The precise mechaniscs of how this would be delivered has not been decided yet, he said.
Most would be loans advanced to customers outside Ireland, he predicted. He added that there was little point in talking about a detailed structure at this stage as the EU would be a key player in any such plans.
Mr Torpey, who has worked at several Irish banks, said it was about creating a "parking space" for non-core assets and the new structure would not be like a "second NAMA" as most of the loans would not be impaired and would not need to take large discounts on their book value.
"What we don't want to do is incur additional costs," said Mr Torpey.
In a presentation about how much assets still needed to leave the banks, Mr Torpey said he wasn't prepared to go into specific figures; however, he said the amount of support Irish banks were getting from the ECB and other central banks was a good indicator of the kind of "deleveraging" needed.
But he added that NAMA bonds needed to be subtracted from this figure.
In reply to questions, Mr Torpey said Irish Nationwide and Anglo Irish could merge as part of the solution, but he strongly denied suggestions this model was already agreed upon.
He said as long as the State's deposit guarantee remained in place, the deposits at Anglo and Irish Nationwide should remain secure, even while preparations to move them to a "reputable" institution went ahead.
He said most deposits that were likely to move from the Irish banks had already moved. "I think we are down to the base case," said Mr Torpey.
"What you don't want is different pieces scattered around the system; it makes more sense if there are as few entities as possible."
He said he preferred not to specify what kind of assets would be "parked".
But he admitted that tracker mortgages were low yielding assets and were a drag on profits. "What we really want to keep is the assets that serve the economy," Mr Torpey said.
Also speaking at the briefing was John Corrigan, NTMA chief executive, who expressed frustration at the slow nature of the EBS sales process. "It has been frustratingly slow. The EU involvement has slowed things down to a snail's pace," he said.