Friday 24 November 2017

State to own banks for years yet, says Noonan

Klaus Regling, right, and Finance Minister Michael Noonan.
Klaus Regling, right, and Finance Minister Michael Noonan.
Colm Kelpie

Colm Kelpie

Michael Noonan has said there will be no fire-sale of government shares in the bailed-out banks, signalling the State could hold on to them for decades to ensure a return.

The Finance Minister said the share price of Bank of Ireland had gone up considerably, even after the asset quality review was carried out late last year.

And he claimed the Government wasn't going to be "waiting around asking for European help" after the head of Europe's bailout fund again poured cold water on hopes that Ireland may be able to recover some of the crippling cost of bailing out the banks.

"I want to say very clearly that in the absence of success in that respect, we still have strategies to reduce the debt, to get towards the European norm and beyond it," Mr Noonan said.

"The policy is to restore the banks to the private sector, but there'll be no fire-sale.

"We'll be prudent and we'll see at some time in the cycle either I or one of my successors will over a period of time sell the shares in the banks back to private investors."

He said that when the shares were eventually sold, the money would be used to reduce the debt further.

Mr Noonan said he had been speaking with the Swedish Finance Minister Anders Borg at a recent meeting of European Finance Ministers, who told him that the Swedish government had only last year sold the last tranche of shares it held since the rescue of the country's banks in the early 1990s.

"He also said they realised between two and three times what they originally invested," Mr Noonan said.

"We're not flying on one wing and simply waiting on European assistance. We have an active policy of dealing with our debt as well."

Mr Noonan said that the State would taper the cash reserves it holds gradually over the next two or three years.

"We'll hold always about 15 or 16 months' cover for a deficit, but we don't have to hold the cash buffers that we're holding now," Mr Noonan said.

Klaus Regling, the head of the European Stability Mechanism, was in Dublin for talks with Mr Noonan, Central Bank governor Patrick Honohan and to address the IIEA.

BONDHOLDERS

He said that while there was goodwill towards Ireland in Europe, there was a "general reluctance in a number of countries to provide financing retroactively", amid hopes the Government would be able to tap into the ESM fund.

Mr Regling also said that the international money markets were rewarding Ireland with a reduction in borrowing costs because it didn't burn senior bondholders. He said Ireland had the lowest interest rates of the bailout countries.

"That may also have something to do with the way that the solution was found, without imposing haircuts on senior bondholders," he said.

"And, therefore, the reward is from the markets to now have particularly low interest rates for Ireland. That is also of benefit for the economy on the budget."

Irish Independent

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