Thursday 22 February 2018

State very likely to keep stakes in banks for some time, says finance official

Donal O'Donovan

Donal O'Donovan

A RETURN of the Irish banks to private ownership in the near term is unrealistic, according to the top government official managing the bailed-out institutions.

Department of Finance official Michael Torpey said restructuring the country's banks is "likely to go on for quite some time". He was speaking at a Bloomberg-organised Ireland Economic Summit in Dublin.

Mr Torpey told Irish and international business leaders and policy makers that the State will "very likely" retain stakes in the main banks over the long term even though it is seeking to attract further private investment.

"I think you will see significant overseas ownership, but it's likely we will retain an interest in AIB as we have with Bank of Ireland,"

Last year the Government sold a major stake in Bank of Ireland, now the country's biggest bank, to a US and Canadian consortium, but has retained a 15pc shareholding.

Mr Torpey declined to say how long it will be before a stake in AIB would be sold by the Government.

He refused to say that further bailouts are out of the question, admitting that officials can "never say never", but insisted banks have enough cash invested in them to cope with all of the known problems they face.

"Despite an uptick in mortgage arrears there is still a capital buffer above and beyond the Central Bank-imposed capital buffer.

"So-called strategic mortgage defaults are not a significant problem for the banks," he said, referring to cases where people who can pay their debts are refusing in the hopes of a softer bankruptcy regime coming into place.

"The reality is nine out of 10 people are paying their mortgage every month, of the other 'one' the vast majority are people in financial trouble," he said during a panel discussion.


On the same panel, Alan Dukes, chairman of the Irish Bank Resolution Corporation, formerly Anglo, warned that European leaders had taken their eye off the pan-European banking crisis to focus on fiscal policy -- and without a wider solution Irish efforts to repair the banks could prove a wasted effort.

A discussion on the property sector reached a broad consensus that commercial property here could offer good value for investors through strong rental yields -- but warned that the European market could be flooded with assets as Spain and other countries begin to tackle their real estate crisis, which would damage sellers including NAMA looking to offload property.

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