The decision to nationalise Anglo Irish Bank as a going concern of systemic importance dates back only five months. There is no valid reason to change a policy so recently adopted.
The country's third largest bank is clearly a systemically important part of the banking system.
Clearly, one of three roughly equal-sized players in the real estate and development market, between them accounting for about 60pc of lending into that market, is systemically important.
Market reaction to positive or negative events in Anglo Irish Bank impacts on the other Irish banks: the market says that Anglo Irish Bank is systemically important.
Some commentators suggest a change of policy to an "orderly wind-down", claiming that this would avoid the need to inject €4bn capital.
In this scenario, the bank would continue to need a banking licence, requiring the capitalisation that the injection is intended to bring about. Thus, there is no way of avoiding the injection.
This scenario would have a number of disadvantages. It would inevitably bring forward claims for repayment of deposits, which the Government would have to meet. While a large proportion of the bank's retail deposits -- which are currently at €18bn -- would remain as long as they are guaranteed by the Government, it is unlikely that the bank could continue to attract new deposits.
Corporate deposits of €16bn would probably flow out more quickly than retail, as such depositors like to have enduring relationships with counterparts.
Similar considerations would apply to inter-bank deposits of €7bn.
Market operators are understandably likely to look elsewhere, regardless of pricing, if the current repository is on the way out of business.
The "orderly wind-down" scenario includes the suggestion that there could be a negotiation with bondholders to get them to bear a part of the pain and avoid the need for the capital injection.
Subordinated bondholders, currently holding €5bn, have already marked down the value of their holdings to a very substantial extent.
There is a market for this kind of paper, which is where any "negotiation" would take place.
It is idle to suggest that the Government or the bank could otherwise compel bondholders to bear "pain" -- they cannot simply repudiate their debt obligations.
Obligations to central banks, at €23.5bn, would remain and would have to be met.
The "orderly wind-down" scenario would lead to a requirement to meet very substantial obligations in a foreseeable timescale without the ability to gain access to further funding.
Far from avoiding commitments, it would crystallise them.
Current policy is to reinforce the bank's capital, de-risk it, shrink the balance sheet by the transfer of parts of its loan book to the National Asset Management Agency and to produce a new business plan.
This "going concern" scenario makes it possible for the bank to deal normally with the performing parts of its loan book and to adopt an active policy of liability management.
It gives it space to develop new activities. It avoids having to meet larger commitments in the short to medium term and secures the best outcome from the capital injection now required.
Alan Dukes was appointed to the board of Anglo Irish Bank in December under the Bank Guarantee Scheme. The contents of this article are the personal views of the author.