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What the implications are for savers and investors as State takes over Anglo

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By taking control of Anglo the Government is effectively admitting the bank has no long-term future. Crispin Rodwell/Bloomberg

By taking control of Anglo the Government is effectively admitting the bank has no long-term future. Crispin Rodwell/Bloomberg

By taking control of Anglo the Government is effectively admitting the bank has no long-term future. Crispin Rodwell/Bloomberg

THE nationalisation of Anglo Irish marks a further ratcheting up of the Irish banking crisis.

By taking control of Anglo the Government is effectively admitting that Ireland's third-largest bank has no long-term future. Below we summarise the implications.



What does the nationalisation of Anglo mean for the taxpayer?

At the end of September Anglo had gross assets of €101bn and a total loan book of €72bn.

By nationalising Anglo the Government has nationalised Anglo's assets and liabilities also. If most of Anglo's loans turn sour then the national debt, currently €50bn, could almost triple.



What does the nationalisation of Anglo mean for Ireland?

The Anglo nationalisation is going to further push up the cost of borrowing. Earlier this month the Government paid a premium of 1.5pc over German bond yields when it borrowed €6bn last week. With the Government set to borrow up to €20bn this year the nationalisation of Anglo is going to push up the cost of government borrowing even further.



What does the nationalisation of Anglo mean for the other banks?

By nationalising Anglo the Government has prevented Ireland's third-largest bank from collapsing. Such a collapse would have damaged confidence in the entire Irish banking system and also threatened the stability of the other Irish banks.



What does the nationalisation of Anglo mean for the bank's shareholders?

Even before the Government moved to nationalise Anglo its share price had fallen to just 20c, just over 1pc of its peak price of €17.60 in May 2007.

By nationalising Anglo now the Government has snuffed out whatever faint hopes Anglo shareholders may have harboured of ever seeing the value of their investment recover.

While the appointment of an assessor by the Government holds out some hope, in practice the best that Anglo shareholders can hope for is a couple of cents per share.



What does the nationalisation of Anglo mean for bank customers?

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Unless you are a cash-strapped property developer or builder, probably not a lot. Anglo concentrated virtually exclusively on lending to builders and property developers, and had no retail customers.

This means that the likely disappearance of Anglo will have virtually no implications for retail banking with competition in such products as current accounts, overdrafts, personal loans and credit cards likely to be largely unaffected. However, small businesses may find it harder to get loans.



What does the nationalisation of Anglo mean for Anglo itself?

The nationalisation of Anglo Irish almost certainly marks the final chapter in the bank's roller-coaster 45-year history.

By bringing the bank into public ownership less than one month after announcing a recapitalisation package, the Government is acknowledging that things are much, much worse at Anglo than had previously been realised.

With some analysts now reckoning that up a fifth of Anglo's loan book could go bad it is difficult to see how it can survive in any recognisable form and it is likely to disappear sooner rather than later.

What does the nationalisation of Anglo mean for Anglo depositors?

In practice most of Anglo's retail depositors have been pulling their money out of the bank in recent months with the vast bulk of its funding now coming from the wholesale markets courtesy of the Government's unconditional bank deposit and bond guarantee.

Not alone does the guarantee remain in force until September 30, 2010, the position of the depositors and bond holders has been further strengthened now that Anglo has passed into state ownership.



What does the nationalisation of Anglo mean for the Government's bank recapitalisation scheme?

Less than four weeks after the Government's €7.5bn bank recapitalisation was first announced it has already been overtaken by events.

From what we now know, the €1.5bn which the Government planned to inject into Anglo is hopelessly inadequate to meet the bank's mounting losses. Will the Government have to pump more money into the other banks also?


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