Tuesday 23 January 2018

€22,000,000,000 Anglo hole deepens


Final cost of bank's rescue 'still open' says boss

THE €22bn "black hole" in Anglo Irish Bank could get worse, the bank's chief executive Mike Aynsley has admitted.

The massive loss, the "lion's share" of which Mr Aynsley has said "would never be seen again", is -- it turns out -- based on calculations that commercial property values have "bottomed out".

Asked by the Sunday Independent if the taxpayer could be called upon to pump more than the €22bn already committed towards the rescue of the now-nationalised institution, the Anglo boss conceded that the question of the final cost of the bank's rescue was "still open".

"You could say that it [the question] is still open.

"Realistically, however, when you look at the things that impact the most, for example further potential deterioration in the commercial property market -- if you have a view that this market has bottomed out, or is close enough to bottoming out, you probably at this stage suspect that you are not going to see any substantial, further downward move in the commercial real estate market, which has already fallen between 50 and 55 per cent.

Analysis & poll Pages 2, 13, 24-25

"So, if there was a big move down in the market, it could impact on it. But of course it could impact on all of the other banks as well," Mr Aynsley said.

The prospect of having to hand over even more money to Anglo Irish Bank to repair the damage caused by years of mismanagement under the regime of its former chairman Sean FitzPatrick will infuriate taxpayers.

The public's dismay is borne out today by the findings of a Sunday Independent/Quantum Research nationwide poll.

Asked if they were shocked to hear that the bulk of the €22bn being given to Anglo Irish Bank would never be recovered, 65 per cent of those questioned said that they were.

Responding to the question, one country-based male respondent placed the blame firmly with the Government, saying: "Why should we be surprised? All this Government has done is shovel our money down a great big black hole."

That view was echoed yesterday by UCD economist Professor Ray Kinsella.

"If you look at the last 15 months, Anglo have recorded a loss of almost €13bn. They have written off €15bn.

"The amount that is said to be required to stabilise it is uncertain, very uncertain. I don't think anybody has an accurate figure, but it's an awful lot of billions.

"At some stage the Dail are going to have to face a very big question: Do you continue to put money into an open-ended way into a failed institution that is a cancer in the Irish financial services sector or do you reallocate that capital and write off the bank?" he told RTE Radio's Saturday View.

But while opposition to the €22bn bailout of Anglo Irish Bank remains intense, Mr Aynsley challenged critics of the plan to provide him with a better solution for the taxpayer.

"Every now and again, I still see criticism and suggestions of closure with reasons given that don't hold water. I don't mind if people have views which are backed up by solid, fact-based quantitative analysis and a reasoned case that the bank should be closed down.

"If they've got that view and they can show the facts as to why, then of course I'll listen. My job is to come into this organisation, work with a new team of people and work out what the best solution is, and, as I keep on saying, for the benefit of the taxpayer. If the best solution was to close it down, then we would close it down," he said.

Elsewhere in today's Sunday Independent/Quantum Research poll, 71 per cent of those questioned believe that Finance Minister Brian Lenihan should end the guarantee for those institutions from whom Anglo Irish Bank borrowed billions prior to its nationalisation. Referring to Anglo's proposals for its future, Mr Aynsley pledged that he and his officials would disclose its detail once it had been considered by the EU.

Commenting on this, he said: "I understand it's difficult as we're going through the European Commission process. We can't release as much information as we would like to on the analysis side, but I'm hopeful they [the critics] will come on board."

Asked if Anglo Irish Bank was the worst bank he had ever worked with in the course of his career, Mr Aynsley was diplomatic in his response.

"I think it's certainly a very difficult situation, which is compounded by the extent of the move in the marketplace. It's not a normal problem with a bank going belly-up which is driven by a set of circumstances whether it's fraud or market driven.

"What we have is a major dislocation in the marketplace which has meant that asset values have lost over 50 per cent. And because the bank was predominantly concentrated on property lending, operating in the sector of the market where the 50 per cent decline has taken place, that's what's really generated these losses," he said.

Sunday Independent

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