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Tuesday 12 December 2017

Anglo 'good and bad' banks plan to be rejected by EU


The Government's plan to break the nationalised Anglo Irish Bank into 'good' and 'bad' banks is set to be rejected by the EU, with the chances of that deal now happening being described as "virtually nil", the Sunday Independent has learned.

This means the failed bank, which last week announced losses of €8.2bn for the first half of this year, will now be wound down over a period no shorter than seven years, senior sources have said.

The final plan is to be announced in the coming weeks with an announcement due any day now on extending the bank guarantee, which is due to run out at the end of the month.

However, it has emerged that Brussels was dissatisfied with Anglo's proposal for splitting the bank and the nature of the discussions at present are about how best the bank can be wound down.

At present, Anglo chief executive and chairman Alan Dukes wants to put 20 per cent of the bank's assets into a new entity, with the rest of the loans being run down over time.

However, senior officials both in Dublin and in Brussels have said that this has been ruled unacceptable.

A total wind-down of the entire loan book now looks to be on the cards, which would rule out the possibility of establishing a new business bank from the wreckage of Anglo.

In the wake of last week's horrific Anglo Irish losses, Taoiseach Brian Cowen ruled out any immediate wind down of the bank.

He said the cost of immediately winding down Anglo Irish Bank could be more than €70bn and would not be in the interests of the taxpayer.

According to sources, advanced discussions are continuing over the level of flexibility that the bank will have to sell its assets.

The key concern for the Government at present is that any fixed timescale in the short run could lead to a fire sale, which in turn would be an increased loss to the taxpayer. However, the Government remains totally opposed to any short-term closure of the bank and is determined to honour all obligations to depositors and bondholders.

The shortest possible timescale for an Anglo wind down is seven years.

The Taoiseach said the Government was anxious to bring the matter "to finality" as soon as discussions with the European Union were completed.

"But the idea that it would be wound up with us having to come up with up-front costs of winding up that bank to the tune of €70bn or further billions clearly would not be in the interests of the taxpayer," he said.

Sunday Independent

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