Tuesday 12 December 2017

Coalition faces battle to recoup €21bn paid out to banks from pension fund

Fionnan Sheahan Political Editor

THE Government's chances of getting back €21bn pumped into the banks from the state pension pot under an EU debt deal are regarded as a long shot.

But nothing is being ruled out by the Government ahead of talks to ease the debt burden following last weekend's historic go-ahead from EU leaders.

Tanaiste Eamon Gilmore said yesterday the Coalition will "aim high" as it enters the negotiations.

Mr Gilmore was unwilling to say what parts of the €64m cost of the bank recapitalisation would actually be on the table.

Government sources say the Coalition will be looking at every aspect of bank debt in negotiating the deal.

Of the €64bn injected into the banks, €21bn came from the State's own resources, the National Pensions Reserve Fund (NPRF).

The Government is hoping it will be able to get back part of the funding for the recapitalisation of the banks from the new EU bailout fund, the European Stability Mechanism.

However, Government sources warn it will be difficult to see the money from the NPRF returned to State coffers.

"It's possible, but a long shot. By and large if you owe a lot and have money put aside, the lenders require you to pay up something.

"It will require a different strategy for each part of the debt. A lot of work behind the scenes is and has taken place using bank shares as collateral," a senior source said.

Various options are being examined. Rather than one single package covering all the debt, the Government is likely to seek an examination of the different elements.

The bulk of the funding for Anglo Irish Bank and the Irish Nationwide Building Society came from the controversial promissory notes, the so-called IOUs, worth €30.7bn.

These two defunct institutions are being wound down under the Irish Bank Resolution Corporation (IBRC).


The Government has been looking to restructure the repayments on this debt and stretch them over a longer timeframe.

And this may continue to be the approach -- although it remains unclear.

The remainder of the €33.4bn of funding for the banking sector -- mainly for AIB, Bank of Ireland and Irish Life and Permanent -- makes up another element.

The Government will probably look to have the funding for these viable banks covered by the ESM. Officials are putting proposals together, with one option being to set up a NAMA-like body to put all the banking debt into.

The new body would buy up all the state-owned shares of the banks, which would then be funded by EU bailout funds and paid back over a lengthy period of anything up to 40 or 50 years.

The effect would be to manage all the bank debt under one arrangement and take it off the State's books entirely, making it more attractive for the markets to loan money to Ireland.

Finance Minister Michael Noonan will formally begin negotiations on an EU debt deal at a meeting of EU finance ministers next week.

Before that, he will meet officials from the EU-IMF to discuss the Irish position.

Irish Independent

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