IRELAND’S government outlined a compromise solution for winding down troubled Anglo Irish Bank yesterday but failed to put either a price or a timeline on its plan.
Yielding to political pressure, finance minister Brian Lenihan ditched Anglo Irish’s own plan to carve a functioning niche lender out of what is left of the nationalised bank when it transfers €36bn (£30bn) in property loans to Ireland’s state run bad bank.
Instead, Anglo’s remaining loans will be housed in an asset recovery bank, where they will be worked out over a period of time while its deposits will be put into a government-backed deposit bank which will not engage in any lending.
The news means Anglo will effectively cease to be a force in the City. Although the Financial Services Watchdog said UK depositors’ money would be regulated as in any other bank, Anglo will stop new business lending in the region,
The capital cost of the plan -- the final bill which investors have been seeking -- will be known in October when the central bank announces the units’ capital requirements.
The prospect of a final price being put on the cost of bailing out Anglo, which has saddled Ireland with the worst budget deficit in the European Union, gave some relief to Irish debt spreads but analysts said overall the lack of detail was disappointing.
“We’re still none the wiser really. Okay, it tells you the route they’re going, but I don’t think it gives you any clarity on the amount of money it’s going to cost the exchequer which is what the market is worried about,” said Alan McQaid, chief economist at Bloxham Stockbrokers. The spread on Irish 10-year bonds fell slightly.
City A.M. Reporter