THE Government could be forced to pump up to €7.5 billion of taxpayer money into Anglo Irish Bank after the troubled institution posted the worst losses by a bank in the history of the state.
Anglo is to receive a massive €4bn cash injection after it reported losses of €4.1bn for the six months to the end of March. The loss is made up totally of bad debt write-offs which have wiped out the bank’s balance sheet overnight.
The bank said it expects to have to write off €7.5bn over three years to 2011 as loans to its elite clientele of property developers continue to go sour.
If land and property values continue to deteriorate, total bad debts could rise by a further €3.5bn resulting in total write-downs of €11bn.
The Government has already agreed to recapitalise AIB and Bank of Ireland to the tune of €7 billion.
Bank of Ireland said its bad debts will total €6bn over the next three years while AIB said it will double its charge to €4.3bn.
Due to the major losses the Financial Regulator has waived the need for Anglo to comply with the current regulation on capital requirements. The bank is to buy back outstanding bonds that will generate some income that will be used to boost its virtually non-existent reserves.
Finance Minister Brian Lenihan described what had gone on in the bank as a "disgrace" and said he understood why many people wanted to see the bank wound up.
He described the €4.1bn first-half loss by the bank as "extremely disappointing".
Before any money is injected work on a strategic plan has to be carried out to "de-risk this bank as a threat to the Irish banking system", he said. To allow the bank to fail would leave the state liable for €64bn under the state guarantee scheme, he said.
Top executives at Anglo resigned after a multi-billion-euro loans fiasco was revealed in December. Garda fraud officers later raided the head offices and the lender is being investigated by white-collar crime watchdogs.
The Director of Corporate Enforcement said his investigation into events at Anglo was complex but was proceeding well.
Paul Appleby, launching his 2008 annual report, said: "The investigation is progressing satisfactorily, and the office continues to work constructively with the bank, the Financial Regulator and other relevant parties in this matter."
Fine Gael’s finance spokesman Richard Bruton said the Government should think long and hard before committing the equivalent of €2,500 from every family into the "floundering" bank. Labour’s finance spokeswoman Joan Burton said the public’s worst fears had been realised with the disclosure of the massive losses.
a d v e r t i s e m e n t
This appeared in the printed version of the Irish Examiner Saturday, May 30, 2009
