THE Government is ready to pump billions more of taxpayers’ money into the troubled banks – who are expected to show their gratitude to the public by raising charges.
Taoiseach Brian Cowen confirmed the Government is prepared to provide further recapitalisation. It came after Central Bank governor Patrick Honohan told an Oireachtas committee that the banks would definitely require more capital.
But Fine Gael leader Enda Kenny warned there would be a "revolution in the streets" if the Government put any more money into Anglo Irish Bank.
The exchanges came as the country’s biggest bank, AIB, posted losses of €3.5bn for Irish operations in 2009. It posted an group pre-tax loss of €2.65bn – its first full-year loss.
AIB group managing director Colm Doherty said the bank would have no other option but to increase mortgage rates and other charges. "It is inevitable unfortunately," he said.
It means a double whammy for taxpayers – as €3.5bn of their money has already been pumped into AIB by the Government, and they will now be hit for more money in the shape of increased charges.
Mr Doherty said the bank would only return to the Government for more funding if it exhausted all other options for raising capital.
Mr Cowen told the Dáil that AIB’s losses were evidence that NAMA – the agency set up to relieve the banks of high-risk property loans – was working.
"Those results show that NAMA is forcing the banks to face up to the reality of their bad loans," he said. "Without NAMA, the banks would have inevitably tried to do what Japanese banks did in the 1990s, which was to spread out the losses over the next decade to the detriment of lending to viable small businesses and households."
Those comments were echoed in a subsequent statement by Finance Minister Brian Lenihan, as the Government tried to put a positive note on the news.
But Mr Kenny predicted AIB would eventually come looking for between €3bn and €5bn more from the Government, and Anglo would seek up to €6bn.
He called on Mr Cowen to put in place preconditions to protect the taxpayer before any further money was given to AIB. He also insisted that no further money should be given to Anglo in its current shape.
Plans have been mooted to split Anglo into a "good bank" and "bad bank" – similar to proposals which Fine Gael originally put forward to deal with the banking crisis. Mr Kenny claimed this was proof that the Government was finally accepting Fine Gael’s proposals.
But Mr Cowen said the good bank-bad bank plan for Anglo had been in the public domain since well before Christmas, and insisted it was different to the Fine Gael proposals.
Labour leader Eamon Gilmore said it was clear the Government’s policy on banking was not working and it was time the Government "changed tack" rather than place massive burdens on generations of taxpayers.
a d v e r t i s e m e n t
This appeared in the printed version of the Irish Examiner Wednesday, March 03, 2010
