Brian Lenihan tonight warned that nationalised Anglo Irish Bank needs another €18.3bn to survive.
Following a dramatic day of moves to re-establish Ireland’s economic reputation, the Finance Minister revealed the taxpayers’ bill for rescuing the rogue lender would begin soar this week with an €8.3bn cash injection.
More alarmingly, it may take another estimated €10bn to cover future losses.
“The sums required to rescue the bank are enormous but the costs of winding it down are even greater,” Mr Lenihan said.
“The current bank strategy of seeking to devise a way to realise value for the taxpayer out of the remains of the old bank means the State could at least get some return, in time, recouping some of its assistance.”
Some €4bn was paid in last year following nationalisation.
In his statement to the Dáil, the minister insisted that winding-up the collapsed bank was not an option.
Based on figures from Anglo and the Department of Finance, Mr Lenihan said shutting down its operation could run up a bill for the taxpayer anywhere from €60bn to €100bn.
He said an immediate wind-up would be followed by a fire-sale of assets with an “unnecessary loss” of €30bn and up front cash bills of €70bn euro to meet the cost of deposits, bondholders and the liabilities due to commitments across Europe.
Mr Lenihan also vehemently rejected calls for a long-term wind-down insisting it was not in the taxpayers’ interests and would cost €60bn – €30bn losses from the sale of assets followed by a €30bn bill to complete the shutdown.
“Finding a long-term solution for Anglo Irish Bank is by far the biggest challenge in resolving the banking crisis. The sheer size of the bank means there are no easy or low-cost options,” he said.
“Winding-up the bank is not and was never a viable option.”
He went on: “I understand why many want us to close this bank. I understand the impulse to obliterate it from the system.
“But I cannot, as Minister for Finance, countenance such a course of action. The realisation of the costs involved and the wider disruption to the financial system would generate enormous instability for the State with unforeseeable but potentially long-lasting damage to the overall economy.
“The unavoidable reality is that the bank has incurred losses from its large-scale property lending and needs substantial further capital. Unpalatable as it is, only the taxpayer can provide that capital.
“It is the least worst option.”
Mr Lenihan warned however, there were significant uncertainties over estimates that €10bn is needed for future recapitalisation.
The country’s bad-bank National Assets Management Agency will take €10bn euro of loans from Anglo in April, paying 50% of the book value.
The minister also revealed that officials were aiming to sell the bank on as a going concern when bad assets are cleared with a target date of five to seven years set.
“This is a complex process but I am confident that by the end of the summer we will have a clear plan for the future of the bank approved by the (European) Commission,” he said.