Lenihan: Allowing bank to fail was not an option

FINANCE Minister Brian Lenihan said allowing Anglo Irish Bank to fail was not an option.

To do so would have sent the wrong signals to global markets and “it would clearly pose a systemic threat to the rest of the financial system” in Ireland.

Given the government guarantee, it would have “to stump up” the €64 billion the bank has on deposit.

To wind up Anglo would “imply some element of default” by it and would send out the wrong signals to the rest of the world.

Mr Lenihan added that the bank itself, “was not of systemic importance” to the economy. Its failure would, however, do serious damage to the banks and cause widespread job losses also.

In stressing the “systemic” importance of the bank, he said while the country could survive without Anglo, letting it fail could have added an enormous “cost burden” to the state. That’s the explanation behind the decision to keep the bank as a going concern.

Previous reference by the Government to the systemic importance of Anglo seemed to imply it believed the bank had a key role to play in the future of the Irish banking sector.

Mr Lenihan scotched that view yesterday and said the jury was out as to what the bank’s future role will be.

He confirmed significant interest in the bank as a going concern. A number of bids have been received since it was nationalised.

Looking to the future of the bank, he said board has advised him that an “immediate” wind-up of the lender is “not an option”.

Executive chairman Donal O’Connor said the bank was currently looking at a draft business plan.

Mr O’Connor said the board, after consultation, decided the wind-up option would be extremely costly on the taxpayer. The interests of the minister as shareholder “would be best served by stabilising and de-risking the bank and for the bank to continue to operate as an independent going concern to assist recovery in the Irish economy.”