Anglo chief believes it is critical the bank survives

ANGLO Irish Bank chief executive Mike Aynsley said he does not believe the bank should be wound down because it holds an international funding platform of around €50 billion and that would not migrate to an asset recovery company.

In a circular to the management team, Mr Aynsley also said while the bank had hoped to secure approval for its split into a viable bank, BankCo, and an asset recovery company AssetCo, by now, that approval was not likely to come before September.

He said an operational split is likely to occur by December 31 this year and a “full physical split” by December 31, 2011.

“We have identified €10 billion to €15bn of performing loans that appear to satisfy all filters established to screen the loan portfolio for BankCo. Work remains between now and year end to complete the comprehensive loan-by loan due-diligence on the entire portfolio,” he said. “It is conceivable that by the time we get through this process the final transfer amount could be closer to €10bn rather than €15bn.”

Mr Aynsley said he is often asked why the bank can’t just shut the bank down.

“While the popular view is that the bank shouldn’t be allowed to survive... particularly given the public furore over previous management and the level of losses they generated, the lowest cost alternative is to keep a small portion of the assets and to maintain the deposit base,” he said.

“As I have repeatedly said, and has been borne out by the report produced by the Governor of the Central Bank, the systemic role played by the bank is the critical reason not to close.

“We currently maintain an international funding platform of around €50bn, which we believe would not migrate to an asset recovery company.”

Mr Aynsley admits in the circular that the past management “leaves a lot to be desired”.

“While a great deal of the €20bn plus of losses is the result of the 50%+ fall in commercial property values and an unprecedented collapse in business confidence domestically and internationally, previous management must bear blame and responsibility for the failure of governance, risk management and other critical management processes.”

He also points the finger of blame at an ineffective regulatory regime which, he said, failed at multiplelevels.

“Our core objective is to resolve the bank’s pre-nationalisation problems at the least cost to the taxpayer and to contribute constructively to economic recovery and produce beneficial exit options for the Government,” he said.

[e-mail]