Anglo chief says EU support does not solve Irish banks’ problems

ANGLO Irish Bank’s chief financial officer, Maarten van Eden, said European Union support doesn’t fundamentally address problems at Irish lenders and they remain reliant on central bank funding, according to an op-ed in Dutch newspaper Het Financieele Dagblad yesterday.

The banks operating in Ireland have a long-term capital need of €75 billion and require €70bn in the medium term to cover bad assets,” he wrote in the newspaper.

Van Eden said that a further €50bn is needed to restore the term structure of the banks’ obligations.

It has also emerged that Anglo bondholders’ insurers may have to pay to settle losses linked to the lender’s subordinated debt.

Credit-default swaps traders set initial recovery values in auctions yesterday of 18.25% and 18.5% on the lender’s junior bonds, according to administrators Markit Group and Creditex Group. Results varied because of the different maturities of notes being auctioned.

Anglo Irish default swaps are being settled because the nationalised lender changed terms on 2017 subordinated bonds, virtually wiping out investors who refused to accept an 80% discount on their notes. Investors can choose not to settle contracts, betting they will get more if losses are imposed on the lender’s remaining junior notes maturing in 2014 and 2016.

“If you have a bearish view, you may wait to get out of your position in a few weeks time with another CDS auction, and if spreads deteriorate you will have benefited,” said Tim Brunne, a Munich-based credit strategist at UniCredit. “There’s a clear will this restructuring will happen.”

Legislation “to facilitate further burden-sharing” by subordinated bondholders in Irish banks will be submitted to the Dáil next week, Finance Minister Brian Lenihan said.

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