Bank stakes will not be ‘sold off cheaply’

If the Government offloads its stakes in Bank of Ireland and AIB, it will only do so for a price much higher than the value of €8bn by the National Pension Reserve Fund, said Finance Minister Michael Noonan.

The Government is in negotiations with the Troika about restructuring the €64bn used to rescue the banking system. Just under €30bn was pumped into AIB, Bank of Ireland and Irish Life & Permanent with the remaining €34bn in the form of promissory notes for Anglo Irish Bank.

A Finance spokesman says the purpose of the troika talks is to break the link between the sovereign and banking debt. If the Government was to sell its stake in the banks for €8bn, then it would be giving away future upside potential and still be lumbered with €22bn in debt it cost the State in bailout funds.

The minister was speaking at the publication of the National Treasury Management Agency’s (NTMA) 2011 annual report. NTMA chief executive John Corrigan mapped out the agency’s three short-term objectives. It will hold a further three to four auctions of short-term treasury bills over the remainder of the year. It plans to diversify government funding options through the issuance of amortising bonds and inflation-linked bonds, and it plans to issue its first conventional bond between either at the end of 2012 or beginning of 2013.

Mr Corrigan said the NTMA would potentially look to raise €3bn to €5bn over the course of the next 18 months in amortising and inflation-linked bonds.

Even though the short-term treasury bill auctioned off in early July went to 80% international investors, Mr Corrigan said he would like to see more domestic investors in the market for Irish government debt. That is why the NTMA had chosen amortising and index-linked bonds to add to its offerings. Amortising bonds are much longer-term maturities that pay a combination of capital and interest over their lifetime. Both types of bonds would be attractive propositions for the Irish pension fund industry, said the NTMA chief.

Mr Corrigan said striking a deal with the Troika on restructuring Ireland’s debt was a very important step towards full re-entry to the sovereign debt markets.

It would be a policy decision for the Government on whether the NTMA played a role in creating a special purpose vehicle that would take over the toxic assets sitting on the balance sheets of AIB, Bank of Ireland and Permanent TSB, he said.

Mr Noonan said he had full confidence in former HSBC banker Michael Geoghegan, who is on the Nama advisory board. Mr Geoghegan was named in a US Senate investigation into money-laundering activities HSBC helped to facilitate in Iran and Mexico.

“Michael Geoghegan is not in a paid position. He is doing pro bono work. I am very comfortable with the advice he is giving me and I don’t see a change to his position.”

AIB chairman David Hodgkinson has also been named in the HSBC Senate probe. Mr Noonan said the Fitness and & Probity unit in the Central Bank was responsible for issues such as this, and it had brought nothing to the attention of the minister over Mr Hodgkinson’s role in the affair.