Expert says we need ‘toxic bank’

A toxic bank needs to be set up before the Budget next month, a leading economist said today.

Trinity College economist Brian Lucey believes the Government has been dragging its heels on tackling the issue of accruing bad debts in the Irish banking system for too long and needs to act immediately.

Estimates vary between €20bn and €40bn on the value of bad debts currently in the Irish system. Peter Bacon, who was brought in to advise the National Treasury Management Agency (NTMA) on bad bank loans, last week submitted his recommendation for a toxic bank to Minister for Finance Brian Linehan.

Today, Brian Lucey said such a bank would clean up the balance sheets of Irish banks and would “clear the toxins out of the banking system.”

He said that the Government should take steps to nationalise all the banks. He added that there is no reason to delay what is now inevitable, especially since the concept of a toxic bank has been mentioned by several commentators since last autumn.

“The Government is only coming on board now,” he said.

Mr Lucey said the Government needs to act on the idea, and put the State before the needs of a small group of bank shareholders and subordinate debtors.

“It needs to be done before the Budget — as soon as possible — because of the perception which the international borrowing markets have of Ireland,” he said. “We need to convince these markets that our banking system is in control.”

Mr Lucey was speaking as the Cabinet prepares for the budget on April 7.

Ministers met for five hours in Dublin yesterday to discuss the Budget, and a series of other meetings will take place during the coming weeks to iron out a plan.

Article courtesy of the Evening Echo newspaper.