C&AG report: State paid €152m to advisors in bank crisis

The Government and State agencies have paid consultants €152m for advice on the banking crisis.

More than 70 specialist legal, accountancy, and investment firms shared in the business created by the collapse of the banking sector from 2008 to 2014.

Top earners Arthur Cox solicitors were paid €33.06m by the Department of Finance, National Treasury Management Agency, National Pensions Reserve Fund, and Central Bank.

Blackrock Financial Management was next, raking in €23.48m from the Central Bank, followed by Ernst and Young and KPMG, which took in €20.9m and €13.19m respectively, also from the Central Bank.

Other high earners were: Goldman Sachs, €9.39m; PricewaterhouseCoopers, €8.46m; Merrill Lynch, €7.33m; NM Rothschild & Sons, €6.96m; Boston Consulting Group UK, €5.08m; McKinsey & Co, €4.41m; Deloitte and Touch, €4.21m; Barclays, €3.51m; Grant Thornton, €2.16m; Mazars, €1.87m; Matheson Ormsby Prentice, €1.54m.

The report by the Comptroller and Auditor General (C&AG) says the expertise was hired chiefly to help with tasks such as the recapitalisation and restructuring of the banks, establishing the bank deposit guarantees, and carrying out funding assessments.

Some of the smaller sums included €4.2m on advice relating to credit unions, €2.9m for help with setting up the National Asset Management Agency, €2.5m on “crisis management”, €2m for advice on bank nationalisation, and €400,000 in relation to the Nyberg Commission.

The report said: “The State... has used the services of advisors extensively in the course of developing and implementing the measures aimed at stabilising the banking sector.”

The Central Bank and NTMA pointed out that they recover a proportion of the consultancy costs from the banks. However, the amount is not stated and, given the State owns or owned several of the main banks, the cost is still borne by the taxpayer.

The Department of Finance told the C&AG it, too, recovers some costs but no details are given. It also said that, “where appropriate, it receives advice from firms on a pro bono basis”, but this is not expanded on.

Consultants fees were additional to the €60bn the C&AG says the State had spent on bailing out the banks by the end of last year.

Just under €9bn was paid in interest on borrowings to fund the bailout to the end of 2014 and the C&AG says interest payments, expected to be €2.3bn this year will be between €0.85bn and €1.7bn per year in the long-run presuming interest rates of 2-4%.

For the €60bn investment, the State got shareholdings in AIB, Bank of Ireland, and Permanent TSB estimated to be worth just under €17bn — leaving the net cost of the banks bailout at €43bn.

The specialist unit set up in the Department of Finance to manage the State’s shareholdings in the banks has so far cost €7.6m.

The C&AG also notes that Nama reported losses of €126m at the end of last year which are not included in the costs of the bailout, as Nama has predicted it will make a surplus of up to €1bn when it is wound up.

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