€25bn of state money going into a ‘black hole’

UP to €25 billion in state funds being put into Anglo Irish Bank and Nationwide Building Society is going down “a black hole”, according to the Government’s former top banker.

Micheal Somers, who retired as the National Treasury Management Agency’s (NTMA) chief executive late last year, said “Anglo and Nationwide are really basket cases”, adding that “€20bn-€25bn of our cash is going to go down a black hole in those cases”.

However, Mr Somers said he did expect the €7 billion given by the state to recapitalise AIB and Bank of Ireland would, in time, be repaid.

Mr Somers is a current member of the AIB board.

“What has gone into the two main banks will come back,” he said in a RTÉ interview.

He insisted the funds gone into Anglo and Nationwide were “dead”.

“It is unbelievable that amount of money has gone – €20bn to 25bn of our money just down the drain.”

As head of the NTMA, Mr Somers had stopped depositing large amounts in Anglo many months prior to the crisis, concerned by its business model.

Asked if the Government knew then about possible problems, Mr Somers said “they knew as much as I knew”.

Meanwhile, Anglo chairman designate Alan Dukes expects to submit the latest version of its business plan to the European Commission next week, with the aim being to split it into a “good” and “bad” bank.

Anglo – which in March posted the biggest loss in Irish corporate history – is negotiating with the European Commission about its restructuring plan.

Mr Dukes, who is taking over as chairman next month, said the EU had asked the bank to consider a 20-year wind-down as part of those plans but he did not think that option would be a good one.

The former Fine Gael leader maintained his position that splitting up Anglo remains the least costly option open to the state, despite pressure to wind it down over time.

In the RTÉ interview, Mr Dukes said: “I hope we will have conclusions from the commission during the summer and be able to get on with implementing the plan as agreed.”

The cost of bailing out Anglo has resulted in Ireland having the biggest budget deficit in the EU.

The troubled enterprise has received over €12bn of state aid, with another potential €10bn promised.

“I would hope that (the commission) will see the logic of the general thrust of our plan. If they want adjustments made in it, that’s something we would have to look at,” Dukes said.

Anglo will transfer half of its loan book to NAMA as well as setting up a bad bank of its own and keep the remaining assets for a lender that can remain open.


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