€10bn bank investment written off

THE state has written off about half of its investments pumped into the two country’s main banks, leading to potential losses of nearly €10 billion.

The National Pension Reserve Fund revealed yesterday that €4.8bn has been put into Bank of Ireland while another €16.1bn was put into AIB.

The funds were invested as part of the recapitalisation of the two banks. But the fall in values of shares at the banks has seen investment returns plummet, the Oireachtas Public Accounts Committee (PAC) heard.

Of the over €20bn put into the two main banks, the NPRF said yesterday that the remaining value was €2.4bn in Bank of Ireland and €7.2bn in AIB.

Fine Gael’s Kieran O’Donnell said the funds written off were “astronomical”, considering a similar sum is allocated for the Department of Education annually.

“It’s phenomenal ... it’s gone, it’s money down the drain,” he told committee members.

PAC members were also told yesterday that Ireland would pay a higher rate for investments when returning to the markets than for the of funds being lent under the EU/IMF bailout.

John Corrigan, the National Treasury Management Agency chief executive, said that he expected Ireland would return to the markets at the end of next year. The country had enough funds until the end of 2013 under the bailout programme but was also set to pay out for the maturity of bonds by the following year.

It was therefore necessary that Ireland return to the markets by the middle of 2013, TDs were told.

Mr Corrigan said it was difficult to estimate the interest rate Ireland would get on returning to the markets but it would likely be considerably higher than the 3% applied to the EU/IMF loans.

There were key issues for investors returning to buy Irish bonds when the country returned to the markets.

These included the progress made in meeting fiscal targets set out by EU/IMF lenders; the successful recapitalisation of the banks; progress on bank deleveraging; the sales of NAMA assets, as well as the situation at EU level on the euro crisis.

Mr Corrigan said: “Obviously, we will get there, but its going to be a jumpy journey along the way.”


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