State to ask ECB to help wind down Anglo

THE Government is expected turn to the European Central Bank for help as it looks to wind down Anglo Irish Bank over a 10 to 15-year period.

Finance Minister Brian Lenihan said the Government will not seek financial help from the European Financial Stability Facility, which has €750 billion at its disposal to help countries with problems borrowing on the market.

“We don’t anticipate that at all,” Mr Lenihan said, despite the cost of borrowing for Ireland rising to record levels yesterday on the markets.

The alternative is for the ECB to help fund the wind-down, possibly through buying Anglo debt, or bonds, described by sources in Brussels as a “back door bail out”.

The ECB has already put in about €25bn to Anglo while the state has put in about €23bn.

Mr Lenihan said he will put the various options on the future of the nationalised bank before the Government today.

Up to now the Government has favoured retaining a portion, around 20%, of Anglo as a good bank and winding down the remainder. However, it is under intense pressure from Brussels to wind it all down.

“The Government will look at the options and make a decision. It’s time to bring it to a conclusion,” Mr Lenihan said after discussions with the European Commission in Brussels.

The commission will look at the Government’s proposal and make a decision within a few weeks, he added.

Meanwhile, Labour MEP Alan Kelly, after a meeting with competition commissioner Joaquin Almunia, said the Government has never submitted a formal proposal on the future of Anglo.

“The Government’s management of this situation is contributing greatly to the uncertainty we are now facing. They have spent the last two years talking up a good bank/bad bank.”

Mr Kelly said that an orderly wind-down would be the easiest to assess, adding that he believed it would protect Irish taxpayers from further grief.

Taoiseach Brian Cowen said the cost of a wind-down could be as high as €70bn, the total amount of deposits with Anglo.

And credit rating agency Standard and Poor’s put it at €32bn, saying this reflected higher expected capital injections due to “worse than expected deterioration in Anglo Irish’s asset quality”.

The latest suggestion is that it will be closer to €40bn once all the debts have been taken into account, sources in Brussels said last night.

So far just about half the bad loans have been transferred to NAMA and just 15% are performing.

Mr Lenihan said it will take time to deal with Anglo and the workout of the banking assets.

“You can’t have a fire sale of banking assets. The workout element of any strategic plan will take place over time where Anglo is concerned.”

Sources suggest that the time scale could be between 10 and 15 years even though the junior coalition partner, the Green Party, was looking for a faster wind down.


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