Taxpayers ‘will not have to pay for bad debts’

TAXPAYERS will be protected from having to cough up for unpaid loans and bad debts owed to Anglo Irish Bank when it goes into public ownership, the Government assured yesterday.

Finance Minister Brian Lenihan insisted that when the process of nationalisation is completed “the clear priority for us is to collect the debts”.

He said: “What the Irish taxpayer has bought is a bank that has assets in excess of liabilities of more than €4 billion, that’s the position that has been confirmed.”

The Government is refusing to say exactly how much is owed and what payments are being made on loans given out by the bank, mainly to property developers, because the information is “commercially sensitive”.

The bulk of these loans are believed to be secured on property that has significantly dropped in value.

The Labour Party estimates that the taxpayer might have to cough up about €20bn when those who have deposits in the bank come looking for their money.

There is €80bn worth of deposits in Anglo Irish Bank and the depositors of this money will be paid “on request and with interest” according to Mr Lenihan.

He said: “At present the loans are generating sufficient income to pay the deposits and to pay the interest due on deposits and to keep the bank going in the ordinary course of its business.”

He indicated that had the Government not taken the action it did to nationalise the bank on Thursday night, then the customers would not have been able to get their cash.

“The worst thing that can happen from Ireland’s point of view is that a bank can fail. If a bank fails, the damage to the country, the reputational damage to the country, in trashing deposits and refusing to honour obligations, would be enormous,” he said.

Fine Gael said there is no point in operating the bank as an ongoing concern. “It is simply not credible that the state would continue injecting unknown funds on a rolling basis in to Anglo in some vain that the bank will be refloated,” said party leader, Enda Kenny.

Labour Party finance spokesperson, Joan Burton, said: “My first concern is for the taxpayer because there is no estimate of the likely cost in what the Government has said. I fear it will be very significant, as much as €10-€20bn. That would be a pretty calamitous situation.”

Just last week, Mr Lenihan warned of the danger to the taxpayers of a possible nationalisation of Anglo: “Clearly, when you nationalise, the risk to the taxpayer is greater because the taxpayer then has to provide the working capital for the bank... Were we to go from the last step before nationalisation to nationalisation itself, the taxpayer will be taking an awful lot of risk with no return,” he said.

But yesterday Mr Lenihan attempted to reassure the public: “As far as we’re concerned, this bank is going to be run along proper commercial lines and loans have to be collected,” he said.

Mr Lenihan strongly rejected any suggestion that there was a run on the bank in recent days prompting the Government’s decision.