Lenihan admits proposals amount to ‘wind-down’

FINANCE Minister Brian Lenihan has admitted that his department’s new plan for Anglo is effectively a wind-down of the toxic bank.

“It is a work-out, but you can call it a wind- down if you like. But it’s over an extended period of years, and it’s an orderly work-out of the institution in question,” he said yesterday.

Anglo management had wanted to carve a new business out of the institution by splitting it into a ‘good bank’ and a ‘bad bank’.

The former would have taken the deposits and better quality assets left in Anglo and would also have sought new lending opportunities to grow as a viable business over time.

The latter would have taken all the troubled Anglo loans not going into NAMA and worked them out over time.

But the Government didn’t want a new lending business to emerge from Anglo and has rejected management’s proposals, instead opting for a “variation” on them.

Anglo will still be split in two, but will not lend to new customers.

Under the Government’s plan, a bad bank, or asset recovery bank, will still be established, but it will take all of Anglo’s left-over loans, both performing and non-performing, and work them out over a maximum 15-year period.

A funding bank will also be established to handle Anglo’s deposits.

The Government has yet to spell out the final cost to taxpayers. Financial Regulator Matthew Elderfield has been asked to assess how much capital each of the two new banks will need, with an answer expected by October.

Mr Lenihan admitted Wednesday’s announcement wasn’t a “silver bullet”, but insisted it would help build confidence.

“We need to take a series of measures. [Wednesday] is not a silver bullet in terms of creating confidence but it’s an important step in building up confidence,” he said.

The Government will be hoping that, once the final costs are announced, it will draw a line under an issue that has raised fears of a full-blown Irish debt crisis.

Markets are nervous that the escalating cost of dealing with Anglo’s disastrous property binge, combined with the biggest budget deficit in the EU and anaemic economic growth, could drive the country deeper into crisis.

Anglo’s chief executive, Mike Aynsley, told Reuters yesterday the bill for the new plan could top a recent €25 billion estimate.

The bank had warned last month that the favouring of a long-term wind-down over the good bank-bad bank proposal could see the bill reach €30bn.

And Mr Aynsley said yesterday: “All things being equal and subject to the details we’re going through, I suspect it is going to be somewhere in between what we have would have expected in a long-term wind down versus a good bank-bad bank.”

Meanwhile, Mr Lenihan is expected to appear before the Oireachtas Finance Committee next week to discuss the Anglo plan and related issues.