Bank debt burden talks under way

Discussions are believed to be under way between the Government and officials at the European Financial Stability Facility on a possible way of reducing the cost of Ireland’s bank debt burden.

It would involve creating an EFSF bond which could potentially be used as collateral to allow the Irish Bank Resolution Corporation to access the ECB’s normal bank financing structures and the normal low-cost ongoing financing from which it is currently excluded. Such a bond could potentially help wean the IBRC off the emergency liquidity assistance which the bank currently sources from Ireland’s Central Bank.

According to RTÉ, the plan would eliminate the need for the IBRC to rely on the expensive emergency funding mechanism.

It comes as it emerged the country may yet have to pay a high cost for the deferral of the €3.1bn promissory note payment, as the ECB is unhappy with the deal and the extra cost to the exchequer may have to be made up in spending cuts.

The Government will have to show the troika, when it returns to the country next month, where it will find the extra €90m the arrangement involving the Bank of Ireland has cost.

The ECB is sceptical, believing the deal comes close to breaking its rules against funding governments.