State may sell bank shares to investors, says Noonan

The Government could give up on getting the money it put into the banks back from the EU and instead sell the shares to investors, according to Finance Minister Michael Noonan.

While he insisted Ireland would hold the EU to its commitment on retroactive bank recapitalisation, he indicated this would not be the only option.

“I’m totally pragmatic about this,” he said.

The Government has been softening its stated determination to recoup money from the EU’s rescue fund, the ESM, when this becomes possible towards the end of this year.

While all the main players agree there is a commitment to allow the ESM to directly recapitalise banks, it is unlikely to happen because all countries need to agree on any application and Germany especially is against it.

The Government continually falls back on the recognition it received from EU leaders that Ireland was in a special position — because it was banned from burning bondholders — to push its case for retrospective recapitalisation.

However, under the rules it would receive no more than the current market value — estimated at around €4bn — while the taxpayer put more than €24bn into the three pillar banks. Their values have been increasing, but are still far from matching the sums put into them.

Mr Noonan, in Brussels for the monthly eurogroup finance ministers’ meeting, said the Government had decided it would in time sell the bank shares and use what it gets to reduce the national debt.

He ruled out looking for new investors during his visit later this week to New York, where he has a lunch with up to 30 people who bought Irish government bonds. But he said the Government was holding on to the commitment made to them by EU leaders in Jun 2012 to keep open the option they could sell the bank shares to the ESM to recoup the banking bailout.

In Davos last week Mr Noonan said the Government may look to sell some of the 99.8% of shares it owns in AIB before Apr 2016. He said such a sale would help set a value for the bank which analysts estimate at €4.5bn.