Government should take long overdue look at IBRC
BUSINESS OPINION:Public anger at the salaries paid to the senior management at Irish Bank Resolution Corporation is understandable but may ultimately prove as futile as previous eruptions over the apparently mindless avarice of Irish bankers.
Chances are the Government will publicly scold the bankers, do nothing and wait for the storm to move on.
The only reason they might not is if the Department of Finance seizes what some believe is an opportunity to take a long-overdue look at IBRC .
It is no secret that the department has some concerns in this regard and wants more oversight. Earlier this year, it parachuted one of its senior banking policy officials – former UBS executive Neil Ryan – into the bank to help run down the loan book and, more pertinently, sit on the executive committee.
It is understood Ryan reports directly to the Minster for Finance every couple of weeks, indicating that concerns about the bank are not restricted to the mandarins on Merrion Street.
At the heart of the problem seems to be a divergence of views as to how Anglo should be wound up. The department’s view – and Government policy – is that the bank should be run down in a straightforward fashion as quickly as possible. It is, in effect, in liquidation and should be shedding loans as fast as it can.
The management of IBRC has a rather different view. They argue that they will deliver a better outcome for the taxpayer if they are allowed operate more like a living bank and, in particular, if they are allowed maintain banking relationships with clients, who happen to include many of Ireland’s business elite, such as Denis O’Brien.
It is a plausible argument but it necessarily means a more protracted death for IBRC. The problem is that, in a climate as devoid of trust in bankers as the one in which we live, people will quickly question whether some sort of perverse incentive is at play and IBRC’s very well-paid management are just stringing things out for their own benefit.
The second issue is that the sort of favourable treatment regularly given by “living” banks to their big clients is not necessarily compatible with the notion of a State-owned bank in run-down mode. Several IBRC deals involving Denis O’Brien are already contentious, particularly where the bank has forgiven the debts of companies subsequently bought by entities linked to Mr O’Brien.
The other side of the coin is that Mr O’Brien has repaid most of his loans from Anglo which, at one stage, were reported to be close to €1 billion.
IBRC’s decision to support one of its other clients, Paddy McKillen, in his battle with the Barclay brothers over ownership of the Maybourne Hotel group in London was also controversial as it pitched the bank against the National Treasury Management Agency.
The disclosure in court of a number of text messages between IBRC chief executive Mike Aynlsey and McKillen was excruciating. This sort of publicity has not helped IBRC’s cause and it remains to be seen if the backlash over the remuneration of its top executives tips the balance in favour of those who would like to see the bank reined in.
IBRC’s ace in this game to date has been its single-minded pursuit of Seán Quinn for the money he owes it. You could question whether a bank paying so many top executives over €500,000 should have let itself be outfoxed to begin with but you could not question the resolve of the bank to get back the overseas assets stripped by the Quinns. It has provided a powerful counterweight to criticism.
But the decision to hand over this job, and much of the proceeds, to a Russian outfit could yet blow up in its face.
The tide may well be turning against IBRC. But what are the alternatives? It has very few peers and its closest relative is the National Asset Management Agency.
There is now serious talk of merging the two entities and you can see the attraction. Nama, after all, is running down the bulk of the Anglo loan book – IBRC kept the “good” bits – and seems to be doing so with far less controversy and equal zeal. Putting Treasury Holdings into liquidation is a recent example. And it manages to do all this under the guidance of a chief executive, Brendan McDonagh, who earns a mere €365,500 – albeit helped by 14 executives earning over €250,000.