End of an era: Central Bank sells remaining IBRC-linked bonds

The Central Bank confirmed that it has sold the remaining €500 million of bonds linked to the restructuring a decade ago of the taxpayer bailout of the now-defunct Anglo Irish Bank and Irish Nationwide Building Society (INBS).

This means that the Central Bank has sold off all of the €25 billion of government bonds it received in February 2013 under a restructuring of so-called promissory notes, which had been used by the State during the financial crisis to rescue Anglo and INBS.

Anglo was renamed Irish Bank Resolution Corporation (IBRC) in 2011 and subsequently took over the remains of INBS. The sale of the remaining notes comes within weeks of the 15th anniversary of the September 2008 banking guarantee.

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The Central Bank has sold down of the floating rate bonds since 2014 to the National Treasury Management Agency (NTMA), which has immediately cancelled the notes.

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“I welcome the news that the NTMA has today purchased and cancelled the final tranche of the floating rate bonds that were issued in connection with the liquidation of the Irish Bank Resolution Corporation,” said Minister for Finance Michael McGrath.

“This development brings to an end a specific consequence of the banking crisis of more than a decade ago and has also happened ahead of the original schedule for the disposal of the floating rate bonds.”

Mr McGrath added: “The substantial regulatory reforms put in place domestically and with our EU partners during the years since the crisis mean that the Irish banking system is much better placed to face any future challenges, should they arise.”

The Central Bank has made multibillion-euro profits from the bond sales, as the value of the bonds surged in the past decade as the Government’s borrowing costs on the financial markets plummeted. Some 80 per cent of the profits have been handed over to the exchequer.

Still, the NTMA has had to raise money to buy the bonds in the long-term bond markets – albeit at much lower interest rates than what were attached to the original bonds. It is estimated that the NTMA has spent about €37 billion buying out the bonds.

The Central Bank was under pressure from the European Central Bank from the outset of the 2013 deal to sell the bonds as quickly as possible in order to ease concerns that the financing amounts to monetary financing, which is prohibited in the euro zone.

“Today’s transaction marks a milestone for Ireland,” said Frank O’Connor, chief executive of the NTMA. “In 2013, the exchange of the promissory notes for floating rate bonds allowed Ireland space to deal with its schedule of debt maturities, at a time when we were coming out of the EU-IMF programme and re-entering the debt markets.”

Deputy Central Bank governor Vasileios Madouros said: “The sale of these bonds, ahead of schedule, represents the end of a long chapter in Ireland’s banking crisis. The long-lasting scars that crises can leave on the economy and society underscore the importance of the substantial regulatory reforms introduced over the past decade to strengthen the resilience of the banking system.”