Anglo's waiver from capital rules extended


THE FINANCIAL Regulator has extended part of Anglo Irish Bank’s waiver from its capital rules until the end of the year due to doubt over the scale of the bank’s need for new capital when its loans go to the National Asset Management Agency (Nama).

Anglo has already received €3.83 billion in new capital from the Government since June, but its total capital still remains below the minimum requirement set out for it by the Regulator.

The extension of Anglo’s derogation from that standard means the nationalised bank will be able to proceed into the Nama process without an immediate call on further State capital.

Nationalised in January as scandal engulfed the bank, Anglo is under Garda and regulatory investigation on three fronts: the concealment of directors’ loans; the secretive placing of a 10 per cent stake in Anglo to clients who funded the deal with non-recourse loans from the bank; and the lodgment of multibillion-euro deposits at the end of Anglo’s last fiscal year by Irish Life Permanent.

Even as it received a Government commitment in May to recapitalise the bank by up to €4 billion, Anglo publicly said it may require further injections of up to €3.5 billion from the State post-Nama to rebuild its balance sheet.

However, the bank’s actual requirement will be determined only when the discounted price at which the Nama acquires loans is set. This will govern the loss that Anglo realises on the Nama deal and the extent of the resulting capital depletion. “Any further decisions will be impacted by Nama. We can’t speculate on capital requirements until that happens,” said a source close to the bank.

Australian banker Mike Aynsley was this week appointed chief executive of Anglo. He will take up the post next month.

Anglo’s latest derogation from the Regulator is disclosed in a new supplement to a prospectus for a €30 billion medium-term bond programme. “The Financial Regulator extended until December 31st, 2009, its temporary derogation relating to maintaining a 9.5 per cent minimum total capital requirement,” it said.

Although the EU Capital Requirements Directive sets out a minimum total capital ratio of 8 per cent for most banks, the Regulator imposed an additional requirement on Anglo some years ago in light of the high-risk profile in its business.

Anglo declined yesterday to say where its current total capital ratio stands, but interim accounts show that it was 8.2 per cent in March after the bank realised very heavy loan losses.

The Regulator granted a number of waivers from its capital rules in May, the remainder of which were since lifted. “All the other temporary derogations are withdrawn and this temporary derogation continues until the end of the year,” said a spokeswoman for the Regulator.

When granting the latest derogation on July 31st, the Regulator also extended for seven days another temporary derogation relating to the bank’s requirement to maintain a 4 per cent core tier-one ratio. Anglo achieved that ratio on August 6th when it received €827.72 million from the Government, a payment that followed a €3 billion injection in June.

Anglo incurred a pretax loss of €4.1 billion in the six months to March as the value of land and development assets plummeted. While taking a €4.1 billion impairment charge, Anglo said that the level of “past due” and “impaired” loans had risen to €23.6 billion from €2.5 billion in six months.