AIB return to markets a 'step on the road'

The Secretary General of the Department of Finance John Moran yesterday welcomed AIB’s return to the markets as “another step on the road” to full recovery in the sector.

AIB yesterday raised €500m in a bond issue, the first “covered bond” of its kind since 2007. It said the issue was over-subscribed with orders valued at €2.3bn.

Speaking last night at the Financial Services Ireland (FSI) annual dinner at the Shelbourne Hotel in Dublin, Mr Moran said: “In July of last year, spreads on Irish covered bonds trading in the secondary market were above 10 per cent. Now, both of the Bank issuances have been public issues; they are unguaranteed and both were priced inside the secondary market at 270 basis points above mid-swaps.

“The return of the NTMA to the markets earlier this year, and the level of support received demonstrates clearly market recognition of progress.

“We have distinguished ourselves from other Programme countries and indeed our two-year and 10-year yields are below those of Spain and Italy.”

Mr Moran repeated the previously flagged possibility of the removal of the Eligible Liabilities Guarantees (ELG) scheme by early next year, a move that would improve the ability of the banking system to move toward profitability.

Last night’s dinner also saw the unveiling of Patrick Manley as the new chairman of the FSI, succeeding Fergus Murphy.

Meanwhile, the Central Bank’s banking regulator Fiona Muldoon has reiterated the need for a shift in culture in the Irish banking system if more stringent regulation is to be successfully implemented in the sector.

She said there had been a “reluctance” to accept change among some of the financial institutions.