Net cost of Irish banks bailout rises to €45.7bn, comptroller says

Fall in market value of surviving banks as well as cost of servicing debt accounts for €4bn increase since last estimate

Irish taxpayers have paid a net cost of €45.7 billion up to the end of last year to bail out banks during the financial crisis, according to the Comptroller & Auditor General. Photograph: Matt Kavanagh

Irish taxpayers have paid a net cost of €45.7 billion up to the end of last year to bail out banks during the financial crisis, according to the Comptroller & Auditor General (C&AG).

The figure was up from the last estimate of €41.7 billion that was tallied at the end of 2018. The increase is largely due to a “significant” decline in market value of investments in the three surviving banks over the period, as well as three more years of borrowing costs associated with the investments, the C&AG said in its latest annual report, published on Friday.

The market value of shares in AIB, for example, fell by 42 per cent over the three years to the end of 2021. However, they have since rallied 16 per cent and Minister for Finance Paschal Donohoe has been selling shares in the bank since the start of the year, reducing the State’s stake to 63.5 per cent from 71 per cent.

The C&AG puts the total investment into the three surviving Irish banks — AIB, Bank of Ireland and Permanent TSB — as well as the now-defunct Anglo Irish Bank and Irish Nationwide Building Society, at €66.8 billion.

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The report estimates that the cost of servicing funding associated with the bailouts at €28.8 billion. This includes money borrowed by the Government as well as the imputed cost of investments undertaken by the Irish Strategic Investment Fund (ISIF) in the surviving banks.

However, much of this was offset by about €16.9 billion of surplus income that the Central Bank made from the role it played in stabilising the banks during the crisis. This included interest on emergency funding provided to banks, as well as gains made on bonds the Central Bank received from the State in 2013 under a complicated restructuring of the rescue bill for Anglo Irish Bank and Irish Nationwide, by then called Irish Bank Resolution Corporation.

The C&AG examination also included the National Asset Management Agency’s accumulated earnings of €4.8 billion at end 2021 in its calculation of the Government’s estimated net cost of coming to the aid of the financial system. Nama took over €74 billion of toxic commercial property loans of the banks between 2010 and 2011 for a discounted price of €32 billion — reflecting how the value of property assets behind the loans had slumped in the wake of the crash.

“Overall, unless the State realises significantly more than end-2021 values for its residual shareholdings, the overall net cost of the banking stabilisation measures will be around €46 billion,” the report said. “This net cost will increase by upwards of €700 million annually [from end 2021] due to the cost of servicing this level of debt, with the extent of the increase determined by the State’s average cost of borrowing.”

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times