Cantillon: Were IBRC loans rolled over at old rates?

That getting on for half of IBRC's borrowers were paying an interest rate of less than 2 per cent seems extraordinary. It is grist to the mill of those who criticise the way the bank was run following its creation through the nationalisation and merger of Anglo Irish Bank and Irish Nationwide.

But there is a danger of a rush to judgment. Many questions need to be answered. The most pertinent is when the interest rates were agreed and how they compared to the market rates at the time. It has to be borne in mind that interest rates were low in the credit boom that preceded the credit crunch, and part of the two banks’ undoing was that their own cost of funds exceeded the interest rates they were charging borrowers.

This seems like the most benign explanation for the low interest rates and no doubt will be thoroughly explored by the Commission of Investigation into IBRC, chaired by Mr Justice Daniel O’Keeffe (pictured).

What is arguably of more importance is whether IBRC management – and its liquidators – continued to lend on such generous rates post the nationalisation and subsequent liquidation of the bank. Whilst they would have had little option but to honour agreements made by the previous management, they were not under any obligation to extend the low interest rates beyond the agreed terms.

If they did roll over or extend loans at pre-crisis rates of interest they would have had to have a very compelling commercial reason to do so, because the interest forgone by not charging the market rate is essentially a loss to the taxpayer.

It is hard at this remove to see what sort of argument they could make to behave in this fashion given that the bank was in wind-down and ultimately liquidation.