IBRC bought back €1.5bn in bonds last year

STATE-OWNED Irish Bank Resolution Corporation bought back €1.5 billion of covered bonds from investors last year at the direction of the European Central Bank and had the banking licence on the subsidiary which issued these bonds officially revoked last month.

The winding up of the IBRC Mortgage Bank, which was previously known as Anglo Irish Mortgage Bank and was used to fund lending at the main bank, is part of the wind-down of IBRC.

The 2011 accounts for the former Anglo subsidiary say it moved a further €3 billion of commercial property loans into the “cover assets pool” to be used as collateral to raise €1.5 billion of fresh funding during the year.

“The Central Bank, based on a decision of the governing council of the European Central Bank, advised the bank to redeem these bonds and to transfer the €3 billion of loans back to IBRC,” said the bank in the accounts.

The covered bank had €1.8 billion of bonds in issue at the end of last year against loans of €2.9 billion which served as collateral.

The mortgage bank’s 2011 accounts say the board of IBRC decided to wind up the subsidiary due to the diminishing size of the main bank’s loan book, the requirement to redeem bonds and the operational risk arising from the departure of key bank staff.

IBRC said in its half-year accounts last week that the remaining €1.8 billion of bonds issued by the subsidiary had been redeemed and the supporting loans returned to it. The bank said the subsidiary’s banking licence was revoked by the Central Bank on July 25th.

IBRC accounts for most of the Central Bank’s exceptional liquidity assistance (ELA) funding.

Emergency loans from the Central Bank covered 89 per cent of IBRC’s funding at the half-year, up from 87 per cent six months earlier.

The bank had €42.3 billion borrowed from central banks and monetary authorities at the end of June, of which €41.7 billion was drawn from the Central Bank under “special liquidity facilities”.