IMF queried bank's sell-off strategy

 

THE INTERNATIONAL Monetary Fund queried as far back as April 2009 the value of Allied Irish Banks disposing of assets to generate capital, saying it assumed the market had priced this in.

The IMF questioned the sales in meetings for its 2009 assessment of the Irish economy. The opinion is contained in records released under the Freedom of Information Act by the Department of Finance following an appeal by The Irish Times to the Information Commissioner against the withholding of certain files by the department.

The IMF raised this view after meetings with the Financial Regulator, AIB and Ulster Bank.

AIB is selling its Polish bank BZ WBK, a stake in US bank MT and its UK business as part of a €7.4 billion fundraising to meet the regulator’s new capital rules.

French bank BNP Paribas, Poland’s Bank Polski and Spain’s Banco Santander are in the running to buy BZ WBK.

The Sunday Times reported yesterday that private equity firm Apax Partners has had talks with Santander about joining the bank in its bid for BZ WBK. The newspaper said Santander officials had been invited to Poland this week as AIB seeks to conclude a sale.

Internal department records also show that in April 2009 the IMF queried the scenarios on bank loan losses provided by accountants PricewaterhouseCoopers.

The IMF also warned that “a lot of thought [was] needed” about how to exit the bank guarantee, saying that Indonesia had phased it out, by withdrawing it from wholesale debt first, then inter-bank lending and deposits.

Department officials warned internally that if the IMF was going to publish that bank losses could top €35 billion, then they would have to be ready to respond.

“Assuming their papers eventually come into the public domain, their estimate of bank losses and their (very preliminary) assessment of Nama, we may need to have answers ready,” said one official in an internal e-mail.

In another e-mail, a department official warned against Anglo talking up its capital requirements in meetings with the IMF.

“I’m not sure that it would be helpful to have Anglo talk up their capital requirements. Perhaps a word with DOC [Anglo’s then chairman Donal O’Connor] could temper this,” said the official.