Anglo funding may top €24bn

 

The total State aid that will be provided to Anglo Irish Bank is set to top €24 billion as a result of deeper discounts being applied to loans that it is transferring to the National Asset Management Agency (Nama).

This emerged yesterday as the European Commission gave its approval for the Government to provide up to €10.054 billion in temporary emergency State aid to Anglo Irish Bank on top of the €14.3 billion that has been approved to date.

This included an additional €1.4 billion sought by the Government recently to allow Anglo meet its regulatory capital requirements in light of increased costs associated with transferring loans to Nama.

A spokesman for the commission described this funding as a “buffer” for the bank. The Government estimated in March that it would provide €22.9 billion in State aid to Anglo.

But the steeper discounts being applied to the loans moving to Nama have resulted in the Government seeking permission from Brussels to provide yet more capital to Anglo.

Commission vice-president for competition Joaquin Almunia said the move was necessary to “preserve financial stability in Ireland”.

“However, there is no doubt that Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued State support,” Mr Almunia added.

News of the extra funding resulted in the premium investors demand to hold Irish bonds moving to its highest level in two weeks yesterday.

Anglo submitted a restructuring plan to the commission on May 31st and is awaiting approval. It has proposed splitting the bank into two entities – old Anglo and a good bank – with the good bank focusing on being a business lender.

A spokesman for the commission declined to comment yesterday on when the restructuring plan might be approved but it is understood that the bank hopes an agreement will be reached next month.

This is the third emergency recapitalisation of Anglo that has been approved by the commission.

In June 2009, it gave the green light for the Government to provide €4 billion to the State-owned bank.

In March 2010, it approved an additional €10.3 billion although the Government had sought to provide €10.44 billion to Anglo.

The two latest recapitalisations are being provided by way of promissory notes, or IOUs, in annual tranches over a decade or so.

Anglo is due to transfer about €36 billion to Nama although the final figure could be lower as some loans in the UK and the US are likely to be reclassified. A second tranche of loans totalling about €7.5 billion is currently being transferred to Nama.

Opposition parties yesterday accused the Government of providing consistently inaccurate information about the full cost of the Anglo bailout to taxpayers.

Fine Gael’s spokesman for economic planning Richard Bruton said Nama should cease purchasing loans from Anglo as the losses crystallised the need to pour more capital into the bank. “The taxpayer is being left carrying the can,” he said. “This bank is not going to lend anything to anyone in the future.”

Labour Party frontbencher Joe Costello said Anglo was proving to be Ireland’s “biggest money pit ever”.

He said the Government’s figures on the costs of Nama to the taxpayer had been “constantly inaccurate”.

Anglo will publish its interim accounts on August 31st.