Anglo gets further €2bn in capital

 

Anglo Irish Bank has received a further €2 billion in Government funding, the bank confirmed today.

The capital contribution announced today is in addition to €8.3 billion the State-owned bank received on March 31st, when it was issued with a promissory note for that amount.

However, the note provided for adjustment instruments that could amend the original amount of the note. Minister for Finance Brian Lenihan increased the amount by €2 billion to €10.3 billion, the bank said in a statement.

This additional capital was received on May 28th.

The capital contribution was authorised by the European Commission on March 31st, 2010 under EU state aid rules. The requirement  arises out of additional losses resulting from the level of the discount on the first tranche of Anglo’s loans transferred to the National Asset Management Agency (NAMA) and further impairments on the remaining loan book.

The capital support is being provided by the State in the form of a promissory note, payable over a number of years into the future. In essence this means the amount will be paid over a period of 10 to 15 years, thereby hopefully reducing the impact on the Exchequer this year and stretching the payments into the future.

Mr Lenihan previously provided €4 billion to Anglo Irish Bank in 2009.

Fine Gael said the decision to give further finance to Anglo would "horrify" taxpayers.

“This confirms the worst of our fears about Brian Lenihan’s strategy for Anglo Irish Bank. The Minister expects to bail out the bank with ever larger sums of taxpayers’ money. Yet the bank guarantee is sucking us into an ever-deeper recapitalisation of Anglo Irish as new losses continue to be identified in the bank’s loan book," said the party's finance spokesman and deputy leader, Richard Bruton.

“As taxpayers brace themselves for €3 billion in tax increases and cuts in the next Budget they will be appalled at the casual way in which Minister Lenihan has tipped another €2 billion into Anglo Irish. This is dead money which only adds to Ireland’s indebtedness,” he added.

In a statement issued this afternoon, Mr Lenihan said Anglo’s restructuring plan is being submitted to the European Commission today.

Separately, the European Commission said today it has extended the banking guarantee covering Irish banks until the end of June.

The guarantee is "an appropriate means of remedying a serious disturbance in the Irish economy," the commission said in a statement on its website.

Meanwhile, Central Bank Governor Patrick Honohan said Ireland's biggest banks will be "fixed" by the end of the year as the economy edges out of a recession.

"People may not fully internalise and appreciate that we've fixed the banks until they suck it and see," Mr Honohan said in an interview. "It may be some months before the market fully realises that this is working out."