Estimate for Anglo bailout expected this week

THE GOVERNMENT expects to release a final estimate on the cost of bailing out Anglo Irish Bank later this week.

However, it has reiterated that Ireland will not default on senior debt.

A spokesman for Minister for Finance Brian Lenihan denied that the Government was pursuing a deal with certain senior bondholders that would see them sharing some of the cost of winding down Anglo Irish Bank with taxpayers, as reported in the Sunday Times.

Responding to the article, Fine Gael finance spokesman Michael Noonan said the Government “appears to be preparing the ground for an embarrassing U-turn on its banking policy” that would involve “savings” of €2 billion on subordinated debt and €1 billion on senior debt.

However, the spokesman for Mr Lenihan said it was “incorrect” to say the Government had sanctioned talks with the holders of senior debt that was issued before the introduction of the two-year blanket bank guarantee.

This guarantee expires on September 30th.

Last week, Mr Lenihan told an Oireachtas committee it was “unthinkable” that Ireland would default on senior debt or that the State’s banks would default on senior debt.

“Ireland is not prepared to be some kind of social experiment for bank default,” Mr Lenihan said.

The Government is not in a position to announce or give an indication of future policies on the debt before the guarantee expires, as doing so might risk triggering the guarantee.

Many of the key details relating to the wind-down have also yet to be finalised.

Speaking on RTÉ's The Week in Politics, Minister for European Affairs Dick Roche confirmed that there would be a "bottom line" figure for the estimated cost of winding down Anglo Irish Bank within the next week to 10 days.

As part of the estimate, the Financial Regulator will issue two figures. One figure will represent the expected total level of capital that the Government will inject into Anglo Irish Bank, while the other figure will include a stress-test scenario where the losses on Anglo’s loan book are bigger than anticipated.