Rescue plan a decisive move to solve crisis, says Lenihan

 

PRESS CONFERENCE:MINISTER FOR Finance Brian Lenihan has said that the detailed rescue plan for the Irish banking system would be widely recognised as the moment the Government took “the final decisive steps to solve the problem”.

Mr Lenihan said the series of announcements on transfers of distressed loans to Nama, and on bank recapitalisation, showed that Ireland was “facing up to our problems and dealing with them. We have built up confidence internationally and we are now translating that confidence to sorting out the bank [sector],” he said.

Mr Lenihan was speaking at a press conference in Government Buildings, held shortly after he unveiled the plan in the Dáil. He was accompanied by Taoiseach Brian Cowen, Minister for Energy Eamon Ryan, and the director of the National Treasury Management Agency, John Corrigan.

Mr Lenihan and Mr Cowen both defended the decision in September 2008 to extend the guarantee to all Irish financial institutions, including Anglo Irish Bank. Mr Lenihan also rejected Fine Gael’s argument that Anglo should be wound down, asserting that such a move could expose the exchequer to up to €70 billion in commitments.

And while saying that recapitalisation issues were for the Financial Regulator, he indicated that his view was that the State would not have to take a majority stake in Bank of Ireland.

In response to questions about the bank guarantee, Mr Lenihan said that a guarantee had been the first response of the Swedish authorities when confronted with a similar crisis a decade ago.

He also said that calls to nationalise all the banks were not realistic. “If we were nationalise the system en bloc, we would not have been able to differentiate between the institutions. We would have said that all the banks have the same level of reckless lending when that is clearly not the case. Nama has allowed us to go in and see the exposure.”

Responding to criticism by Fine Gael deputy leader Richard Bruton that Anglo’s burden on the State had surpassed €40 billion, Mr Lenihan said that winding the bank down would cost more. “We heard in the [Dáil] that there are other options for Anglo. I am afraid to say, there are not,” he said.

At the outset of the conference, Mr Corrigan confirmed that the NTMA was adhering to its 2010 bond forecast of €20 billion and not envisage further borrowing this year.

Mr Lenihan also dismissed Opposition claims that the Government had “bottled it” by giving both Bank of Ireland and AIB a period of time to try to raise private capital. He said it was a very tight deadline and said the Government had not ruled out a majority stake in either institution.

He did, however, strongly signal that the State was unlikely to become a majority shareholder in Bank of Ireland. He said the bank had detailed, well-worked plans and a “broad agreement on the structural framework which can facilitate an investment”.

He also defended the disparity between the “haircut” estimates from last autumn and the much larger 47 per cent average discount for loans disclosed yesterday.

“The figures last September were an estimate supplied by institutions. We conducted a bottom-up evaluation. That is how we got the figures. Each loan would have a separate and individual value.”

Mr Ryan said the Government was taking control by forcing the banks to face their losses. He said that Nama and the regulator had been told to be very cautious. “All the downside risk has been taken into account,” he contended.

However, Fine Gael’s deputy leader and finance spokesman Richard Bruton said the taxpayer faces a bill of €40 billion and counting for bailing out Anglo.  He  said over 70 per cent of the money the Government  was allocating to recapitalise the banks was going to Anglo “which will  not get one cent of new credit flowing or finance a single new job”.

“Having  built  up  today’s announcement as the day to sort out our banking system  once  and for all, the Government bottled it when it came to AIB and Bank of Ireland. Those banks have faced the Government down, and been given another month to prepare plans to recapitalise before the end of the year.

“The uncertainty regarding the final taxpayer commitment to these banks will continue.  In  the meantime,  these  banks  will not be willing to finance bankable business projects. They will be hoarding their capital to try and protect their independence.”