The exchequer will benefit by €1.7 billion after the Central Bank realised a €2.1 billion profit from its operations last year.
Capital gains arising from the phased disposal in 2014 of sovereign bonds outstanding from the rescue of Anglo Irish Bank will reduce the national debt by some €1 billion, said bank governor Patrick Honohan.
As Prof Honohan confirmed he would leave the post before the end of this year in advance of the formal end of his mandate in September 2016, he set out how the bank had accelerated the reduction of the debts held since the Anglo Irish promissory note scheme was scrapped in 2013.
With market conditions favourable at present, the bank is expected to continue accelerating the disposal of such debts. However, Prof Honohan only said that “the Central Bank remains committed to selling the bonds as soon as possible subject to financial stability conditions”.
Assistance
Some €42 billion in emergency liquidity assistance to Anglo’s successor, IBRC, was accounted for by more than €12 billion in Nama bonds, €25 billion in bonds with a floating interest rate and an average maturity of 34 years and €3.5 billion in a fixed rate bond maturing in 2025.
The bank said all of the Nama-related IBRC bonds had now been redeemed by Nama following its sale of assets acquired through IBRC’s liquidation. Redemptions of this debt in 2014 stood at €12.21 billion, said the annual report.
A further €2.36 billion of the 2025 note was sold in 2014 and the remaining €900 million has been redeemed since the start of this year, the bank said.
Some €500 million of the floating rate note was redeemed in 2014, leaving an outstanding balance of €24.5 billion at the end of the year. The Central Bank has committed to a minimum disposal schedule of €500 million per year until 2018, rising to €1 billion per year for five year and to €2 billion per year after that.
Debts
The extant debts of Anglo had a book value of €25.86 billion in the accounts of the Central Bank at the end of 2014. However, the market value of this debt was €9.4 billion greater than the book value at end of the year.
While the bank’s 2014 annual report said a sustained recovery was gathering pace, Prof Honohan said the damage inflicted on Ireland’s economy in the crash was still not fully repaired.
“I don’t want to exaggerate the degree to which the crisis damage has been fixed,” he told reporters at Dame Street.
“The situation is well on the road to repair, but there is a degree of fragility which means management of the economy has to be very, very prudent and cautious.”
The Government paid tribute to Prof Honohan.
“Throughout his tenure he faced many challenges and always acted in the best interests of the public,” said Taoiseach Enda Kenny.
Minister for Finance Michael Noonan said the departing governor would leave an enduring legacy, adding that his departure marked the end of an era.
“His clear thinking, leadership and wise counsel helped to steer the country through some of our most difficult times,” Mr Noonan said.
