ANGLO IRISH Bank expects to make a loss of €3.5 billion – on top of the current €25 billion cost of the bank to the taxpayer – if the bank was closed in a 10-year wind-down, its management team told politicians in a briefing yesterday.
The bank’s chief executive Mike Aynsley led a briefing at its new head office on Burlington Road to explain to politicians from various parties the cost of the options facing the nationalised bank.
Members of the Oireachtas finance and economic regulatory affairs committees and the Dáil public accounts committee were invited to attend the briefing.
The bank told about 15 politicians that it will face a €17.5 billion loss – on top of the €25 billion current cost – if closed over a year.
Anglo favours splitting the lender into good and bad banks with the eventual sale of the good bank, which would be no more than a fifth of its original size, and the wind-down of the bad bank.
However, Government Ministers are leaning towards a long-term wind-down of the bank under political pressure from the junior Coalition party, the Greens, who want a quicker closure over a period of up to five years.
The European Commission is expected to rule on the Anglo plan as a condition of Government aid within weeks as Minister for Finance Brian Lenihan and European competition commissioner Joaquín Almunia met this week.
The Government has so far committed €22.9 billion to the bank. Anglo said the cost of a wind-down over 10 years would be €3.5 billion in addition to the €25 billion current cost. The bank also said that the State would have to provide an additional €22 billion in funding – to finance day-to-day operations – lost due to the long-term closure of the bank as depositors would be forced to withdraw funds.
Anglo wants to split the €38 billion in loans remaining after the transfer of €35 billion to the National Asset Management Agency into good and bad banks.
The bank believes it can recover 80 per cent of the value of the remaining €38 billion loans – after writing off €7.5 billion or 20 per cent of the loans – under the split option, according to sources with knowledge of the bank’s plan.
The bank has told the European Commission that it only expects to recover about 68 per cent of these loans under a 10-year wind-down as it will have to sell or refinance loans at lower prices given it will be a forced seller in the market.
Anglo also expects to lose all but €12 billion of the €47 billion in deposits from companies, customers and other funding if a wind-down of the bank is chosen.