IRISH BANKS will end up spending well over €160 million on lawyers, investment advisers and underwriters as part of their efforts to raise enough money to meet targets set out in stress tests earlier this year, new figures show.
In March of this year the Central Bank ordered four of the country’s main lenders to raise €24 billion to bolster confidence in the financial system.
The Department of Finance has been told by the four banks – AIB, Bank of Ireland, EBS and Irish Life and Permanent – that they will face significant expenses in raising this money.
In total AIB will require €13 billion, Bank of Ireland €5 billion, EBS – which is being folded into AIB – €1.5 billion and Irish Life and Permanent €4 billion.
Bank of Ireland has advised department officials the total cost of meeting these targets will amount to about €150 million.
The bulk of this will go towards legal advice and underwriters, although the final figure is still uncertain. The bank had pledged to pay all costs and expenses of the State involved in the revenue-generating exercise.
AIB has already spent in excess of €6 million on legal and financial advice. It says it is continuing to raise money to help meet its capital targets and that “further unquantified fees will be incurred”. The bank maintains that the cost of professional fees involved are in line with market norms.
Irish Life and Permanent has spent €2 million on lawyers, investment advisers and underwriters. It says there will be “further significant additional amounts” due in relation to the sale of its life assurance company and other banking businesses.
It says it had tendered all its work to reputable firms and, in some instances, set fixed price contracts to ensure value for money and to guard against a potential “drift” in fees at a later stage.
EBS says it has already spent close to €500,000 on legal fees, accountancy fees and tender agents.
It says it sought quotes from a numbers of investment banks and other bodies and opted for the cheapest quotes.
In the case of its legal advice, it used its previous legal advisers as it says they were familiar with the structure of the firm and insisted that other firms would have cost “considerably more”.
The figures were contained in a written Dáil question last week to Sinn Féin TD and finance spokesman Pearse Doherty.
The need to raise such large amounts of capital follows the third and most stringent set of stress tests conducted last March.
In these forecasts, the Central Bank predicted that €24 billion would be needed to cover loan losses at AIB, Bank of Ireland, Irish Life Permanent and EBS.
The figure of €24 billion is roughly equivalent of all the income tax and VAT the Government expects to collect this year.
The cost of undertaking this most recent round of stress tests was also significant.
In total, the Central Bank spent an estimated €30 million on consultants such as UK bank Barclays Capital, US asset manager BlackRock Solutions and the Boston Consulting Group, among others.
