The European Commission wants to wind down nationalised Anglo Irish Bank while management still believes it would better to keep a rump open, the bank's chief executive said in an interview published today.
"The European Commission is saying, 'this bank has dropped €25 billion, and it doesn't deserve to survive', and they're right. But you have a dysfunctional banking system," Mike Aynsley was quoted as saying in the Sunday Business Post interview.
Investors see the escalating cost of rescuing Anglo Irish and uncertainty over its fate as a major threat to Ireland's creditworthiness and the next potential euro zone trouble spot after Greece.
Minister for Innovation Conor Lenihan said yesterday the bank would be "decommissioned", the latest signal from the Government that it is about to bow to growing political pressure to shut down the lender.
The Sunday Times said without citing sources that Finance Minister Brian Lenihan would ask in his meeting with European Competition Commissioner Joaquin Almunia tomorrow if Anglo Irish could be wound down over a period of up to 15 years, arguing that a quicker closure would be too costly.
Mr Almunia, who will have the final say on Anglo Irish's fate, said yesterday he would discuss the matter with Mr Lenihan but did not say what was his preferred outcome.
Mr Aynsley has proposed carving out a small functioning bank via a "good bank/bad bank" split, but there are signs ministers are moving towards wanting an eventual winddown.
Mr Aysnley told the Sunday Business Post the good bank/bad bank split "doesn't look like it is going to happen".
The Government - with a wafer-thin Dáil majority - will be hard-pressed to ignore public opinion, already angry at having to shell out €25 billion for the bank's reckless property lending while facing yet another round of tax hikes and spending cuts in this December's budget.
Mr Aynsley said it would be wrong to close the bank entirely as even a gradual wind down over 10 years would cost €4 billion to €5 billion more than keeping part of it open "From an economic and financial point of view, we are better off to keep it as a stub," he said.
The Sunday Business Post said Anglo executives planned to meet members of the Dáil this week to present arguments in favour of retaining a rump of the lender.
Reuters