Most of Anglo’s promissory note money outside scope of ECB plan

Some €19 billion of the original €25 billion in Anglo Irish Bank promissory notes fall outside the scope of the European Central Bank’s asset purchase programme which will last until at least September 2016.

This has emerged from a written answer by Minister for Finance Michael Noonan to a question from Fianna Fáil’s spokesman Michael McGrath.

The reason is that the maturities on the bonds are in excess of 30 years and so fall outside the scope of the ECB programme, which is restricted to bonds with a remaining maturity of greater than two but less than 30 years.

Under the ECB’s plan, the Central Bank of Ireland (CBI) would buy Irish sovereign bonds on secondary markets and hold them to maturity. The Government would pay the interest rate on the bond, which would be returned to the exchequer by way of a dividend from the Central Bank.

Mr Noonan said the holding of these promissory notes by the Central Bank will, in practice, “have no impact on the amounts that can be purchased by the CBI” as part of the ECB’s programme.

“While other bonds within the two- to 30-year maturity window that are already held by the CBI and other national central banks will be taken into account for the purposes of calculating the amounts that can be purchased, I understand that this still leaves ample room for participation by the CBI in the asset purchase programme,” he said.

Sovereign bonds

About €12 billion in Irish sovereign bonds are expected to be acquired as part of the ECB’s quantitative easing campaign to spur growth and prices in the euro zone.

Mr Noonan said the CBI’s disposal strategy for its special portfolio – those bonds acquired following the liquidation of Irish Bank Resolution Corporation and the exchange of the Anglo promissory notes – remains unchanged.

“It will continue to dispose of the bonds as soon as possible, provided conditions of financial stability permit,” he said.