OPINION:The PwC report brings us closer to an end game in terms of sorting out the banks, writes JOHN McMANUS

PROJECT ATLAS is an unlikely name for a study of Anglo Irish Bank’s loan book. Atlas after all was the Greek god who supported the sky while Anglo is the bank that has done more than most to bring the sky crashing down on our collective head. But it’s encouraging that at least someone has managed to maintain a sense of humour in all this mess.

And it may well be the Minister for Finance himself, for his assertion on Friday that the Project Atlas report from PricewaterhouseCoopers (PwC) vindicated the Government decision to guarantee the banks last September is surely a playful jest.

All that anyone reading the sections of the report that have been released which pertain to September can conclude is that Anglo was bust. Some €5 billion in corporate deposits had flowed out of the bank in the last week of September, followed by €440 million in retail deposits. And management was predicting there would be a €12 billion hole in the accounts by mid October.

What the report implies is that the Government took a punt – based on the information to hand – that Anglo might be able to survive and hence guaranteed the whole banking system rather than just nationalise Anglo.

The PwC report gives no clues as to how they arrived at this view. But unfortunately the later sections of the report – which relate to work done on the Anglo loan book after the guarantee was in place – do not amount to a vindication either.

What they do is indicate the extent to which Anglo had become a time bomb underneath the Irish banking system; locked into some sort of death spiral with its big property clients.

The Anglo “model” as PwC described it was about deliberately developing a very deep relationship with the strongest operators in the property business to the extent that they dominated the loan book. Anglo told PwC that they could take this risk because of their “thorough understanding” of the clients who are “continually reassessed in face to face meetings”. They obviously thought they were better bankers than they actually turned out to be.

PwC debunk this assertion in the next paragraph by pointing out the bank – despite its thorough understanding etc – had failed to take action over a number of customers with liquidity problems. It then goes on to run through everything else wrong with the model from the inability of its big clients to refinance to the fact that the state of the property market will make it impossible for it to let clients roll up interest. Throw in the fact that its clients are heavily exposed to shopping centres across Ireland and development land around Dublin and you have an awful mess.

What you don’t have, however, is support for the argument that Anglo had to be kept going because nationalising it last September would have had systemic implications for the banking system. But that was not PwC’s brief and hopefully the Government based its decision to guarantee all the banks, including Anglo, on other factors.

Publication of the report has thus added little to our knowledge of the events on last September. But it may yet prove a turning point of sorts.

The appalling mess at Anglo depicted in its pages will not be lost on the various international players lining up to kick Ireland and its banks and also those who may be taking a more balanced view.

Broadly speaking two things are going to happen. Those who have already made up their minds will take a cursory look at the report and conclude that all the Irish banks are shot through with bad loans and poor management. And if that view takes hold then AIB and Bank of Ireland will join the ranks of the semi-States in short order.

The hope is that more sophisticated observers with an understanding of the Irish markets and economy will be able to extrapolate correctly from Anglo to the other banks – which are fundamentally different beasts. They will be able to get their firmest grasp yet of just how much trouble the two big banks are in and then set that off against the banks recently revised bad debt provisions and the Government recapitalisation. The final ingredient being their view of the prospects for the wider economy.

And maybe, just maybe some sort of solid floor will form under the remaining banks.

Either way, the publication of the PwC report brings us closer to an end game in terms of sorting out the banks. An issue that has taken far too long and in which sight seems to have been lost of the primary objective which is providing the economy with credit. For that reason it was the right thing to do.