ANGLO IRISH Bank has proposed putting just one-fifth of its loans into a so-called good bank as the cheapest option facing taxpayers under a revised viability plan submitted to the European Commission yesterday.
The bank plans to dump up to €24 billion in loans into an internal bad bank to be run down over time after Anglo transfers €36 billion in loans to Nama.
The bank believes there could be between €12 billion and €15 billion in loans on its books that could be moved to a good bank out of a total loan book of €72 billion before transfers to Nama began. The revised plan to split State-owned Anglo into a good bank-bad bank was submitted to Brussels as the Government committed a further €2 billion in capital to the heavily loss-making institution.
This brings to €14.3 billion the total amount in taxpayers’ funds committed to the bank as the capital bill at Anglo rises toward the potential €22.3 billion outlined by the Government in March. Anglo has argued that the cost of winding the bank down immediately or over time would be significantly higher than splitting itself into a good bank and bad bank.
Minister for Finance Brian Lenihan has increased the promissory note to €10.3 billion from the €8.3 billion committed in March – on top of €4 billion in State cash injected into the bank last year.
The Department of Finance said the note, which is essentially an IOU under which Anglo can draw cash from the State for up to 15 years, reduces the impact of the bailout this year and stretches the payments into the future.
The additional €2 billion was required after Nama paid a lower-than-expected price for the first loans acquired from Anglo owing by the 10 biggest borrowers.
Nama, which was set up by the Government to remove toxic development loans from the banks, applied a discount of 55 per cent on the first €9.3 billion in loans moved last month from Anglo. The bank had expected Nama to apply a discount of 28 per cent.
Further capital injections will depend on discounts applied on the remaining €26 billion Nama-bound loans at Anglo and losses on the loans left behind at the bank.