Liquidators will be appointed to the Irish Bank Resolution Corp, following the introduction of emergency legislation in the Dáil shortly after midnight by Minister for Finance Michael Noonan.
The legislation was drafted as part of a deal with the European Central Bank (ECB) that will result in a major improvement in the terms of Ireland's bank debt. The ECB's governing council will discuss the deal today at its monthly meeting in Frankfurt.
Mr Noonan told the Dáil he would have preferred to introduce the Bill "in tandem with a finalised agreement with the European Central Bank. However, I understand that the European Central Bank will continue to consider the proposals made by the Irish Government tomorrow".
He said that because information relating to the proposal was made public, he had to take immediate action to secure the stability of the bank and the value of its assets on behalf of the State. "To this end, I vested the powers of the board temporarily in an employee of KPMG and a KPMG team is now in control of the bank on my behalf."
When the legislation is passed, joint special liquidators will be appointed to IBRC - formerly Anglo Irish Bank - with immediate effect to wind up its business and operations.
"It is intended that the net debt owed by IBRC to the Central Bank and its associated floating charge security will be purchased by Nama, using Nama bonds, in a way that ensures that there is no capital loss for the Central Bank," he said.
He added that the ministerial guarantee underpinning the net debt owed to the Central Bank would be transferred to Nama and that eligible depositors, bondholders and counterparties would be repaid.
The IBRC began life in July 2011 after the business of Irish Nationwide Building Society was transferred to Anglo Irish Bank Corporation Limited.
Mr Noonan said he understood the announcement would come as a shock to employees of IBRC and to some of those who do business with the bank.
"Unfortunately, as is common in liquidations, all employee contracts will be terminated on the winding-up of IBRC. However, it has been indicated to me that the majority of staff will, if they wish, be re-hired for the purposes of the orderly liquidation on such terms and for such duration as may be determined by the special liquidators."
Employees fearful
The general secretary of the Irish Bank Officials Association, Larry Broderick, said earlier that IBRC employees were "fearful that they may be overlooked completely or at best regarded as 'collateral damage' ". He said that he was seeking urgent meetings with the Minister for Finance and with the liquidators, KPMG.
Mr Noonan said employees would rank, in the normal way, as preferential creditors .
The Minister said the decision to liquidate IBRC would not affect other banks. "In the case of IBRC, the vast majority of IBRC's deposit accounts moved to AIB and Permanent TSB last year and they are unaffected by today's announcement.
He added that it was critically important that deposit account holders, mortgage account holders, and those indebted to IBRC understand that their situation following the liquidation should generally remain unchanged.
"If deposit account holders have any concerns they should make contact with the operators of the relevant schemes. Contact numbers are available on the Department of Finance website."
He emphasised that the steps being taken were entirely distinct from the performance or direction of the board or management of IBRC. "It is simply compelling in the larger public interest to now take this action and the Government has made its decision on that basis alone.
"I want to acknowledge, with much appreciation, the significant efforts the directors and staff of IBRC have made to the stabilisation of, and maintenance of value in, IBRC. I regret the abruptness of how this decision is communicated to the management and staff, but due to the scale, sensitivity and complexity of the economic issues involved, it was necessary in the public interest to keep the matter confidential until now."
Finalised agreement
Fianna Fáil finance spokesman Michael McGrath said he was prepared on behalf of his party to take in good faith the Minister's reassurance that not passing the Bill exposed IBRC, and by extension the State, to substantial risk.
"I have no objection in principle to IBRC being wound up with immediate effect," he added. "But I do want you to reassure me, my colleagues and everyone in this House that the national interest has been fully protected in respect of the decisions we are making here tonight."
Mr McGrath said he wanted to object in the strongest possible terms about the way the legislation had been handled.
He said many people would rejoice at the notion of IBRC being obliterated and taken off the banking landscape. "That is not the true effect of what you are proposing here tonight," he added. "This is a technical liquidation of IBRC which will involve, for example, all its assets being transferred to Nama."
Sinn Féin finance spokesman Pearse Doherty said the one clear thing from this morning's Dáil debate was the Government's determination to pay every last cent of the debt.
He criticised the Government over the loss of about 850 jobs at the bank, which he said employees heard about from the news agency Bloomberg.
"You're winding up the bank Minister but you're not winding up the debt", he told Mr Noonan. He described the rush to legislation as "an affront to democracy" and to the citizens of the State.
