The Government should consider setting up a second “bad bank” to deal with distressed loans at the banks that are not moving to the National Asset Management Agency, the chairman of the State-owned Anglo Irish Bank, Alan Dukes, has said.
It seemed logical that if the banks had to deal with distressed assets outside of Nama, then they be dealt with in one place, he said.
"That way we would have two major banks with cleaned up major balance sheets that would immediately become better prospects for market funding," he said in a speech to Leinster Society of Chartered Accountants Ireland.
He said he was not suggesting that Anglo's proposed asset recovery bank be used as a platform but it would be part of this.
About €6.6 billion of development loans originally set to move to Nama from AIB and Bank of Ireland will remain with the banks after the Government increase the cap on eligible loans from €5 million to €20 million last month to speed up the transfers to the agency.
Mr Dukes also suggested that the Irish units of overseas banks which are pulling out of Ireland or reducing their Irish operations could be put together with Anglo's proposed funding bank to create a viable bank to create increased competition with the big two banks, AIB and Bank of Ireland.
There needed to be more debate around the future make-up of the banking system, he said.
Speaking to reporters, Mr Dukes said that Nama "will not have dealt with the whole problem" across the banks if there are still distressed assets left at the banks after some €74 billion in loans are moved to the agency.
"I think that was because of the way it was constructed at the time it was constructed," he said. "That is not a criticism of Nama but it seems to be a fact."
Mr Dukes said that the second "bad bank" would be owned by the Minister for Finance and would require further capital from the Government. "If people agree with the idea we would have to sit down for a structure for it and how to run it," he said.
