BANK COSTS:THE TROIKA of bailout lenders has agreed to devise a plan by the end of next month to find a cheaper way of funding the cost of Anglo Irish Bank and Irish Nationwide Building Society to the State.
Minister for Finance Michael Noonan said the European Commission, European Central Bank and International Monetary Fund would seek a common policy to replace the promissory notes, or State IOUs, to cover the cost of the banks.
To push the cost out over time, the Government issued €25.3 billion in notes to Anglo and €5.3 billion to Irish Nationwide, both of which have been merged as Irish Bank Resolution Corporation.
Under the notes, €3.1 billion is injected into the bank each year.
Mr Noonan said troika officials were in technical discussions to find an alternative mechanism, but this would need to be signed off by the 27 EU countries.
The aim is to find a way of reducing the €17 billion interest bill on the notes, he said, and show that Ireland’s ability to repay its debts had improved. Some €34.7 billion is being injected into IBRC.
ECB official Klaus Masuch said the troika was working to find “technical solutions” in line with the framework of the ECB.
Mr Noonan said the Government would decide on a plan for Irish Life and Permanent by the end of April. The bank was the “last bit of the banking jigsaw” to be resolved.
The Government still plans to dispose of Irish Life, the sale of which collapsed last month, but no plans have been agreed for the loss-making bank Permanent TSB.
It would either become a stand-alone bank or merge with another bank, said Mr Noonan
He ruled out a wind-down of the bank, saying this was the least favoured option because of the number of mortgages at the bank.
The Minister said the recapitalisation of Irish Life would be completed by the end of June. The Government has injected €2.7 billion of the €4 billion required, taking a 99.5 per cent shareholding.
Mr Noonan said the Government had an agreement with the troika that the pace of the downsizing of the banking sector through the sale or disposal of €73 billion in loans would change if it was affecting lending.
Mr Masuch said there were no plans to do so.
This year’s bank stress tests will be co-ordinated with EU-wide tests and the results will be published by the end of November. The last tests took place in March 2010.
The ECB ruled out forcing losses on senior unguaranteed unsecured Anglo bonds, saying it could affect confidence in the Irish banks and prove “very costly”.
