The Minister for Finance, Brian Lenihan, has just issued a statement to the effect that Anglo is to be split into two – an Asset Management company and a Funding Bank. The Funding Bank will not provide any new lending and will simply manage customer deposits, a scenario which is likely to see the bank wound down (this isn’t stated in the release but is a likely consequence). A new detailed proposal is being submitted to the EU.
In his statement today the Minister has acknowledged the work done by Anglo’s management and their preferred option of a good bank/ bad bank but has clearly rejected their proposal. It is worth differentiating what is presently proposed by the Minister from what was supposedly proposed by Anglo’s management. Anglo is to be killed off – the asset management arm will be sold or wound down over time. The so-called Funding Bank is effectively a dead bank as it will not be engaging in lending and seems that it will be more akin to a post office (without the branch network) and as such it is puzzling what its purpose will be – perhaps the DoF will add flesh to the bones. An indication of the lifespan of state involvement in the asset management company would also be helpful.
Patrick Honohan, the governor of the Central Bank has been tasked with producing a credible estimate of the cost of the new structure – effectively he has to produce a credible estimate of the true loss on the non-NAMA loanbook. It is in all likelihood going to be substantially more than the €25bn upper limit he suggested in Beijing a month ago with the betting that it will be over €30bn.
Unfortunately we still have INBS and to a lesser extent EBS to correctly cost. And there is the not insubstantial question of whether AIB will meet its capital requirements. Today might be a brave attempt to regain the initiative in sorting out the country’s banking crisis but the devil in the detail of what is being proposed and residual INBS-EBS-AIB concerns are likely to maintain the pressure on the government for better resolution of the final costs and the resulting landscape.
NAMA Wine Lake 