The European Commissioner for Competition, Spaniard Joaquin Almunia is an important figure in determining the cost and configuration of our banking bailout. It is his Commission that approved the EU Impaired Assets Scheme, NAMA, Bank of Ireland’s restructuring (decision in July 2010 is not publicly available yet). His Commission also rejected Anglo’s restructuring plans (twice effectively but he has only gone public once). He is presently mulling over INBS and EBS’s plans. However in his statement yesterday reacting to the Minister for Finance Lenihan’s statement on the bail-outs he lets slip that he hasn’t seen the details of the Asset Recovery Bank – Funding Bank split – “once the Commission receives the details of the plan, it will proceed rapidly towards taking a final decision”.
It was on 8th September, 2010 that Minister Lenihan announced the split of Anglo, following his meetings with Commissioner Almunia in the preceding days. The impression given was that the split was awaiting EC approval. And yet it seems that three weeks later, the EC has not even received those details.
It is possible of course that the delay has been in getting NAMA to provide an estimate of the discounts on the remaining Anglo NAMA-bound loans or that the work of Anglo, the Central Bank, the “independent third party” needed to be undertaken so that losses on non-NAMA loans could be assessed. To me this displays a woeful absence of contingency planning (that the Anglo v2.0 restructuring plan submitted in May 2010 would be rejected, that regardless of Anglo’s future a credible estimate of Anglo’s losses on both its NAMA and non-NAMA loans would be required). And so here we are, three weeks after Minister Lenihan announced the split and still working on the details.
Yesterday’s press release from Sr Almunia had a few other interesting snippets –
(1) “I will of course follow this process [AIB’s recapitalization plans which are subject to EC approval] very closely. I have no doubt that, as in all previous cases, the collaboration between the Irish authorities and the European Commission will be satisfactory.” In other words AIB’s future is far from certain and whilst the collaboration between Ireland and Brussels might be “satisfactory”, it has not been perfect in the sense that Minister for Finance Lenihan has broken State-aid rules on at least three occasions in the last 12 months when he gave written undertakings in respect of Anglo (twice) and INBS without EU approval.
(2) “Regarding NAMA, the announced changes to the way it manages loans are in line with the Commission’s approval of the NAMA scheme” The announced changes still require NAMA to undertake due diligence on a loan-by-loan basis. That NAMA is going to value and undertake due diligence on at least €15bn of Anglo loans in the next 30 days is, on the face of it, not credible. Plainly the race is on to get certainty on Anglo’s final cost but if the work undertaken by NAMA is undermined by expediency then no-one (including bond investors) is going to believe the valuations and will await EU approval of the valuations which might take months.
(3) “I note positively that Bank of Ireland will be able to continue the restructuring process without further recourse to State resources.” Something interesting happened yesterday morning as the MSM went into a frenzy with the quickfire succession of announcements. Bank of Ireland announced that it now expected its NAMA-bound portfolio to total €10.1bn (compared to €12.2bn in August and €16bn in late 2009). That’s a major change. Has BoI disposed of loans elsewhere to boost its capital position and avoid State resources? This topic will be returned to shortly.
NAMA Wine Lake 
The BBC’s Conor Spackman has clearly been through the cuttings library in an attempt to piece together Anglo’s Northern Ireland dealings.
http://www.bbc.co.uk/news/uk-northern-ireland-11450298
Thanks for that, I suppose what makes the North so interesting locally is that it is a smaller pond than the State and anecdotally there is less interenational investment so there are few major players. I admire Conor Spackman’s confidence that identities and details will be revealed in court cases – so far NAMA has taken one developer (+ his sometime partners) to court.
And the WSF on the subbie conundrum http://online.wsj.com/article/SB10001424052748703859204575525932204431398.html?mod=googlenews_wsj
It goes beyond the remit of this site but it is really unclear why Ireland cannot do what the Danes have been authorised to do yesterday with their delinquent banks – the EC approved a scheme (statement below) for Denmark which includes a provision that “burden-sharing is ensured by excluding shareholders and subordinated debt holders of the failed bank from any benefit from the aid”
Why is it that Ireland is considering honouring €3bn-odd of subordinated debt in Anglo and INBS? We’re not dead beats and are burdening ourselves with massive debt to meet our responsibilities but that shouldn’t involve bailing out risk investors unless there is a strict and unalterable legal requirement to do so.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1266&format=HTML&aged=0&language=EN&guiLanguage=en