Irish Nationwide Building Society should be closed in September ’10

Looking at the Irish Nationwide Building Society, the September 2008, blanket guarantee by the government looks wrong in this case. The same question arises, – why should the Irish public pay for this building society that has in effect gone bust? I do not believe that this institution should have been involved in NAMA at all but should have been put into the hands of a receiver. Why did the government stray away from the true systemically important banks AIB and Bank of Ireland? Was it to placate the ECB and European finance? The effects have been to saddle a generation with debt which they have not been responsible for.

I believe that the INBS should wound up in September and any public finance due there should be held off by whatever means is legal.

I publish a transcript of Minister Brian Lenihan Jr’s March statement on the NAMA transfers in relation to Irish Nationwide Building Society.

Banks Statement by the Minister for Finance – 30th March, 2010 “Traditionally, building societies have played a vital role in providing residential mortgages in Ireland.

But in recent years EBS and, in particular, INBS became involved in non-residential lending. Indeed, in the case of INBS such lending became its primary focus comprising approximately 80% of its lending business. As a result they have incurred significant losses on speculative lending for land and development and commercial investment loans. In the case of INBS around €9 billion will have to transfer to NAMA while in the case of EBS approximately €1 billion will transfer.

Both societies have passed resolutions allowing them to issue new Special Investment Shares to the State in return for its support. Both institutions have recently been subject to the Regulator’s capital assessment process to determine their capital needs.

INBS

INBS will transfer €670 million of assets to NAMA in the first tranche, which represents 7% of its €9 billion NAMA assets. NAMA has confirmed that it will buy the loans transferred in the first tranche at an average discount of 58%. Taking account of this and his broader assessment of the building society the Regulator has determined that INBS will need an injection of €2.6 billion to remain compliant with its current regulatory capital requirements. This is a very large bill for the taxpayer but as in the case of Anglo, it is the least costly solution. It is important to highlight that this level of capital support is required to maintain the institution’s financial position in light of the large losses incurred on its loan portfolio. Without this capital injection, the taxpayer would have to shoulder the significant and immediate costs in meeting the deposits, bondholders and the liabilities due to the ECB.

I intend to inject the necessary capital through a combination of €100 million in Special Investment Shares in the society and a Promissory Note for €2.6 billion issued to the Society, giving INBS a small buffer. This Note will be payable over ten to fifteen years, which will reduce the impact on the Exchequer this year. Following the investment by means of the Special investment share, the State will have extensive powers as well as economic ownership of INBS. As a result, the State will control the society.

Following the transfer of €9 billion of its loan book to NAMA, INBS will have a small mainly residential loan book of about €2 billion. In such circumstances the institution does not have a future as an independent stand-alone entity.

The Government’s priority will be to secure a swift sale of INBS or its integration with another entity. All options will be fully examined in the institution’s EU Restructuring Plan which must be completed within three months. Deposits in INBS are secure and INBS will continue to have adequate regulatory capital.

As in the case of Anglo Irish Bank, a new management team is now in charge of INBS. I will insist on Board changes in the changed ownership circumstances.”