Black NAMA Tuesday

The bank bailout could cost taxpayers a staggering €75 billion  and Anglo Irish Bank alone could account for €40bn of it.

Taoiseach Brian Cowen promised last year to write whatever cheques were necessary to rescue the banks and the huge cost of meeting that promise became clear yesterday.

• Anglo Irish may yet require a further €10bn to cover future losses.
• €2.6bn will be pumped into Irish Nationwide, with the state taking ownership of the institution.
• EBS will also be effectively nationalised, with the Government putting €100 million of capital into it immediately and prepared to inject more if the need arises.
• Allied Irish Banks will need to raise €7.4bn by the end of year to plug the hole in its balance sheet and if it can’t raise the capital privately, the state will step in.
• Bank of Ireland must raise €2.7bn, but is in a stronger position than the other banks and expects to be able to raise the money privately.
• The first tranche of high-risk loans being transferred from the banks to state agency NAMA will cost €8.5bn at a discount of 47%.

At a press conference last night, Mr Lenihan described the actions as the “final, decisive steps” to resolving the problems in the sector but was unable to say what the “bottom line” would be.

Before yesterday, the Government had already injected €11bn of capital into Anglo, AIB and Bank of Ireland. Yesterday’s recapitalisation measures will add a further €11.1bn to the bill, €8.3bn for Anglo, €2.6bn for Irish Nationwide, and €100m for EBS. Anglo may yet require a further €10bn, and if AIB, in particular, cannot raise money on the markets, it too will need additional capital. Based on yesterday’s figures, meanwhile, NAMA could end up paying up to €43bn for the loans it is taking off the banks in a bid to cleanse their balance sheets.

This means the total bailout bill could reach €75bn or more, and Anglo could account for over half of it. This is because, in addition to the potential €22.3bn recapitalisation requirements for Anglo, NAMA could pay up to €18bn to acquire loans from the bank. But the Government stressed
that taxpayers will see returns for some of the massive investment. It believes NAMA will eventually achieve a profit on the loans it is taking over, while the shareholdings in the banks will also yield money to the state.

Mr Lenihan laid the blame for this mess at the door of the bankers and, to a lesser extent, previous regulators. Unfortunately, he did not have the guts to name incompetent Finance ministers and officials or the former Taoiseach as having a large culpability for this mess.