There were two bad banks – now there is one

Monday 11 February 2013 09.52

Former IBRC CEO Mike Aynsley keeps a momento from Anglo Irish Bank

By David Murphy, Business Editor

During Mike Aynsley’s tenure as boss of IBRC, formerly Anglo Irish Bank, he pulled off a few feats.

One was to shrink the bank’s loan book from €100 billion to €15 billion, another was to sell off its US assets for €10 billion.

But the Australian banker made enemies within Government. Ministers piled pressure on the IBRC boss to reduce his remuneration and that of his top team, with six executives earning more than €500,000. When salary levels remained unchanged, they commissioned consultants Mercer to review the pay of bank executives. The report, which has yet to be published, was expected to be a useful tool for the Coalition to push for pay cuts.

But the abrupt liquidation of the bank makes the row about pay levels there an academic question. Mr Aynsley has now left, and most of the top tier of management is also standing down.

The decision to tip the bank into NAMA raises a host of questions.

Despite the Fine Gael-Labour administration’s initial misgivings, the team at NAMA led by chief executive Brendan McDonagh and chairman Frank Daly has won the Cabinet’s trust.

However, the agency is now entering new territory. Until now it had only dealt with relatively large land and development loans. But a patchwork quilt of assets which liquidators KPMG won’t be able to sell will be transferred to NAMA. Among them will be mortgages once held by the former Irish Nationwide – reportedly the most distressed home loans in the country.

Ireland had two bad banks – NAMA and IBRC. Now it has one.

While the team at the former Anglo may not have made friends in Government Buildings, many in regulatory and financial circles regarded them as able and tenacious.

Running IBRC was no easy task. It was made up of the former Nationwide and Anglo, which will cost the taxpayer somewhere between €30 billion and €34 billion. That’s roughly as much money as was spent on NAMA.

IBRC was engaged in complex and controversial legal cases against the Quinns across the globe, in an effort to secure repayment of €2.8 billion which the bank said it was owed. The bank also took actions which resulted in Seán FitzPatrick and Seán Quinn being declared bankrupt in the Republic of Ireland.

The step to liquidate the bank came as a bolt from the blue. It was required so that Finance Minister Michael Noonan could replace the onerous promissory notes – a deal which significantly improves Ireland’s situation. While critics rightly point out there has been no debt write-off, it replaces a near-impossible interest and capital payments schedule with a more manageable timeframe.

However, the decision to liquidate IBRC was rushed through the Oireachtas. It happened in just seven hours, to ensure nobody blocked the measure in the courts, but it meant the move did not receive the political scrutiny it deserved.

A lot of public money is riding on the plan – dubbed Project Red by those in the know in the Department of Finance. And the lack of either oversight or public debate prior to the Oireachtas approving the legislation to liquidate Anglo must surely set some warning lights flashing.

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