EC expresses doubt about Anglo's plansTuesday 06 July 2010 16.43
The European Commission has expressed serious doubts about Anglo Irish Bank's plans to stay in business by splitting into a so-called good bank and bad bank.
The worries were contained in the full-length version of its decision last March to approve the recapitalisation of Anglo for a six-month period, which was published today.
The Commission examined Anglo's plans to set up a new bank and leave its non-performing assets in a new asset management company.
It challenged the assumptions on which the plan was drawn up and requested a new plan, which it is now considering.
The bank claimed the original plan would be the least costly option facing the Irish taxpayer.
The Commission questions the claim that by 2014 the new bank will generate profits equivalent to those earned by Anglo at the height of the boom.
The Commission doubts these assumptions are achievable with reasonable levels of risk, considering the size of the impairments at Anglo, the reduced size of the new bank and its plan to diversify into areas it has no experience in.
The bank also undertook not to make any new loans for at least a year after establishment and would only advance money to complete existing projects.
The Commission asked for a full business plan and a stress test of the new bank's business model by 31 May.
Chief Executive Mike Aynsley said he expected a preliminary ruling from the Commission by the end of July or early August, with a full decision in September.
Anglo management went to Brussels two weeks ago to meet Commission officials and discuss the new plan.