Liquidating IBRC could provide substantial financial gains

Thursday 26 September 2013 18.01
The FAC said the immediate gain to the State from winding up IBRC would be a reduced funding requirement of €1bn a year
The FAC said the immediate gain to the State from winding up IBRC would be a reduced funding requirement of €1bn a year

Research from the Fiscal Advisory Council has found the liquidation of Irish Bank Resolution Corporation could lead to substantial financial gains for the State.

However, it said relative to the overall size of the Government's debt the gains will be small.

The FAC said the immediate gain to the State from winding up IBRC would be a reduced funding requirement of €1bn a year, due to the conversion of promissory notes into long-term government bonds.

This is not a cash windfall, but rather a reduction in the amount of money the Government has to borrow each year.

Further gains from the wind-up may occur, but will be harder to quantify.

They could include improvements in investor sentiment toward Ireland, which could lead to lower borrowing costs for the Government and the remaining banks.

Lower borrowing costs are important, given Ireland's highly indebted position.

The report said Ireland is the third most indebted state in the euro area, with only Greece and Italy carrying more debt.

It said five years ago Ireland had the second-best debt position, and has suffered the fastest deterioration in government net worth of any state in the EU.

Large deficits and the costs of bailing out the banks have far outstripped the State's financial and non-financial assets, leaving the State with a net worth of minus €77bn.

The State had a positive net worth of €20bn as recently as 2009.

Read Economics Correspondent Seán Whelan's blog on the report

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