Anglo To Get up to €4 Bn from The Government

Their half-year results blew people out of the water, Anglo Irish bank has set aside €4bn to cover losses it expects to make on loans, mostly advanced to property developers, along with another 235 million euro in losses on various investments.

The Minister for Finance, effective owner of the bank, reveals that the government will look at putting up to €4bn into the failed bank. This is hardly the stuff election winning campaigns are made of. It will stoke public ire no end. Losses could mount toward €7.1bn by 2011 according to the report (ht: Allan Cavanagh - “forget the hadron collider, we’ve got our black hole in Anglo”)

n keeping with the decision of 21 December 2008 and following the advice of the Central Bank, the Financial Regulator, the NTMA and legal and financial advisors, the Government has decided, subject to EU approval, to provide up to €4 billion of capital to Anglo. The bank is also in a position to generate further capital of its own by buying back certain outstanding subordinated loans from bondholders at a significant discount to par value. This exercise will generate profit and additional capital for the bank.
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“The overriding concern of the Government has been:

* to protect the economy from the wider losses that would occur in the event of the failure of the bank;
* to protect the €64 billion of customer and interbank deposits in the bank; and
* to prevent the bank becoming a systemic threat to the financial system.

The full implementation of the National Asset Management Agency will assist in securing the future stability of the institution and the new business plan will address the need for the bank to reduce costs and restructure. The Government has asked that leadership and expertise in Anglo should be underpinned by the appointment of new management including an external Chief Executive Officer and Chief Risk Officer and I welcome the Board’s initiative in this regard.”
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The Minister noted the emphasis on reducing the cost base and maximising the recoverability of loans. The Minister added: “We are determined that all borrowers will be pursued for the repayment of their loans.”