From the Department of Finance:
The Minister for Finance, Mr. Brian Lenihan, TD has confirmed today that an additional €2 billion is being made available to Anglo Irish Bank to support the capital position of the bank. This capital injection is in line with the Minister’s statement to the Dáil on the 30th March 2010, when he pointed out that the bank would need further capital to cover future losses and accomplish the restructuring of the bank and its balance sheet. This capital contribution was also approved by the European Commission last March.
The capital requirement arises out of additional losses resulting from the level of the discount on the first tranche of Anglo’s loans transferred to NAMA and further impairments on the remaining loan book. The Minister has previously provided €4 billion in 2009 and €8.3 billion by way of a Promissory Note to the Bank on the 31st March 2010.
At that time the Minister indicated that additional capital could be of the order of a further €10 billion. The €2 billion announced today is part of that anticipated capital requirement. The amount of further capital that will be required is dependant on a number of factors including the discount applicable to future tranches of assets transferred to NAMA and further losses on the bank’s non-NAMA loan book
The capital support is being provided by the State in the form of a promissory note, payable over a number of years into the future. In essence this means the amount will be paid over a period of 10 to 15 years, thereby reducing the impact on the Exchequer this year and stretching the payments into the future.
Anglo’s restructuring plan is being submitted to the European Commission today. Discussions between the Commission, the Department and the Bank on the restructuring plan will continue and the future of the bank will be determined by those discussions. As the Minister stated last March the overriding objective of the Government is to minimise the cost to the taxpayer of the restructuring of Anglo Irish Bank.
In relation to the wonder of promissory notes (about which I’ll bet you’ll be reading in the business section of your newspapers tomorrow) I’m pretty sure this stuff about minimising impact on the Exchequer won’t fit in with the Eurostat people’s worldview. Most likely, this and any other promissory notes issued to Anglo, INBS or EBS will count towards this year’s General Government deficit.
This stuff suggests though that the NTMA, lacking the Department’s gift for PR, have been missing a few tricks in relation to promoting their activities. I suggest the following as a press release the next time they issue a ten-year bond:
The NTMA has today issued a new bond. To reduce the impact on the Exchequer, the state will only have to pay out about 5% of the face value of this bond over each of the next few years and the rest of the payment is stretched out way into the future. In fact, apart from that little interest payment, we don’t have to pay a cent back until 2020. We are exploring the idea of further helping the Exchequer by issuing lots more of these wonderful bonds.
Beyond the promissory note silliness, what else can you say at this point? Will the usual suspects be along tomorrow to explain to us how, in fact, there is no connection between the banking and budgetary crises, or have even the most hardcore loyalists thrown in the towel on that particular denial of reality?