Much of the government's time in recent months has been focused on setting up Nama and recapitalising AIB and Bank of Ireland. Once the problems of the two biggest banks are resolved the government will have to turn its attention to the future of Anglo Irish Bank, nationalised a year ago amid scandal and controversy.
In some quarters the bank is seen as an example of all that went wrong during the boom. Not only was Anglo backing property developers who now find themselves unable to repay their massive loans, the bank was also sitting on several timebombs that destroyed its reputation. Former chairman Seán FitzPatrick managed to hide his massive personal borrowings from the bank's investors for years by temporarily putting them with Irish Nationwide Building Society. It engaged in a series of multibillion-euro deposit transactions with Irish Life & Permanent that flattered its accounts. Favoured clients were given partially non-recourse loans to mop up shares in the bank that businessman Sean Quinn didn't want in a bid by management to prevent its share price collapsing further.
The government has bought time to consider its options by dealing with the remaining quoted banks first, but the problem of what to do with Anglo looms on the horizon. When Nama finally starts taking on loans, the largest amount will come from Anglo Irish.
Finance minister Brian Lenihan has limited options to choose from when the final decision on the bank's future comes. He can order an immediate liquidation of the bank, wind it down over time or attempt to turn it into a business lender once the toxic assets are stripped out and sent to Nama. Most of the options will be costly for the exchequer.
The government and the bank's new management would clearly like to avoid an immediate liquidation. At a Dáil committee last June, Anglo chairman Donal O'Connor repeatedly pointed out that the cost of an immediate wind-up would be greater than keeping the bank as a going concern. Lenihan also said it would be detrimental to the state to renege on obligations to those funding the bank, particularly bondholders, on whom the exchequer relies on to fund the budget deficit.
In the past few months, new chief executive Mike Aynsley has cleared out most of the old management team and replaced them with outsiders untainted by Anglo's past. It would have been hard for the Australian CEO to convince those executives to take their jobs purely to preside over the bank's demise, so liquidation looks unlikely.
Brian Lucey, associate professor in finance at Trinity College Dublin and a long-time critic of the government's banking policy, says a quick "orderly wind-down" of Anglo Irish is the most likely outcome.
"It's a toxic brand. We need to wind it down as quickly as possible. The idea that it isn't going to cost a lot of money is disingenuous. It's going to cost a lot of money and we'll just have to accept that. A five- or seven-year wind-up is too long," Lucey told the Sunday Tribune.
As part of the government's €4bn recapitalisation of the bank last year, it submitted a restructuring plan to the European Commission in November containing several options for its future. One of those envisages the bank continuing in operation, with any bad assets that don't go to Nama placed in run-off, leaving it to concentrate on lending to small businesses and the clean loans left on its books.
However, that plan doesn't make sense, Lucey says, as Anglo would be competing for customers against larger institutions with more experience of SME lending, a point backed up by Labour Party finance spokeswoman Joan Burton.
"I don't find it credible that Anglo can become a niche business bank. The name is fatally tarnished for a start. And it doesn't have the branch network across the country that you would need to develop relationships with businesses," Burton said.
And it is already scaling back its operations with plans to cut hundreds of jobs at its offices in Ireland, Britain and the US under a voluntary redundancy scheme.
One banking source suggested that Anglo's future could rest with another Irish bank, possibly as part of the much talked about 'third force' in banking involving Irish Nationwide and EBS building societies and Permanent TSB. The latter three have plenty of experience in lending to consumers but little in business banking. Adding Anglo to the equation would give the combined entity access to business customers and provide the government with an exit opportunity, the source said.
Though some of Anglo's portfolios may be attractive to investors, particularly loan books in the US and Britain, a full bid for what remains of Anglo after its development loans go to Nama is unlikely, the source said.
In the meantime, the cost of keeping Anglo afloat while the government – and the European Commission – decide on its future, is being borne by the taxpayer, Labour's Burton said.
However, the full cost of supporting Anglo isn't known. The bank won't have to publish annual results for several months, after pushing out its financial year end to coincide with the calendar year, so the last publicly available figures are its interim results, which cover the six months to 31 March 2009. That showed a half-year pre-tax loss of €4.1bn, the biggest of any company in the history of the state. The government hasn't disclosed how much more capital the bank may need, but analysts speculate it could be in the order of €6bn.
TCD's Lucey says cost of keeping Anglo Irish Bank going can't be justified and the government needs to make its intentions known as soon as possible.
"I know there are good people in Anglo and there are good bits of the bank, but it's quite clear that Anglo has no future," he said.