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The government plans to remove thousands of soured property loans from smaller lenders like Irish Nationwide and EBS via the National Asset Management Agency (NAMA) even though European Commission and European Central Bank guidelines advise that only banks of true "systemic'' importance should be included in asset relief schemes.
The government last week said it would consult guidelines issued by both bodies before finally legislating for the NAMA, which will become the largest land owner in the country, holding at least €90bn of assets and their underlying securities.
The European Commission said countries with "scarce budgetary resources'' should only try asset management structures "on a limited number of banks of systemic importance''. EBS and Irish Nationwide are the country's two smallest lenders and many economists and equity analysts do not regard Irish Nationwide in particular as of "systemic importance''.
The EC guidelines on treating impaired banking assets says some governments will not be able to deal with all banks in their economies due to the size of their national balance sheets. Both organisations do acknowledge however that countries are entitled to chose the banks on a "case by case basis".
A document prepared by the European Central Bank in late February – seen by the Sunday Tribune – says that when governments set up asset relief vehicles, the banks availing of them should have a "systemic relevance".
The Sunday Tribune has learned that the government did not permit Dr Peter Bacon to assess which banks were of "systemic importance'' and which were not.
The Irish government has steadfastly refused to amend its bank guarantee scheme agreed on 29 September, even though many observers believe it could reduce the scale of the exposure to the taxpayer by leaving out smaller, fringe property banks like Irish Nationwide. While this lender does have substantial bond debts, these could be given a haircut during negotiations and the bank ultimately wound down.
The European Commission gives countries permission to conduct orderly wind-ups if they believe certain banks have only a marginal importance to what it called the "real economy''.
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And what about the Permo ? About as useful as Anglo ? In a kind of a no-mans land. Neither absolutely necessary nor absolutely unnecessary according to the criteria above.
We do not need "one bad bank" - they are all bad banks !! We need a good bank. That is the problem with Irish Banking sector. The Dublin 4 banks are all rotten.
Maybe we just start a new enterprise credit corporate with 100 million of state funds and a branch in Athlone or Portlaoise ? And wait for the depositors to place their money in and thereby supply money to sectors that will provide the jobs that will restart the general economy.
What use is it to save AIB/BOI when the entire country is being placed at risk of default. At least Iceland had the intelligence to get that right. We are making a bigger mess of things than Iceland, or even Hungary.