Irish government to liquidate ‘bad bank’
Ireland passed emergency legislation to dissolve Anglo Irish Bank, one of the country’s largest financial institutions.
Ireland has dissolved one of its “bad banks” in an emergency measure designed to pave the way for a new debt-repayment deal with the European Central Bank.
Politicians in both chambers of Ireland’s parliament overwhelmingly voted to liquidate the Anglo Irish Bank, now known as Irish Bank Resolution Corp (IBRC), in a session that started just after midnight and ended just before 6:00am local time (06:00 GMT) on Thursday.
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“Did you ever hear of a liquidation that was announced one day and not implemented for several days or weeks?” – Micael Noonan, |
Ireland’s head of state, President Michael D Higgins, was summoned back from the start of a three-day visit to Italy to sign the bill into law an hour later.
Finance Minister Micael Noonan told legislators they must approve the measure before Ireland’s courts opened on Thursday, because private creditors of the state-owned debt management bank would file lawsuits to block or complicate the bank’s dismantling.
Noonan said that shutting the two-year-old bank would “come as quite a shock” to the bank’s 800 employees, who immediately lost their jobs.
But he said the government had no choice after its plans, drafted months ago, were leaked to internaitonal news agencies on Wednesday.
“Did you ever hear of a liquidation that was announced one day and not implemented for several days or weeks?” Noonan told legislators, many of whom were given just minutes to read the 57-page bill.
Toxic debt management
“Creditors will line up to strip a company of everything they can lay their hands on, and debtors will not pay a penny because they know the company is going into liquidation.”
Ireland plans to transfer IBRC’s property-based assets worth 12bn euros ($17bn) to the nation’s other toxic-debt management bank, the National Asset Management Agency, or NAMA.
Noonan said he was hopeful that European Central Bank governors meeting on Thursday in Frankfurt would approve Ireland’s latest proposals to reduce its annual bank-bailout bills.
Ireland has been seeking such a deal for two years.
Ireland created BRC to manage the broadly defaulting property-based loans of two collapsed banks, Anglo IRish and Irish Nationwide, the two most reckless property gamblers during Ireland’s cheap cred-fueled Celtic Tiger boom.
Both banks faced ruin as that property bubble burst in 2008.
Under the terms of a 2010 agreement between Ireland’s previous government and ECB chiefs, Ireland must pay 3.06bn euros ($4.1bn) annually through 2023 and smaller amounts through 2031 to cover the costs of repaying the global bondholders of Anglo and Irish Nationwide.
The total cost of their agreement including interest is 48bn euros ($65bn) – or more than 10,000 euros ($14,000) for every man, woman and child in Ireland.