The Government is set to take full ownership of troubled Anglo Irish Bank to safeguard the troubled financial institution’s future.
In the first nationalisation of its kind in the State’s history, Minister for Finance Brian Lenihan announced last night that the Government was taking “steps that will enable the bank to be taken into public ownership”.
The move follows talks yesterday with the Anglo’s board, and after assurances from the Financial Regulator and Central Bank that the company is solvent.
The State was due to take control of 75per cent of the bank after pledging to inject €1.5 billion into the institution last month as part of a recapitalisation programme that also benefited its rivals, Bank of Ireland and AIB.
However, Mr Lenihan argued that as the bank’s funding position has been weakened, and its reputation damaged as a result of a recent scandal, recapitalisation alone would not guarantee its future viability.
“Therefore the Government must move to the final and decisive step of public ownership,” he said. He said that the bank, which has a €100 billion balance sheet and substantial deposits, is of major importance to the Republic’s financial system.
Former chairman Seán FitzPatrick, chief executive David Drumm and a number of board members recently resigned after it emerged that Mr FitzPatrick had concealed details of an €87 million loan he took from the bank from shareholders.
Last month, Anglo Irish Bank revealed that it had set aside €500 million to cover possible losses from loans to developers and property speculators.
Anglo built its business and reputation by lending to the Republic’s high-profile property and construction players. As these sectors collapsed over the last year, investors walked away, wiping out its share price. Last month’s announcement and the State’s ¤1.5 billion cash injection, failed to satisfy investors, and its share price continued to collapse.
Those shares will be suspended from the London and Dublin markets from today as a result of the Government’s move. The bank itself will continue to trade normally and will be open for business today.
Mr Lenihan pledged that the Government will respect shareholders’ rights in the nationalisation process. “The relevant legislation outlines a process for determining compensation as appropriate,” he said.
“All customers of Anglo Irish Bank can be assured that the full amount of their deposits and savings are further safeguarded by this action,” the Minister added.
“Creditors, including bondholders, of Anglo Irish Bank can be assured that it will continue to service its obligations and will repay its debts at maturity,” he said.
An extraordinary general meeting of its shareholders which was scheduled for this morning is still set to go ahead.
