NOW IS the moment for the State to take decisive action and sort out the banking sector once and for all, Minister for Finance Brian Lenihan said yesterday.
On the eve of today’s series of major announcements on the future of five key Irish financial institutions, Mr Lenihan also said the establishment of Nama – the National Asset Management Agency – had allowed the Government accurately to quantify the “black holes” in loan books caused by toxic property assets.
Mr Lenihan defended the timing of today’s announcements on the discounts to be applied, the capital levels that will be set by Financial Regulator Matthew Elderfield, and the amount of recapitalisation that will be underwritten by the Government.
“I think that it is essential to take measures at this stage when we are in a position to take measures,” Mr Lenihan told RTÉ news yesterday evening.
“First of all we have a new [Financial] Regulator who is defining what they should have in terms of their capital reserve.
“Secondly, we have gone in and explored the black holes through the National Asset Management Agency. We see where the losses are impending.
“Thirdly, the Irish State has established its own credibility as a State that can manage its own finances. There is huge international recognition of that now.”
Mr Lenihan said the Government now needed to “translate all that international confidence” in the banking sector and sort it out once and for all.
The most substantial criticism yesterday of the Minister’s Nama plan came from one of his own party’s backbenchers. Fianna Fáil deputy for Cork East Ned O’Keeffe argued that Nama would not work and would destroy Ireland’s banking system. Mr O’Keeffe was a strong supporter of the solution when it was first unveiled last September, but said yesterday that he had changed his mind.
Saying that Mr Lenihan’s judgment was “not great in the whole area of finance”, he said he wanted the bank to remain in private hands and not be nationalised, as might happen after today’s announcement. Mr O’Keeffe said Mr Lenihan had been unduly harsh on AIB because of its reluctance to share information.
“The Minster has to get out of regulator’s arms and that of the Central Bank and make his own decisions, which are political decisions, for the good of the country,” he said.
Meanwhile, Fianna Fáil TD Michael McGrath of Cork South Central said it was the closest thing to a “big bang” solution that was possible and he was glad that the discount and recapitalisation was happening in an upfront manner. “It does mean that the State is having to engage more but I think that the outcome will be a better one. The regulator is factoring in non-Nama losses including increasing mortgage defaults and personal credit loans. That is a good thing.”
Mr McGrath, vice-chairman of the Oireachtas Finance Committee, called on Mr Lenihan to issue a strict lending directive to banks, to start lending to businesses and personal customers.
Labour TD Seán Sherlock claimed that Mr O’Keeffe was “running with the hare and chasing with the hounds” over Nama.
“These TDs want to have the best of both worlds by appearing to be in Fianna Fáil when it is popular and against the party when it suits their re-election prospects,” he said.
Fine Gael deputy leader Richard Bruton said the Insurance Compensation Fund needed to be reassessed by the Financial Regulator following the “disastrous” experience with banking regulation.
Socialist MEP Joe Higgins said complete nationalisation of the banks should take place.