The Government will have to invest up to €9 billion in additional capital to keep State-owned Anglo Irish Bank afloat and reinvent the bank as a business lender under its plans, according to the bank’s chief executive Mike Aynsley.
In his first interview since joining Anglo last year, Mr Aynsley told The Irish Times that the costs of either liquidating the bank immediately or running it down over time were at least twice as expensive.
A liquidation would cost the State between €27 billion and €35 billion, he said, while running it down over 10 years would cost between €18 billion and €22 billion.
Anglo has asked the EU for approval to split the bank into a good bank and a bad bank and to restructure the good operation as a commercial lender.
Mr Aynsley said this would cost between €10 billion and €13 billion, including the €4 billion invested by the State last year.
Liquidating or winding down Anglo over time would lead to "an incineration of taxpayers' money in horrendous terms", he said.
"I don't think the right thing to do is to shoot the organisation – it just makes the hole bigger for the country and the problem bigger for the country."
The increased cost of bailing out Anglo emerged as the Garda yesterday arrested a second former senior executive of the bank.
Former Anglo finance director Willie McAteer was detained by members of the Garda Bureau of Fraud Investigation just before 6.30am yesterday during an unannounced search of his home in Rathgar, south Dublin.
He was taken for questioning to Irishtown Garda station in Dublin.
Detectives spent several hours at his home and collected boxes of documents and computers for examination. He was arrested under the Criminal Justice (Theft and Fraud Offences) Act.
The major focus of the Garda's investigation into Anglo centres on the lodging of €7.45 billion in deposits by Irish Life Permanent (ILP) over Anglo's 2008 year-end, said Garda sources.
Mr McAteer was also questioned about the bank's loans to 10 investors in the so-called "golden circle" share support scheme in 2008.
Gardaí have studied a very large amount of paperwork and electronic communications relating to the ILP deposits, and have put their findings to Mr McAteer.
Mr McAteer was still being held late last night but must be released or charged by lunchtime today.
Meanwhile, Mr Aynsley said he had assigned resources to assist in the various investigations at Anglo and wanted the inquiries "to be over and done with as soon as possible".
Anglo had received external advice that running Anglo as a going concern would be the lowest-cost option facing the taxpayer and had the potential for the highest future return, he said.
Accountants KPMG, investment bank JP Morgan and consultancy firm Bain Co, which advised on the restructuring of failed UK bank Northern Rock, provided advice to Anglo on the issue.
Reinventing Anglo would minimise further State bailouts and create "exit options for the Government", such as a future sale of the bank, a merger with another bank or refloating on the stock market.
He confirmed that Anglo would report the biggest loss in Irish corporate history when it publishes its results for the 15 months to the end of 2009 next week. The bank will post losses of almost €12 billion after writing off bad loans.
Anglo would transfer €35.6 billion of loans to the National Asset Management Agency – about half of Anglo's loans, said Mr Aynsley.
He defended Anglo's decision to pay salary increases to 70 of its 1,240 employees. As staff left, other employees had taken on increased workloads, he said.
"I am appalled and outraged at a lot of the stuff that had gone on in here but there are some facts of life in terms of running a bank – you can't do it without appropriate people," said Mr Aynsley.