Busy holiday weekend for Irish bankers

The Irish government has published the draft legislation to set up the National Assets Management Agency to deal with the banks’ toxic loans – they’re still working on the value of the assets involved. Ministerial statement here, and RTÉ has provided pdf versions of the draft legislation, and the explanatory memo. Meanwhile, as the BBC reports, with the Dutch-owned ACC Bank seeking repayment of €136 million debt, a High Court ruling denying court protection to 6 companies within Liam Carroll’s Zoe group, which owes over €1 billion to 8 banks, has the potential to scupper the Irish government’s plans before the agency starts work – P O’Neill, who spotted this earlier, reckons Mr Justice Kelly should be NAMA’s CEO. And the Irish Times reports

Mr Justice Peter Kelly’s decision to refuse to appoint an examiner to six companies within Mr Carroll’s Zoe group, which owes eight banks €1.2 billion, leaves the developer’s business vulnerable to insolvency action by Dutch-owned ACCBank and potential collapse.

The Irish Times financial correspondent, Simon Carswell, has a closer look at the situation.

If ACC appoints a receiver, other banks may be forced to move to protect their own securities given the contagion effect.

The two biggest lenders are Allied Irish Banks (AIB), which is owed 40.8 per cent of the group’s total borrowings of €1.3 billion, and Bank of Scotland (Ireland), which is owed 26.8 per cent. They are followed by Bank of Ireland (9.3 per cent), Ulster Bank (6.7 per cent), Anglo Irish Bank (3.1 per cent), KBC Bank Ireland (1.9 per cent) and EBS (0.7 per cent).

These debts do not include loans in Mr Carroll’s other groups.

The banks could follow another option by financing a scheme similar to settlement made to the group’s unsecured creditors who were paid off in a deal funded AIB and Bank of Scotland (Ireland).

Rival lenders could “take out” ACC, the one dissenting bank by funding the repayment of part or all of the bank’s €136 million debt.

This would also ease one headache facing the State’s “bad bank” Nama, whose biggest customer is likely to be Mr Carroll. Given the scale of his debts he will be one of the first to be moved to the agency.

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  • Itwas SammyMcNally whatdoneit

    It must have been realised when the leigslation was being drawn up that such action could take place before it was in enacted – they should have devised a legal device to ensure everything was covered initially followed by a further legal device to deal with the detailed values.

    It has been a characteristic of both Irish and British governments that they have allowed the banks to stay one step ahead of them and have continued to allow them to dictate and frustrate their atttempts to introduce the required economic policies.

  • Pete Baker

    “It has been a characteristic of both Irish and British governments that they have allowed the banks to stay one step ahead of them and have continued to allow them to dictate and frustrate their atttempts to introduce the required economic policies.”

    Except, Sammy, that the other 7 banks involved were playing along and it’s only the actions of the Dutch-owned ACC Bank which has forced the issue in this case.

  • Itwas SammyMcNally whatdoneit

    Pete,

    I appreciate that – but it operates within the confines of the state – its not as if they didnt know it was there – it is poor planning to not forsee that ACC or other foreign bank would operate in its own interest – hence the need for a legal device to deal with it e.g. provide funds to cater for this scenario.

    Many months after the British and Irish governments bailed out the banks they are still wrestling with a mechanism to ensure they lend -as if firm action action might damage the credibilty or confidence in these institutions when these commodities were already running close to zero.

  • Pete Baker

    “I appreciate that”

    Then you need to be more precise with your accusations.

    “hence the need for a legal device to deal with it e.g. provide funds to cater for this scenario.”

    Well, Simon Carswell suggests that those other banks could do just that.

  • John Creedin

    The decision next Tuesday by the Supreme Court in relation to Liam Carroll’s debts will surely be the biggest test of the independence of the judiciary in living memory.

    If they overturn the High court ruling without a solid reason based on law then surely we can assume the decision is to “support” Nama and therefore the position of the current government?