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Dublin Bay from Clontarf at 7am this morning. Photo by Daniel Hunt
Black Thursday

Ireland wakes up to the news that Anglo could cost €34.3 billion

Central Bank says Anglo bailout should cost €29.3 billion – but could run to €34.3 billion.

THE FINAL COST of bailing out Anglo Irish Bank has been set this morning at ‘at least’ €29.3 billion – but possibly as high as €34.3 billion.

The figure of €29.3 billion  is based on a haircut of 67 per cent on the rest of the assets to be transferred to NAMA.

In the event of further unexpected losses, “under a severe hypothetical stress scenario”, the final total could rise to €34.3 billion, the Central Bank admits.

This morning’s announcement also confirms reports last night which suggested that Allied Irish Bank (AIB) will need a further €3 billion in capital by December – on top of the €7.4 billion target set in March.

Here’s how the other banks stand:

  • Bank of Ireland has “sufficient capital”.
  • EBS: NAMA has not indicated haircut estimates for EBS at this point. Given the small size of the portfolio of loans, the impact of higher haircuts is unlikely to be significant, the Central Bank says. However, it has warned EBS to take account of higher haircut levels of up to 60% in its capital planning and it should advise acquirers accordingly.
  • INBS: A prudential capital assessment review (PCAR) has not yet been conducted for INBS, because of continuing discussion on its restructuring plans.

The latest bailouts, which were unveiled in an early morning announcement by the Central Bank, push the cost of the banking bailout to close to €40 billion.

The Central Bank governor Patrick Honohan said he hoped this morning’s announcement would give “clarity” and “certainty” to the cost of the bank restructuring.

Taking account of Nama’s estimates of future haircuts has implications for required capital injections which need to be acted on now. The new calculations give clarity and as much certainty as can reasonably be expected to the budgetary cost of the bank restructuring.

He added that “a reprogramming of the budgetary profile” was needed.

Today’s announcements take the Irish banking system closer to a final resolution of its restructuring, which is a prerequisite for sustained economic recovery.

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