The Irish Times - Wednesday, February 9, 2011

EU and IMF mission to review performance on bailout

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ARTHUR BEESLEY, SIMON CARSWELL and MARY CAROLAN

AN EXPERT mission from the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB) is due in Dublin this week to assess whether the Government is meeting its commitments under the bailout scheme.

There is tentative concern among certain European officials about “slippage” in elements of the bank restructuring process. However, the Central Bank in Dublin insists the plan is proceeding in line with the timeframe in the bailout agreement.

“During this mission the Central Bank will provide an update on financial conditions and progress of the financial measures’ programme, including the prudential capital assessment review and prudential liquidity assessment review, which are due to be completed by March 31st and are progressing according to schedule,” said a Central Bank spokeswoman.

She added that the EU-IMF mission was “routine” and in keeping with a timetable agreed at the outset of Ireland’s aid programme. She insisted such teams would visit the Central Bank “regularly” to oversee implementation of the programme.

The mission will also meet officials in the Department of Finance and the National Treasury Management Agency to examine whether Ireland is delivering on the bailout pledges.

The visit comes amid promises by Fine Gael and Labour to renegotiate key elements of the rescue package if elected to office. Such promises have been received with scepticism and concern among certain senior international officials who have worked on Ireland’s rescue plan.

Although officials from the EU-IMF “troika” carried out a previous technical mission to Ireland in the weeks after the rescue pact, the latest visit is expected to lead to the first public assessment of Ireland’s performance by the European Commission, to be released by economics commissioner Olli Rehn.

Yesterday Anglo Irish Bank said it expected to make a loss of €17.6 billion for 2010, breaking its record for losses by an Irish company as the Government began auctioning its deposits, standing at €10 billion.

The Government took the first legal steps to wind down Anglo and Irish Nationwide Building Society, the State’s two worst lenders which have cost the State €34.7 billion.

Minister for Finance Brian Lenihan secured High Court orders starting the orderly and speedy wind-down of the two lenders by selling their deposits to institutions with a long-term viable future.

The Government had pledged, as a condition of the EU-IMF bailout, to radically restructure the two troubled banks. The High Court cleared the merger of the lenders and their closure over several years.

Anglo later revealed in unaudited figures for 2010 that it had lost €16 billion or 59 per cent of its deposits over the year-long run on the bank. As a result, the bank’s reliance on Central Bank funding rose to €45 billion from €23.7 billion over the year.

The Minister sought court orders under the new Credit Institutions (Stabilisation) Act, and told the court that it wanted some information in the case withheld from the public as it was commercially sensitive.

Counsel for The Irish Times asked that the case be heard in public after raising concerns that the Minister had excluded reporters when the legislation was first used last December to effectively nationalise AIB.

The judge said the orders should be published as the issue was of “exceptional public importance” but he prohibited reporting on the application as it was heard.

The High Court was told that legal approval for the restructuring of the institutions and the transfer of deposits out of the lenders was urgently required to reduce the threat to the State posed by them.

The continuing loss of deposits by both State-owned lenders was destabilising them and the wider banking system, the court heard.

The bank’s chairman, Alan Dukes, said a clean banking sector may require a further €50 billion in capital, pushing the cost to €100 billion.