Martin Ferris (Kerry North, Sinn Fein)
Link to this: Individually | In context

Question 24: To ask the Minister for Finance the effects on the domestic economy and the international borrowing markets of the open-ended exposure to the private liabilities of bondholders in Anglo Irish Bank; and if he will make a statement on the matter. [34064/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

There is no doubt that the perceived uncertainty about the total cost of addressing the problems at Anglo Irish Bank has been cited as adversely impacting on the cost of Sovereign borrowing and for Irish financial institutions generally. These total costs arise because of the appalling lending decisions by the bank prior to nationalisation and the losses incurred in that regard. It is not exposure to bondholders that is at issue. The bank's liabilities are to depositors including customers and the Central Bank, senior bondholders and subordinated bondholders.

The Government's primary objective in dealing with Anglo Irish Bank has been to minimise the cost of this distressed bank to the Irish taxpayer. The Government decided in early September that the bank will be split into a funding bank and an asset recovery bank. The Central Bank has determined and announced the appropriate levels of capital needed in both institutions. That announcement, along with my earlier statement on the restructuring of the bank will bring clarity to the markets regarding the amount of capital required by Anglo Irish Bank. In addition my statement earlier today in relation to all the financial institutions will help bring certainty to the market.

With this clarity I would hope that the markets will reassess the position and that the rates for borrowing by the State and by Irish financial institutions will fall below current levels.

The figures for the recapitalisation of Anglo Irish Bank and all other relevant information will be taken into consideration in revised forecasts which will be published in the Pre-Budget Outlook in October.