Ireland may set up a second asset-management agency to slim down the country’s banking system and help lenders reduce their reliance on European Central Bank funding.
The National Asset Management Agency, established in 2009, has purged banks of about 71 billion euros ($93 billion) of risky commercial real-estate loans. Now, a second organization is being considered, Jill Forde, a spokeswoman for the Dublin-based central bank, said by telephone today.
“A number of options are under consideration and will be decided by the end of the first quarter,” Forde said. Other possibilities include asset sales, restructuring, extension of the country’s so-called bad bank to take over additional assets and setting up of internal “good bank-bad bank” structures within banks, she said.
Ireland was forced to resort on Nov. 28 to an 85 billion-euro aid package, led by the European Union and the International Monetary Fund, on investor concern the cost of rescuing lenders including Anglo Irish Bank Corp. would swamp the state. About 35 billion euros is earmarked for the country’s banks.
As part of the accord, Ireland’s central bank agreed to the “steadily deleveraging” of the banking system and measures to cut the lenders’ dependence on short-term funding from the European Central Bank.
“Downsizing is easier said than done,” Emer Lang, an analyst with Dublin-based securities firm Davy, said in a note to clients today. She cited Allied Irish Banks Plc’s “inability to sell its U.K. operation and the slow pace of runoff” of Bank of Ireland Plc’s and Irish Life & Permanent Plc’s mortgage books, both closed to new business.
Bank of Ireland fell 4 percent to 33.4 euro cents at the 5:10 p.m. close of trading in Dublin, while Allied Irish lost 7.7 percent to 28.6 cents and Irish Life declined 6.1 percent to 93 cents.
Irish banks grew increasingly dependent on the ECB for emergency funding last year amid deposit outflows and as the wholesale funding markets remained volatile. Irish domestic lenders, including foreign-owned banks, increased their reliance on ECB funding by 13.7 percent in November to 97.3 billion euros, the country’s central bank said Dec. 30.
Matthew Elderfield, head of financial regulation at the central bank, said in an interview with the Irish Independent today that a second asset-management agency could take over non-core assets such as the whole of a bank’s U.K. division. It could warehouse these assets as they are being prepared for sale, he said.
The central bank hired Barclays Capital, the investment-banking unit of Barclays Plc, to advise on shrinking the balance sheets of the country’s banks, two people with knowledge of the talks said today.
Barclays will work on the central bank’s liquidity assessment, or Prudential Liquidity Assessment Review, of the country’s lenders, to be completed early this year, said the people, who declined to be identified because the decision isn’t yet public.
BlackRock Inc., the world’s biggest money manager, will also advise the central bank with a separate review of lenders’ capital requirements, one of the people said. An announcement may be made as soon as today, the person said.
Forde, the central bank spokeswoman, said it’s due to make an announcement on potential advisers shortly. Jon Laycock, a spokesman for Barclays in London, declined to comment.
EU Bond Sale
Separately, European investors accounted for 71.5 percent of the 5 billion euros in bonds sold yesterday by the European Union to help finance the aid package for Ireland, according to the EU. Asia represented 21.5 percent and the Americas 6 percent, the European Commission, the EU executive arm, reported in an e-mail.
The issue was the first by the commission through its European Financial Stabilization Mechanism as part of the EFSM’s 22.5 billion-euro share of the 85 billion-euro Irish rescue. Ireland expects to receive the first tranche of funds from the EFSM on Jan. 12, a spokesman for the finance ministry in Dublin said yesterday.