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Tuesday 6 August 2013

IBRC decision puts taxpayers at risk of compensation hit

FINANCE Minister Michael Noonan's decision to liquidate the former IBRC has left the taxpayer exposed to potential compensation claims that could run to hundreds of millions of euro from the creditors of Anglo Irish Bank.

And taxpayers could be facing a tougher budget next year if a feared €3bn shortfall in the valuation of IBRC assets is realised.
Fresh fears about the State being sued by angry creditors who were wiped out have been raised after the former boss of IBRC, Mike Aynsley, revealed in an interview with the Sunday Independent that the bank was solvent at the time of its liquidation.
Former Anglo Irish Bank chief financial officer Maarten Van Eden – who was a key member of the bank's management team after its nationalisation – has said that all Anglo creditors would have to be paid in full because the bank had been solvent up until the Government's decision to liquidate it.
"The liquidators may decide not to pay the creditors of Anglo, but then they will be taken to court and the Government will lose because you cannot walk away from the liabilities of a solvent bank.
"In a way, Mr Noonan is shooting himself in the foot by saying that the bank was not insolvent. Insolvency is the only reason for not paying your bills. Even if you expropriate by law you will have to pay compensation," Maarten Van Eden said.
However, this weekend, sources close to the special liquidator, Kieran Wallace of KPMG, rejected the claims by Aynsley and Van Eden, saying the IBRC had only survived because of the extraordinary support given to it by the State.
"The bank was only solvent at the grace of the Central Bank of Ireland. It was not a solvent bank," the source said.
The issue of whether the bank was or was not solvent is central to the claims for compensation. Included on that list of creditors who were burnt are a number of major investment funds.
These include the Munich-based Xaia Investments, headed up by Dr Wolfgang Klopfer.
Asked if Xaia had given any consideration to suing the State in the event that it wasn't repaid, he said: "I expect a European government to act within the laws and once they act within the laws, there is no need to sue.
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"I'm very confident that they will do it – and if they don't do it, yes."
It has also been confirmed that the decision to liquidate the former Anglo Irish Bank in January will lead to a tougher budget if a feared €2bn-€3bn shortfall in the value of assets is realised. The Department of Finance has confirmed that taxpayers will be left picking up the tab for any shortfall that is found once the valuation process is concluded by the liquidator.
"The money will have to be found, yes," a spokesman for the department said.
Under the emergency act, the State's bad bank, Nama, issued bonds upfront what the estimated value of the loan book of about €16bn.
However, a department spokesman said this weekend: "It is simply too early to estimate any shortfall at present and multiple statements have been made at this stage in relation to this."
Michael Noonan has also rebuffed concerns about the extension granted to Mr Wallace to until the end of November to complete the valuation process, despite the legislation saying it must be completed within 150 days of the act being signed into law.
Speaking to the Sunday Independent, Mr Noonan said: "I never expected any timeframe that didn't carry us out until the late autumn.
"There is 27,000 people involved who are customers of IBRC in one way or another. So I think the liquidator is doing quite well."

Sunday Independent

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