‘Bad bank’ plan to be announced today

It is expected that today’s supplementary budget will contain a plan to create a new state agency tasked with buying up all the bad loans currently clogging up Irish banks’ balance sheets.

According to a report in today’s Irish Times, the budget will contain a plan for a new asset management agency that will buy up the bank’s bad loans, and in due course, sell them down and hopefully realise a profit for the taxpayer.

This new agency would fall under the auspices of the National Treasury Management Agency and would be backed eventually by a fund worth €60-€80bn, the newspaper said.

There has been much speculation in recent weeks over the advantages and pitfalls of a so-called ‘bad bank’ to clear bad loans from Irish banks.

The Minister for Finance, Brian Lenihan TD,  gave a strong indication in an interview with RTE News yesterday that the bad loans clogging up the balance sheets of banks would have to be addressed.

“It’s my firm conviction that until we deal with the impaired assets in the banks, until we look at those loans the banks have advanced – foolishly in many cases in Ireland – to large developers, until we tackle that problem and clear them off the bank’s balance sheets, we will not make progress in our reform of banking.

“It’s not enough to guarantee these institutions, it’s not enough to invest these institutions for a return, these institutions themselves need to be cleaned up,” he said.