Irish gov’t seizes Anglo Irish Bank

Bloomberg

Irish Finance Minister Brian Lenihan said late Thursday that a proposed 1.5 billion euro ($1.97 billion) cash injection was "not now the appropriate and effective means to secure" the bank’s viability and that he was taking the "decisive step of public ownership."

Anglo Irish lost 98 percent of its value last year as Ireland’s economy slipped into a recession and losses on property loans mounted. Its woes increased last month when Chairman Sean Fitzpatrick quit after failing to fully disclose 87 million euros in loans from the bank over an eight-year period. Chief Executive Officer David Drumm left a day later and Finance Director Willie McAteer resigned last week.

"The funding position of the bank has weakened, and unacceptable practices that took place within it have caused serious reputational damage," Lenihan said. Prime Minister Brian Cowen, speaking to Irish radio station RTE, said the nationalization of the bank was the "right decision."

Legislation surrounding the takeover will provide "fair compensation" for shareholders depending on how an "assessor" values the company, according to Lenihan. "If the assessor decides the bank is worthless, then compensation will be nil."

Lenihan said there is no need to recapitalize Anglo Irish immediately and refused to comment on the extent of the bank’s bad debts.

The nationalization comes less than four weeks after the government agreed to the initial bailout and said it would take a 75 percent stake in Anglo Irish. The bank, which was founded in 1964 and first sold shares to the public in 1971, said in a statement that it will "work fully with the government to ensure the long-term commercial viability" and that customer deposits are safe.

The loan scandal at the bank also hit Ireland’s financial regulator, whose chief executive officer, Patrick Neary, retired this month after an inquiry showed the agency failed to take "appropriate and timely" action.