Scale of bank mismanagement 'truly shocking' - IBOA
Issued : 31 March 2010
Business and Leadership
The Irish Bank Officials Association (IBOA) has said the scale of mismanagement within Ireland's financial institutions which was revealed by the Finance Minister Brian Lenihan TD in the Dail yesterday is "truly shocking".
IBOA general secretary Larry Broderick also said the level of financial support which will be required from the State to place the five covered institutions on a sound footing is "likely to be colossal".
He suggested that the State is likely to become the sole or majority shareholder in four of the five institutions and the biggest single shareholder in the fifth.
Ordinary bank staff sacrificial lambs
According to Broderick, there is now a danger that ordinary Irish bank staff will become "sacrificial lambs" as the focus of management turns to job cuts.
"These staff were in no way responsible for the critical condition of the banking sector. Indeed they have already endured a significant deterioration in their working conditions - as a result of the departure of over 6,000 of their colleagues - in order to secure the future of these institutions," Broderick said.
"Further wholesale job cuts would represent a continuation of the reckless short-termism which was one of the root causes of the current crisis.
"However, it does not have to be this way. The State will soon occupy a pivotal position in the financial services sector - not only as the regulator - but also as the dominant shareholder," Broderick said.
The IBOA is urging Minister Lenihan to use his influence to ensure that the covered institutions do not take a "slash-and-burn approach" to bank jobs.
"Indeed, it would make little sense for the taxpayer to underwrite these institutions to the tune of tens of billions of euro so that they could then make thousands of their employees redundant - with the result that the Exchequer would incur further expense in terms of additional social welfare benefits and loss of income tax revenue," Broderick suggested.
Future landscape of Irish banking
Minister Lenihan outlined the future landscape of Irish banking yesterday as the National Asset Management Agency (NAMA) announced it is applying an average discount of 47pc to the first tranche of 1,200 loans transferring to it from the Irish banks.
Among the most notable announcements made by the Minister yesterday was that Anglo Irish Bank requires an injection of €8.3bn in fresh capital in the short term to remain afloat, and that the lender will need further taxpayer support to cover future losses, which could add up to be as much as €10bn over time.
The Minister also said that Allied Irish Banks (AIB) must raise additional equity capital of €7.4bn to meet the new capital standards laid out by the Financial Regulator yesterday, and warned that if not enough private capital was forthcoming the State may be forced to take a majority stake in the bank.
Meanwhile, despite being a relatively small financial institution, Irish Nationwide Building Society (INBS) is transferring €9bn in loans to NAMA and will require a capital injection of €2.6bn.
