The Anglo Irish Bank, which was nationalised by the Republic’s government and has already received €4bn in funding, has now told Ireland’s Department of Finance it needs an additional €5.7bn to remain viable and resume lending, it has emerged.
But the bank is far from certain to secure additional funds in light of the stand being taken by the European Commission — and it is Europe which could ultimately decide the fate of the bank.
Irish Finance Minister Brian Lenihan said on November 13 that a second capital injection into Anglo Irish won't exceed the €4bn the government put in earlier this year.
Yesterday the bank said it needs the money to restore capital levels to international norms and to have sufficient capital buffer against losses which can come from lending to the SME business sector.
A spokesman for the Department of Finance said last night it could not comment on the report.
A debate is now taking place between the bank and the department over the cost of re-capitalising the bank compared to a wind-down of the lender.
According to the report, the wind-down option has found considerable support from within the department. However this is likely to run to well beyond the €5.7bn which the bank is apparently looking for.
Out of its €67.3bn loan book, almost €29bn was in difficulty or in danger of deterioration when the bank issued its half year report.
And it is also thought likely that much of the €64bn in deposits held by the bank would disappear in the event of a wind-down being called, leaving the Republic with an even bigger financial headache.
The half year figures painted a disturbing picture, with figures showing the bank's deposit base had shrunk by a third, or €17bn, as business customers went elsewhere. Also inter-bank deposits have more than halved to less than €10bn. In March Anglo Irish was relying on central banks for almost a third of its funding needs of €23.5bn, up from €7.6bn in September last year.
But despite the dire cost of such a move, it is still possible that the European Commission will order such a wind-down.