Brian Hayes MEP today said that the government and Fianna Fáil should negotiate a new standalone deal which would give the government more flexibility to sell its holding of shares in Irish banks. Under the current confidence and supply arrangement, the government is limited to a total sale of 25% shareholding in any bank before the end of 2018
“The time is right to look at another sale of government shareholdings in the Irish banks. We now have an opportunity to get a good return for Irish taxpayers on a share sale. The share price in both Bank of Ireland and AIB has recovered from the shock of Brexit and with the Irish economy growing, share ownership in either bank is an attractive prospect for international investors.
“It seems counter intuitive that even though the Irish economy has been growing for several years, the government is still the main shareholder in two of Ireland’s main banks – PTSB and AIB – and a minor shareholder in our other main bank – Bank of Ireland.
“It is not in Ireland’s long-term interest to have large state holdings in the banking sector. It discourages new entrants from coming into the banking market, offering new products and competing with the pillar banks for business. If ever we need new entrants, it is now.
“As it stands, in the programme for government, only a 25% sell-off in any bank is permitted until the end of 2018. It is time for the government and Fianna Fáil to sit down and negotiate a new standalone deal that gives the government more flexibility to sell off state holdings in Irish banks if the time is right.
“The confidence and supply arrangement will end after the agreement of the next budget and a review of this arrangement will take place. It should be acknowledged that Fianna Fáil has acted very responsibly and in the best interest of the country by allowing the State to draw up and pass a budget every year in the lifetime of this government.
“But the sale of bank shareholdings should treated as an issue separate to any confidence and supply review, given the significance to our public finance position.
“There are potential risks on the horizon if we leave the share sale for too long. The political crisis in Italy along with a trouble banking system poses a spill over threat for the whole Eurozone. Several commentators, such as international financier George Soros, have also suggested that a global financial crisis could be on the way. The OECD has warned of the Irish economy over-heating.
“In my opinion, any proceeds from a bank share sale should go towards the Rainy Day fund and to paying down our national debt. This will protect against the risks of Brexit and other potential economic shocks. We must be realistic about the Irish economy – our strong growth rates will not last forever and we must prepare for potential downturns. There will be some flexibility from the European Commission about how the proceeds are used because from this year we will be running a balanced budget and the proceeds won’t be used for current expenditure.
“Around €19bn has already been clawed back from Irish banks through share sales, fees for a state guarantee over banking liabilities and income from dividends and coupons on debt instruments. The current market value of the government’s stake in AIB, PTSB and Bank of Ireland is around €11.5 billion. At this value, the State would recover the total amount of its original investment in these three banks, with a small surplus.
“Both Minister Donohoe and his predecessor Michael Noonan both worked hard to deliver an excellent outcome on the sale of 25% of the government shareholding in AIB last year. We now have the opportunity to recoup the full amount invested in AIB with some well-timed share sales. But we should not wait around too long for the perfect opportunity as it may never come.”