LONDON/DUBLIN Ireland's government presented emergency legislation to parliament on Wednesday to liquidate the failed Anglo Irish Bank as part of a hoped-for deal with the European Central Bank (ECB) to ease the nation's debt burden.
Prime Minister Enda Kenny had staked his government's reputation on cutting the 28 billion euro cost of bailing out Anglo Irish, now known as Irish Bank Resolution Corp (IBRC), and the ECB's governing council was considering the new plan after a previous proposal was rejected last month.
The government sees the rescheduling of so-called promissory notes or IOUs given to IBRC as crucial to enabling the country to end its EU/IMF bailout on schedule this year. The next 3.1 billion euros payment is due at the end of next month.
"The winding up of IBRC is now necessary to help to restore the financial position of the state and to help to enable the state to re-establish normalized access to the international debt markets," the 58-page legislation stated.
Kenny called a special session of parliament and opposition lawamkers, angered at the short time they had to digest the highly technical bill, demanded that they be given until midnight to study it.
Finance Minister Michael Noonan will then address the lower chamber. He has been negotiating with the ECB for 18 months to try and get a deal.
Anglo Irish and its casino-style lending were at the heart of Ireland's financial crisis. The bank's near collapse in 2008 pressured the government in to guaranteeing the entire financial sector sucking it into a downward spiral and a 67.5 billion euros EU-IMF bailout.
Under the new plan, first reported by Reuters, the 28 billion euros in promissory notes will be replaced with long-term government bonds, meaning that Ireland can make more gradual repayments.
Anglo Irish's net loans, of around 16 billion euros, will be transferred to the state-run bad bank, the National Asset Management Agency (NAMA), which will pay for them by issuing its own state-backed bonds, a source familiar with the situation told Reuters.
"The board has no further function, the functions of the board are being taken over by KPMG,"Alan Dukes, a former finance minister and the current chairman of IBRC, told Reuters.
Dukes and the IBRC board were only informed about the plan on Wednesday, according to sources familiar with the matter, while remaining staff members were told of the appointment of accountancy firm KPMG as liquidator via email.
IBRC, which was due to be gradually wound down by 2020, employees around 775 people.
ECB TO DECIDE
The ECB rejected Dublin's preferred solution of rescheduling part of its bank bailout bill when its board discussed the plan for the first time last month, EU sources familiar with the talks told Reuters.
Irish central bank Governor Patrick Honohan, the country's representative on the ECB's Governing Council, presented the revised plan to his fellow policymakers in Frankfurt on Wednesday.
Ireland's president Michael D. Higgins, whose signature is required on all laws once they pass through both houses of parliament, returned early from a state trip to Rome to make himself available should he need to consider any legislation.
If the ECB signs off for the plan, most of IBRC's balance sheet will pass to Ireland's central bank when the scandal-hit bank is liquidated, a source told Reuters.
Under its original plan, Ireland wanted the Irish central bank to hold a long-term bond for a minimum of 15 years. The ECB's Governing Council warned that such a long holding period would effectively be "monetary financing", which is prohibited by EU treaty.
The 15-year clause is now being dropped, a second source told Reuters.
KPMG's Padraic Monaghan has been given responsibility for running IBRC's board.
Kieran Wallace, of the same firm, will be appointed liquidator, two sources confirmed, and will meet chief executive Mike Aynsley on Thursday.
(Additional reporting by Stephen Mangan; Editing by Carmel Crimmins)