The Central Bank raised doubts at the start of Ireland's bailout programme about whether Permanent TSB would be able to survive as an independent bank, according to cabinet papers from the time.
In March 2011, as the then cabinet weighed a report that the banks needed up to €24 billion of capital following stress tests, Minister for Finance Michael Noonan noted that a Central Bank assessment of PTSB, known then as Irish Life & Permanent, and EBS "cast doubt on their ability to return to long-term viability."
Separately, a letter on March 29th, 2011, from Patrick Honohan, who was Central Bank governor at the time, to Mr Noonan stated: "The problematic commercial viability of small mono-line mortgage lenders argues strongly in favour of not attempting to retain the two smaller banks as stand-alone entities."
“Instead, they can initially be managed as subsidiaries of one of the two new pillar banks.”
Merger The documents, released to The Irish Times under the Freedom of Information Act, are among the first cabinet papers of the last administration to make it into the public domain.
In the end, the Government decided at the end of March that year to merge EBS with AIB, while it moved within months to take control of Irish Life & Permanent and sell off its life assurance arm.
Welsh banker Jeremy Masding was hired in 2012 as chief executive for the remaining bank, PTSB. Having looked at whether the bank should be wound down, he concluded in August the following year that "any reasonable man would now say it's still the least worst alternative to keep this going".
Restructuring plan
The
European Union
approved a restructuring plan for the bank in early 2015, before PTSB went about raising more than €500 million of capital after failing stress tests carried out by the
European Central Bank
.
Still, PTSB shares have slumped to €1.99 from the €4.50 price at which the bank and government sold shares in the institution a year ago.
Analysts attribute much of this decline to the political pressure in recent times on banks to lower mortgage rates.
Earlier this month, it emerged that Department of Finance officials had briefed Mr Noonan, on returning to office under the new Government, that PTSB's long-term viability may be best served by a merger with another bank.
With the department currently carrying out a review of how a banking levy is charged in future, the officials warned that any increase in PTSB’s current €27 million a year fee will put commitments in its European State-aid restructuring plan at risk.
“[It] could in a worst case scenario render the bank unviable,” the briefing notes said.
