GOVERNMENT ADVISERS:THE GOVERNMENT and State bodies paid €14.99 million up to the end of June 2009 to legal, financial and property advisers for services provided in relation to "stabilising the banking sector". This emerged yesterday in the CAG's annual report.
Merrill Lynch was the biggest earner among the advisers, receiving €7.3 million from the National Treasury Management Agency (NTMA) for investment banking advice, which included VAT and out-of-pocket expenses.
This contract expired on June 30th and the NTMA has since engaged Rothschild.
The CAG found that this contract was awarded without a tender process being held. The NTMA told the CAG that time constraints resulting from the collapse of financial markets around September 2008 “did not permit a full tender process, as there were only a limited number of potential advisers and these were also being sought by the Irish banks”.
The Department of Finance had paid €3.9 million to Dublin-based Arthur Cox Solicitors by the end of May this year for advice in relation to the bank guarantee scheme, the recapitalisation of Bank of Ireland and AIB, and the nationalisation of Anglo Irish Bank.
Meanwhile, the Financial Regulator paid €2.95 million to PricewaterhouseCoopers and €840,000 to Jones Lang LaSalle for financial and consultancy services relating to the bank guarantee scheme.
The Government has paid €10 billion to recapitalise the banks. Bank of Ireland and AIB have each received €3.5 billion while nationalised Anglo Irish Bank was given €3 billion. An additional €1 billion in capital has been authorised for Anglo following the agreement of the terms of a programme that will involve the bank repurchasing its debt.
On July 9th, Anglo said it proposes to make an offer for securities with a nominal value of €3.05 billion.
The CAG’s report details how both BoI and AIB each paid an “arrangement fee” of €30 million in relation to their State investment deals. This money was presumably paid to the NTMA, which oversaw the transfer of funds to the banks from the National Pension Reserve Fund.
By the end of June 2009, the seven financial institutions covered by the bank guarantee, had paid €295 million between them in fees to the exchequer, as required under the terms of the scheme.
This money has been paid into a special account in the Central Bank and is being held in reserve in the event that any payments have to be made by the State under the scheme. At the end of June, the State guarantee scheme covered liabilities of €265 billion.
The CAG’s report noted that the Government assumed that its cost of borrowing would rise as a result of the bank guarantee by between 0.15 per cent and 0.3 per cent. As a result, it decided that the covered institutions should pay €500 million a year between them for a period of two years to offset the costs.
According to the International Monetary Fund, the “up-front government financing” provided to Irish banks amounted to 5.4 per cent of our gross domestic product. The CAG said this was “significant but not exceptional” when compared to other countries included in the IMF analysis. Norway and the UK paid 16 per cent and 19 per cent respectively.
