Dublin faces calls to shut Anglo Irish Bank

[Ognir]

The Irish government faces growing political pressure to close the bank at the centre of this week's rescue operation even as the International Monetary Fund broadly welcomed the bad bank plan.

The revelation of record losses of €15bn ($20bn, £13bn) at Anglo Irish Bank, the specialist property lender nationalised last year, came hours after the government said it would need €18bn on top of €4bn already provided to keep the bank afloat.

Standard & Poor's, the rating agency, said the "way forward for Anglo remains uncertain", pointing out its state support was still subject to European Commission approval.

S&P lowered the ratings on Anglo Irish subordinated debt, "reflecting our view that these instruments may be adversely affected by Anglo's restructuring plan".

Anglo has about €2bn of subordinated debt, which is guaranteed as part of a support package the government introduced for all €440bn of bank sector liabilities at the time of the original run on Anglo Irish in September 2008.

Eamon Gilmore, the Labour leader, on Wednesday accused Brian Cowen, the prime minister, of "economic treason" and said the only way to restore public trust was to release papers related to the decision on the guarantee.

There was reason to cover the main banks but not a "'piggy bank" for property speculators, Mr Gilmore said on Friday in reference to Anglo.

Opposition parties suspect the guarantee was largely at the behest of the bank because of its support for builders and developers close to the ruling Fianna Fail party.

An inquiry into the banking crisis is due this year but it will only cover the period up to the decision. Mr Cowen this week rejected opposition calls to publish the minutes of key meetings before the guarantee was introduced on September 30.

In Washington, Gerry Rice, IMF deputy director, said the Irish government's "extensive and ongoing support [for the banks] has been vital to maintaining financial stability".

The transfer of the first assets to the National Asset Management Agency, the bad bank taking over €81bn of impaired property loans, was an "important step", said Mr Rice.

In a sign of improved investor confidence, Irish government debt traded lower on Friday.

Nama will issue the banks with government-backed bonds for up to €53bn – depending on the loan-by-loan discount or haircut to reflect the steep fall in property prices.

The financial regulator has estimated the aggregate capital shortfall across five financial institutions at €32bn – with analysts calculating that about €24bn of that would be provided by the government.

Moody's, the credit rating agency, said Nama was an "ingenious mechanism", adding: "We view this as a balancing act – the success of which, including its impact on the government's credit rating – depends essentially on an early revival of the economy."