Citi’s Buiter: ‘Economy should be focus, not price in AIB sale’

By on January 13th, 2015

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The top economist who first said Ireland should repay the IMF early by borrowing on the markets has warned against prioritising price in the sale of AIB and other bailed-out banks.

Minister for Finance, Michael Noonan, said he expects to recoup the full €29bn cost of bailing out AIB, Bank of Ireland and Permanent TSB over time, despite an independent assessment that values the remaining bank stakes at €15bn.

The minister’s comments are being taken as a sign that bank shares could remain in State hands well into the future, until their nominal value reaches the levels pumped-in in the period up to 2011.

The State’s holdings in AIB are valued at €13.3bn, compared to the €20.9bn spent rescuing the bank, and which the minister says can be recouped.

US banking giant Citigroup’s global chief economist, Willem Buiter, said that the priority in any privatisation should be on the outcome for the economy, not price.

“I always take the principle that for privatisations, the public eye is always on how much money you get, the eye should be on whether it improves the efficiency or the function of the entity,” he said. The key consideration in selling the bank is whether it gets the management or new owners able to provide the most efficient banking services for the Irish economy, he said.

“Extra money is nice, especially when the taxpayer has had such a hard time, but the main thing is quality of new ownership,” he said.

Last year Mr Buiter said Ireland should take advantage of the low cost of borrowing on the markets to repay costly IMF loans early.

The policy was taken up by the Government with support from the rest of the euro area and could save taxpayers €1.5bn.

On a trip to Dublin yesterday the Dutch economist said he was “very pleased” to see the scheme implemented – crediting “residual guilt” among European leaders as the reason it won their support.

On Monday the Government appointed Goldman Sachs to advise on the future of AIB.

The US investment bank was appointed following a tender process and is not being paid for its advice. The bank will be eligible to tender for the lucrative job of managing any potential share sale, if as expected, a decision is taken to offload part of the bank, possibly this year, however.

Irish Independent

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