Fianna Fáil Spokesperson on Finance Michael McGrath has said it is far too soon to contemplate the state disposing of a significant stake in AIB. He was commenting following media reports that the Government is considering an early sale of 30% of its holding in AIB.
Deputy McGrath commented: “There are a number of critical issues that must be resolved before the state begins exiting its stake in AIB. The most important is the question of pursuing a retroactive recapitalisation of AIB via the European Stability Mechanism. The ESM is only effectively open to receive applications for support from November of this year but it already appears that the Minister has thrown in the towel with regard to pursuing this as a means of recouping the €20bn injected in to AIB. Any market transaction is likely to value AIB at significantly below this figure. At the time of the June 2012 summit we were told the ESM option was a game changer in respect of the bank related debt taken on by the State. Now it seems the government is going to sell AIB in the open market, an option that was available to it all along.
“We know from experience that there is a significant risk that in the haste to dispose of assets the state may significantly undervalue them. This has already occurred in the case of the Bank of Ireland preference shares and contingent capital notes as well as Bord Gáis. We cannot allow this to happen again.
“Any potential sale of AIB must also be seen in the context of the state of the banking sector generally. We need a banking sector that meets the credit and service needs of personal and business customers. We are a long way from that at the moment. In fact departures from the market mean we are back to the effective duopoly which existed in the 1980s. Before the state exits its involvement in ownership of the banks it needs to ensure that a stable competitive environment is in place. I have suggested that the Minister bring forward a white paper on banking competition as a matter of priority.
“Another significant issue is what will be done with the proceeds from the sale of AIB when it eventually happens. The shares in AIB are held through the National Pension Reserve Fund which was set up to meet the pension liabilities of the state from 2025. AIB cannot be treated as a political slush fund to provide cash for the Minister to go on a spending spree in advance of the general election. We need reassurance that the proceeds from any sale of AIB will be used in the interests of citizens and not the short term political considerations of Fine Gael and Labour.”