The Government has rejected claims in a British newspaper that Ireland received a “back door bailout” from the UK to cover losses in Ulster Bank.
Yesterday’s London Times claimed that because the UK taxpayer had pumped £45bn (€53bn) into Royal Bank of Scotland and £10bn of this was used to cover losses in Ulster Bank, this was a de facto bailout of the Irish State.
“Capital injections into RBS to support Ulster Bank and losses elsewhere in the RBS group were presumably made in the best interests of the bank,” said a spokesperson for the Department of Finance.
“They were decisions taken by that bank’s board with the support of its shareholders. They were a bailout of the bank, not of Ireland and were necessary to cover bad lending decisions. Irish banks have been similarly recapitalised at great expense to the Irish taxpayer to cover losses that were incurred, not only in Ireland but in the UK as well.”
The British government was forced to take an 81% stake in RBS in Oct 2008 to stave off a collapse of the banking giant. RBS has had to backstop £14bn in Ulster Bank losses over the past five years.
Sam Coates, the Times banking editor, who wrote the story, says the Ulster Bank losses were not predicted at the time of the UK government bailout. Moreover, he quoted Tory MP Mark Field, who claimed there was a huge issue of transparency because the UK parliament did not have this information when British taxpayers’ money was poured into RBS.
Mr Coates said the £10bn, which he claims was the amount RBS put into Ulster Bank, was roughly three times the size of the £3.25bn bilateral loan the UK gave Ireland in Nov 2010. Ulster Bank is wholly owned by RBS.
“This is a real nonsense story,” said one market source who did not want to be named. “RBS could have made a decision to close down Ulster Bank anytime over the past few years but it would still have had to absorb its losses. RBS did not give the Irish Government £10m for the Irish economy. This is the same as saying that the Belgian government gave Ireland a bailout because KBC covered the losses in its Irish operations.”
Over the past few years, there has been speculation about Ulster Bank’s future. The Times article quotes an anonymous source who said the RBS would sell it, if it could find a buyer.
However, following a strategic review in 2012, a decision was made to make Ulster Bank part of RBS’s core operations. RBS declined to comment on the article in the Times. Source: Irish Examiner