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Irish central bank bond profit helps cut national debt

Written by Business World, on 29th May 2019. Posted in Financial

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Bond sales linked to the resolution of Ireland's banking crisis helped the central bank record a profit of 3 billion euros last year, 2.4 billion of which has been paid to the state to help cut the national debt.

The annual surplus paid to the state has risen sharply in recent years as a result of government debt the central bank acquired during the financial crisis, related chiefly to the liquidation in 2013 of the collapsed Anglo Irish Bank.

Ireland's national debt ballooned during the financial crisis a decade ago, partly as a result of its bank bailout, the most expensive in the euro zone.

Ireland pledged to slowly feed the 25 billion euros worth of new bonds - with maturities ranging from 27 to 40 years - into the market via the central bank as part of an agreement with the European Central Bank (ECB) to stretch out the liquidation costs and ease the state's debt burden.

The value of the bonds has risen in line with the higher prices attracted by Irish government debt. That has led to large capital gains over the last four years, when the bonds were sold more quickly than expected.

The ECB wants Ireland to offload the debt as quickly as possible and the central bank in Dublin had disposed of 15 billion euros' worth on a nominal basis, as of last week.

Before the disposal of 1.5 billion euros this year, the bonds' market value stood at 17.7 billion euros at the end of last year, meaning there is currently an unrealised gain of 6.2 billion euros, the central bank said in its annual report.

"While the last number of years has seen elevated levels of surplus income, the fading out of the temporary accounting impact of the special portfolio of floating rate notes means that headline profits will normalise over the medium term," Irish Central Bank Governor Philip Lane said in a statement. (Reuters)

Source: www.businessworld.ie

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