Friday 15 December 2017

Despite all the guff about EBS, members will get nothing when it is sold

The Minister for Finance Brian Lenihan confirmed last week that the list of bidders for the EBS had been whittled down to just two, Irish Life & Permanent, which already owns mortgage bank Permanent TSB, and a group of international investors led by Cardinal Capital.

Both of these bidders have been asked to submit final bids which must be received over the next few weeks.

All going well, the EBS will have new owners sometime early in the New Year.

But why is the EBS being sold at all?

Isn't this the building society that raised the concept of mutuality, ownership by its members, virtually to the level of a fetish during the boom years?


Remember all of that guff about "membership dividends" and the like?

Unfortunately, the EBS is no longer master of its own destiny.

During the property bubble it got carried away and instead of just lending to homeowners, also started lending to builders and property developers.

With predictably disastrous results.

The EBS is now in the process of transferring up to €1bn of bad loans to NAMA.

In return, the Government has already injected €350m into the EBS to keep it afloat and, unless it is sold, may have to pump in up to a further €437m, bringing the total lavished on the organisation to €787m.

In return for all of this money, the Government has taken de facto ownership of the EBS.

This means that unlike other Irish building societies such as the Irish Permanent and First National, which gave their members "free" shares when they converted into banks in 1989 and 1998 respectively, EBS members are likely to receive nothing when "their" building society is sold.

Instead any proceeds will go towards reimbursing the Government for the cost of bailing out the EBS.

By the time this has been done there will be little if anything left for the unfortunate EBS members.

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