1 Apr 2011

More funding needed for survival of Irish banks

6:15 pm on 1 April 2011

Banks in the Republic of Ireland need an extra 24 billion euros to survive the financial crisis.

The figure follows a stress test on the Irish banking system by a group of independent experts and the country's central bank.

It shows, the BBC reports, that the cost of rescuing the country's banks now stands at more than half of the Irish economy's annual output.

Four lenders were tested - Allied Irish Banks, Bank of Ireland, Educational Building Society and the Irish Life & Permanent.

Allied Irish Banks needs most money, and will have to raise 13.5 billion euros.

Bank of Ireland needs 5.2 billion, EBS 1.5 billion and Irish Life 4 billion.

The BBC reports the total amount poured into the Irish banks since the financial crisis is now close to 70 billion euros.

Central bank governor Patrick Honohan said it was likely that, as part of the next infusion of funds, the Bank of Ireland and Irish Life, would now have be taken into state control.

Dublin already owns most of Anglo Irish Bank, Allied Irish Banks and the EBS following previous rescues of the banks.

Bailout money will be used

Money set aside from an 85 billion euro bailout by the EU and IMF in November will be used to fund the latest recapitalisation.

The banks will be set six-monthly - unpublished - targets to reduce their huge borrowings over the next few years through a process of asset sales.

However, Professor Honohan said that the banks should be able to avoid "fire sales" that would cut the amount of money raised from disposals.

The BBC reports trading in the banks' shares was suspended for the day pending the stress tests announcement.

Only about 21 billion euros of the banks' remaining long-term debts are still covered by the guarantee, according to the Irish Central Bank.