Irish Finance Minister's drastic overhaul of banking sector

Michael Noonan announces Ireland is to have two main banks and restructured IL&P

CATHAL DERVAN,

IrishCentral.com Staff Writer

Published Thursday, March 31, 2011, 7:23 AM

Updated Thursday, March 31, 2011, 1:50 PM

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Stress tests will reveal extra funds needed by Irish banks

Minister for Finance Michael Noonan has announced the drastic restructuring of the Irish banking sector with two universal full-service banks and a restructured Irish Life & Permanent.

The "First Pillar" bank will be based on the Bank of Ireland with the second being a combination of Allied Irish Bank and EBS building society.

Noonan said that two new strong banks will be created. He also said that September 30, 2008, the day that the Irish Government made a decision to support and maintain Anglo Irish Bank, will go down in Irish history as the blackest day in Ireland since the Civil War.

The minister said the previous Government ducked, dived and procrastinated instead of fixing the banks - they paved the road to disaster, RTE reports.

The final results of Irish banks stress tests show they will need another $34 billion in capital to help them cope with potential losses.

Ireland's Central Bank Governor, Professor Patrick Honohan, said has said there would be majority State ownership in all banks. He said this will be the most costly banking crises in history.

This $34 billion is comprised of $18.8 billion for Allied Irish Bank, $7.38 billion for Bank of Ireland, $2.13 billion for EBS and $5.68 for Irish Life and Permanent. According to Ireland's Central Bank Governor, Professor Patrick Honohan, these figure are only appropriate in an "adverse and unlikely" situation.

The Central Bank's report, "Financial Measures Programme Report", details the outcome of the stress tests, a review of the capital and funding requirements of the banks. They have also set targets for the banks reduction in size through run-downs and sales of assets.

Honohan has said he aim is to create a sustainable Irish banking system through recapitalization, deleveraging and reorganization. He said smaller but sounder banks will be in a better position to provide loans and financial services to householders and businesses.

The stress tests were based on the worst-case scenario situation that the four banks could lose $13.4 billion over the next three years.

Nster.com

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jacersagain | Mar 31, 2011, 03:12 PM EDT

Interesting using the word “Billions” – difficult to gauge the meaning of the measure, isn’t it? I got a cleverly worded email the other day “A billion seconds ago, it was the year 1959. A billion minutes ago, Jesus Christ walked in the Holy Land. A billion hours ago, ‘mankind’ hadn’t yet walked on two feet. Today, Ireland needs a billion euro every 13 days”.

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jacersagain | Mar 31, 2011, 03:00 PM EDT

Cathal Dervan obviously rushed this article onto ICentral’s website without reading Mr. Honohan’s full statement. Honohan makes it clear that the €24 ($34) billion is considered as “might be needed in a worst case scenario, which is unlikely to happen”. That’s the purpose of stress tests. They’re based on “What-if” analyses. Ask any young person looking for a mortgage to buy a house today; they all are subject to stress tests... "What if one or both of you lose your job in 6 or 12 or more months, how will you manage to repay the mortgage loan?".

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FastEddy | Mar 31, 2011, 12:22 PM EDT

" ... Trading in Bank of Ireland and Allied Irish Banks shares has been suspended by the Dublin Stock Exchange ahead of the announcements which will signal the virtual nationalization of the Irish banking sector. ..." Its called Fascism: the takeover of private sector business "for the good of the state and the people". If the Irish Government can't run the national Bank of Ireland without screwing up, how would anyone expect the Government to run all of the banks?

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LoyalCitizen | Mar 31, 2011, 10:56 AM EDT

Who really thinks what politicians say means anything. The gate is open the horse already gone...The scum of Ireland (the money worshipper) do not fear prosecution by Irish Courts. Irish Courts are worthless...If Ireland gets a court system that works we would have no worries.

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