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.