Investire Oggi - perpetur_marzo_2010 - © onik

Massive shake-up as –25bn pumped into crisis banks
By Laura noonan, Emmet Oliver and Fionnan Sheahan
Thursday March 31 2011
Investire Oggi - perpetur_marzo_2010 - © onik
FINANCE Minister Michael Noonan will today begin a radical overhaul of the banking sector by forcing
the Educational Building Society (EBS) into Allied Irish Banks.
This is the start of a major shakeup of the industry that will lead to the country having just two banks AIB
and Bank of Ireland.
The decision will be announced as the Government pumps up to –25bn in fresh cash into the sector to
finally draw a line under the financial crisis.
The pensions and insurance arm of Irish Life & Permanent (IL&P) is to be sold, but the long-term future of
banking arm Permanent TSB is still being discussed.
The proposed shake-up will have major implications for jobs and branches right across the country.
However, none of this will affect deposits or mortgages in the banks concerned.
Between –20bn and –25bn of state cash is expected to be committed to AIB, Bank of Ireland, IL&P and
EBS to make them strong enough to withstand future loan losses.
The massive injection will be promised after the four lenders went through the most vigorous stress tests
ever carried out on a European bank.
Shares in both AIB and Bank of Ireland were dramatically suspended last night after the Stock Exchange
and the Central Bank feared they would be too prone to rumours today.
IL&P voluntarily suspended its own shares yesterday morning after its stock plunged 45pc on Tuesday.
Mr Noonan is expected to unveil a detailed restructuring plan, which may include the creation of special
units to hold assets the banks have to sell.
The Coalition was last night understood to be locked in negotiations with the EU, European Central Bank
(ECB) and International Monetary Fund (IMF) over its plans.
The Government urgently needs the ECB to announce today that it is prepared to fund Irish banks over the
long term.
Any new funding over long periods will carry a premium interest rate and may only be available for
solvent banks.
A coalition source said some key issues were still being discussed with the IMF/EU/ECB.
The Cabinet yesterday reached agreement on a widespread restructuring of the sector.
Authorities are hoping that the ECB will today announce a special –60bn facility to enable the banks to
continue trading.
It is understood that the Government is pressing for a special seven-year loan facility, but this was thrown
into doubt last night, with sources suggesting that legal difficulties could make it impossible to have the
scheme ready to go today. ECB governors held a conference call last night to discuss options.
The package will outline:
? A capital fund of between –20bn and –25bn to be split between AIB, Bank of Ireland, EBS and IL&P.
? The creation of special units that will allow banks to get some –80bn of extra assets off their balance
sheets. ? Plans to merge some banks
? A warning that mortgages are the key reason the banks need additional cash.
Mr Noonan will set out the banking plan this afternoon.
The Government s Economic Taskforce are expected to meet this morning to discuss the results of the
stress tests.
Today s announcement will show AIB getting the biggest share of the bailout, with some suggesting as
much as –15bn could be ear-marked for the bank. Since AIB is already 93pc owned by the State, there will
be no major change in ownership.
Bank of Ireland is believed to need as much as –5bn. The bank is expected to be given time to raise some of
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