IRELAND'S troubled banking sector will require a further €24 billion (£21bn) recapitalisation, pushing the total cost of bailing out the republic's banks to a staggering €70 billion, writes Douglas Hamilton.
That’s the finding of the Central Bank of Ireland’s stress tests on Bank of Ireland, Allied Irish Banks (AIB), Irish Life and Permanent and the Educational Building Society (EBS).
This is the fifth attempt to draw a line under the banking crisis, which has so far cost the Irish state €46bn, and will bring the entire banking sector under government control.
It also means the government will require more of the €35 billion allocated for the banks under the bailout deal from the European Union and the International Monetary Fund than previously envisaged.
The stress tests, which measured the banks’ ability to cope with unexpected downturns in the economy, indicated Allied Irish Banks will need a further €13.3bn based on estimated losses.
Bank of Ireland, which is already 36% state-owned, will require another €5.2bn while Irish Life and Permanent will need a further €4bn, bringing both lenders into majority government ownership for the first time. EBS will require about €1.5bn and is expected to be merged with AIB. Anglo Irish Bank and Irish Nationwide were not tested because they are to be phased out.
Earlier, Anglo Irish Bank had reported a loss of €17.7bn for 2010 as the bank recorded almost €8bn in impairment charges and lost €11.5bn on bad loans transferred to the National Asset Management Agency. The loss is the highest in Irish corporate history, and according to the Swiss-based Bank of International Settlements, British banks had a £140bn exposure to the beleaguered Irish economy at the end of 2010.
Royal Bank of Scotland, a bank that is largely nationalised, is thought to have had the biggest exposure to the country’s economy, with more than £50bn of outstanding loans through its Ulster Bank unit.
Lloyds Banking Group admitted that it lost £4.3bn on Irish loans last year.
Early last year, Lloyds shut its Halifax retail arm, and towards the end of 2010 the London-based group said that it was shutting Bank of Scotland (Ireland).
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