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Irish banks may need another €27.5 billion: report

Read it and weep.

ANALYSTS BELIEVE that next week’s stress tests could reveal another hole of the magnitude of €27.5 billion in Irish banks – on top of the €46.3 billion that has already been funnelled into the troubled sector.

According to a survey carried out by Bloomberg News, the gap in the finances of the country’s banks is so vast it will immediately eat up about 80 per cent of the €35 billion fund established last year in the wake of the bailout by the EU and the IMF.

The results of the next round of stress tests – which do not cover Anglo – will be published on 31 March. Regulator Matthew Elderfield has already warned that the assessments will be more “conservative” than previous tests.

Bloomberg reports that the tests will allow for:

  • a 60 per cent collapse in house prices from their peak
  • a 1.6 per cent drop in GDP
  • a 16 per cent unemployment rate

However, the European Commission believes that the financial outlook is nowhere near that bleak: it estimates that GDP will grow 0.9 per cent, while unemployment will fall to 12.7 per cent.

The banks are already heavily reliant on emergency funds from the central banks here and in Europe – the reliance on short-term ECB cash jumped 38 per cent to €116.9 billion, and the dependence on Irish Central Bank funding was up 500 per cent to €70.1 billion.

With a fire sale of assets already ruled out, the Central Bank believes the government has little choice but to keep injecting cash into the banks.

BlackRock Inc.’s BlackRock Solutions unit is carrying out the tests, with the results due to be reviewed by Italian and French regulatory authorities, Boston Consulting, the International Monetary Fund, the European Commission and ECB.

Read the full report by Bloomberg News >

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