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Dublin: 13°C Sunday 20 June 2021

Irish banks need €5bn in cash immediately - analysts

Ireland’s international rescue fund in order to save the country’s banks will need to splash out billions immediately.

Image: redspotted via Flickr

BANKING ANALYSTS believe that the country’s two biggest banks will require €5bn in extra capital almost immediately, on foot of the government’s announcement that it had sought an emergency funding package from the IMF and European Union.

Oliver Gilvarry of Dolmen Securities in Dublin told Bloomberg that “the bank issue” needed to be sorted out “once and for all”, adding that the banks needed to be given an upfront top-up of capital immediately.

Gilvarry also said finance minister Brian Lenihan would need to consider breaking up the three lenders in which it had significant ownership: AIB, Bank of Ireland and Irish Life & Permanent.

The Chief European Economist from Goldman Sachs, Erik Nielsen, meanwhile estimated that the amount required by the government to be drawn down over the lifetime of the contingency fund to be a massive €95 billion – pushing the limit of what the government and European Union said would be provided.

Nielsen said yesterday he believed the government would need to borrow €65bn to fund itself for the next three years, and €30bn more to fund Ireland’s lenders for the same window.

The value of shares in the three lenders had slid massively today; as of 3pm on the Irish stock exchange:

  • AIB shares were down 2c to 41c,
  • Bank of Ireland shares were down 8c to 40c, and
  • Irish Life & Permanent shares were down 28c to 87c.

Fine Gael MEP for Munster, Seán Kelly, said he has written to European economics commissioner Olli Rehn asking how Ireland’s banks – which have now forced the country into accepting a bailout – managed to pass EU stress tests in July.

The government will be required to stress-tests the banks once more in advance of being able to draw down any of the bailout funds being made available.

About the author:

Gavan Reilly

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