Anglo Irish Bank To Get 8.3Bn Euros In Fresh Bailout
The Irish government will inject another 8.3bn euros (£7.4bn, $9.9bn) into the nationalised Anglo Irish Bank, it has been announced.
No new government money is likely to be invested in Bank of Ireland, Finance Minister Brian Lenihan said.
This bank will instead try to raise the money it needs from private investors.
Allied Irish Banks will also try to raise money privately, but will probably require taxpayer support, he added.
The second bailout follows the nationalisation of Anglo Irish Bank last year.
The Irish government also owns 25% and 16% stakes in Allied Irish Banks and Bank of Ireland respectively.
“Finding a long-term solution for Anglo Irish Bank is by far the biggest challenge in resolving the banking crisis,” said Mr Lenihan, defending the fresh injection of equity into the lender.
“The unavoidable reality is that the bank has incurred losses from its large-scale property lending and needs substantial further capital.
“Unpalatable as it is, only the taxpayer can provide that capital. It is the least worst option.”
Meanwhile the Irish Republic’s state-run “bad bank”, has announced the first loans to be transferred to it from struggling banks.
We need to translate international confidence into the banking sector… and sort it out once and for all
Brian Lenihan, Irish finance minister
The National Asset Management Agency (Nama), which was created last year, will buy 1,200 bad loans from the banks for a total of 8.5bn euros (£7.6bn, $11.4bn).
Speaking before the announcement, Eoin O’Callaghan, European economist at BNP Paribas, said the transfer of bad loans was important progress.
“This is the start of the plan… designed to cut the vicious circle in Ireland whereby banks aren’t lending in to the economy, which is making things worse and making their own loan portfolios less likely to be paid back, making the banks even less likely to lend,” he told the BBC.
Irish finance minister Brian Lenihan told RTE radio that further action was needed, saying that the banking sector needed to be sorted out “once and for all”.
“The Irish state has established its own credibility as a state that can manage its own finances. There is huge international recognition of that now,” he said.
“We need to translate all that international confidence into the banking sector as well, and sort it out once and for all.”
Irish plans to increase taxpayer stakes in the major banks are in contrast to the position of other countries hit by the financial crisis.
In the US, several bailed-out banks have recovered sufficiently to repay the government aid they received.
This month the US government announced plans to sell back its 27% stake in Citigroup – one of the banks hardest hit by financial crisis.
In UK, the government is expected to consider selling back its stakes in Lloyds Banking Group and Royal Bank of Scotland later this year.
Expectation of further action by the Irish government has caused bank shares to fall again on Tuesday, following sharp falls on Monday.