Irish Banks Headed For New Bailout - The 5th In Two Years
The latest round of bank stress tests in Ireland is expected to show another black hole of between €18bn and €23bn and lead to the fifth bailout in two and half years. The tests, conducted by BlackRock, the world's largest asset manager, were commissioned by the Irish central bank and focus on four lenders – Allied Irish Banks, Bank of Ireland, Irish Life & Permanent and EBS. The results are due to be published on Thursday.
The new Irish government, which has had a bruising time in Europe over its demands for a better bailout deal, hopes the tests will finally draw a line under Ireland's chronic banking debt crisis. The further losses are expected to reflect the worsening state of the banks' commercial and residential mortgage loan books with a worst-case scenario of a 60% fall in house prices from peak to trough.
A total of €46bn (£40bn) has already been pumped into Irish banks, including the bust Anglo-Irish. Another €10bn was due to be injected in February as part of Ireland's agreement with the International Monetary Fund (IMF) but, in a political "hospital pass", the outgoing finance minister Brian Lenihan decided not to do so.
Another €25bn in the IMF-EU bailout fund was earmarked as contingency but this was not expected to be used when the deal was signed last November.
If the figures, which are due to be finalised midweek, are confirmed it will mean virtually all this contingency fund is now consumed, giving Ireland no further wriggle room for bank debt. A leading economist and government adviser said that the flight of capital from Irish banks was partly down to the ECB's continual demands for the return of its emergency funding.
Mar 28, 2011 at 2:44 PM
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