Irish banks need extra EUR 24bn

The Irish Central Bank said the country's main lenders need an additional EUR 24bn to avoid the risk of collapse in the event of a further economic downturn.

Izvor: Deutsche Welle

Friday, 01.04.2011.

11:20

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The Irish Central Bank said the country's main lenders need an additional EUR 24bn to avoid the risk of collapse in the event of a further economic downturn. Three banks and a building society underwent the stress tests as a condition for Ireland's 85 billion euro bailout from the EU and International Monetary Fund that was agreed last November. Irish banks need extra EUR 24bn The results mean that Dublin has been forced to come up with a plan for a "credible banking structure." The government has already announced "a radical restructuring" and scaling down of the banking system, with "two new strong universal pillar banks" to be established. Finance Minister Michael Noonan said the measures "will help instill confidence in our economy." The Bank of Ireland is to be one of the core banks and is set to shed 30 billion euros in non-essential assets. Allied Irish Banks and the Educational Building Society will form the second core bank, which will be fully state owned. The tests had been the most demanding ever carried out, Noonan said, and had been "fully open and transparent." The conditions, deemed likely by some analysts to be realized, assume that Irish residential property prices would collapse by 62 percent between 2007 and 2013. Such a drop has already been seen in some parts of the country, although there are hopes of an upturn within two years. They also assume an unemployment rate of 14.9 percent; the current rate stands at 14.7 percent. The Irish government has already injected about 43 billion euros into the banking sector since 2008. Ireland's banks took particularly high losses on "toxic" property investments during the global banking crisis. The tests were conducted amid rising speculation that Portugal could be the next eurozone country in line for a bailout. The Bank of Ireland headquarters (Beta/AP)

Irish banks need extra EUR 24bn

The results mean that Dublin has been forced to come up with a plan for a "credible banking structure."

The government has already announced "a radical restructuring" and scaling down of the banking system, with "two new strong universal pillar banks" to be established.

Finance Minister Michael Noonan said the measures "will help instill confidence in our economy."

The Bank of Ireland is to be one of the core banks and is set to shed 30 billion euros in non-essential assets. Allied Irish Banks and the Educational Building Society will form the second core bank, which will be fully state owned.

The tests had been the most demanding ever carried out, Noonan said, and had been "fully open and transparent."

The conditions, deemed likely by some analysts to be realized, assume that Irish residential property prices would collapse by 62 percent between 2007 and 2013. Such a drop has already been seen in some parts of the country, although there are hopes of an upturn within two years.

They also assume an unemployment rate of 14.9 percent; the current rate stands at 14.7 percent.

The Irish government has already injected about 43 billion euros into the banking sector since 2008. Ireland's banks took particularly high losses on "toxic" property investments during the global banking crisis.

The tests were conducted amid rising speculation that Portugal could be the next eurozone country in line for a bailout.

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