Finance Minister Brian Lenihan cannot have been too impressed when Irish Life & Permanent (IL&P) boss Denis Casey and the bank’s chairwoman, Gillian Bowler, arrived with a top lawyer in tow last Friday week for his second round of talks with the banks.
It was reported that Mr Casey said the bank would sue if Mr Lenihan tried to force it into a merger.
That wasn’t quite the case, but IL&P made the point that it, and not the country’s finance minister, will be the architect its own destiny, in what most expect will still result in some restructuring.
How that process will pan out is anyone’s guess but it looks likely that the days of Anglo Irish Bank are numbered.
It is clear from the continuing erosion of its share price since it published results last week that investors and analysts have lost confidence in the bank.
In Dublin yesterday AIB, the bank thought likeliest to survive on its own after the banks have been reconfigured, saw its share value dip below €2 for the first time since this crisis took hold.
It is yet another reminder that investors remain deeply concerned about the future status of the Irish banking sector.
The most immediate issue facing the banks sector is refinancing.
As the process drags on, fears are growing that some of the private equity houses like JC Flowers could walk if the talks stall.
It left Northern Rock in the lurch in Britain and the various investors could do the same here.
These guys don’t hang around said one observer.
They know that JC Flowers and others walked away from the British market leaving Northern Rock stranded as it dallied over what re-funding option to take.
Uncertainty still persists about how the refunding of the banks will pan out.
One report this week says the State will cozy up to the private equity firms and that a deal will be done that could see a 50% dilution in Bank of Ireland and Anglo shares, if the latter survives as a separate entity.
It is generally agreed the State will become a holder of shares in the banks if this deal is to go ahead, the only question now is how much funding they will have to commit and for how long.
Most of the private equity people tend to stick around for three to four years, before cashing in holdings, based on their previous track records.
Even with the funding issue stalled the banks are still under pressure.
If they are to borrow money over three to five years, that takes them beyond the state guarantee, which runs to end September 2010.
The banks will have little choice but to square up to this problem pretty soon if they are to avoid doing long-term damage to the Irish financial system and to the economy in general.
In an analysis this week, McEvoy & Associates raised the spectre of the overseas equity groups getting frustrated with the lack of progress with the capital refinancing of the banks.
They could leave the Irish banks, whose values have been utterly decimated by the collapse in the economy and the crippling impact of the global credit crunch, to struggle on without the badly needed capital.
In that case the pressure on the Government and the Irish-owned funds, represented by IAIM, interested in supporting the system could be enormous.
Concerns are growing that some of the top private equity houses will not hang around indefinitely, if the ongoing talks fail to produce some investment formula.
The danger exists that the Government’s options on the banking crisis “are closing down fast”, McAvoy said.
The big worry is if any of the Irish banks fail, the level of Government borrowing could soar.
This has not been lost on the global sovereign debt markets and the potential threat to the cost of funding going forward is another emerging threat.
In essence McAvoy fears the re-capitalisation dilemma is moving in such a way that it has the potential to do damage to the national finances as well as the economy at this stage.