€7bn package in pipeline for two main banks

A TWO-PRONGED strategy of investing €7 billion in Allied Irish Banks (AIB) and Bank of Ireland (BoI), combined with state insurance to cover up to €25bn in property loans, is being negotiated with the Government.

The Government said in December it would invest €2bn in each of AIB and BoI via preference shares in the first quarter of 2009 and would underwrite plans by each of the banks to raise €1bn before the end of March.

However, the banks’ shares have been buffeted by the fallout from the nationalisation of Anglo Irish Bank last month making it difficult for them to tap investors for funds.