Bank restructure plan ‘within days’

THE GOVERNMENT could announce its restructuring plan for the country’s major banks in the coming days — possibly before the end of the weekend.

The Department of Finance said yesterday that an outline of the necessary steps to rebalance Ireland’s damaged banking network could be issued within the coming two to three weeks, depending on the timeframe of the Government’s ongoing bailout talks with representatives of the International Monetary Fund (IMF) and the EU.

However, a spokesperson for EU Economic and Monetary Affairs Commissioner, Olli Rehn — who has voiced his support for the Government’s four-year economic recovery plan — said the Irish bailout talks should be concluded by the end of this month.

“We hope that by the end of November, beginning of December that this work can be concluded successfully,” EU spokesperson Amadeu Altafaj told RTÉ yesterday.

That has put some commentators on high alert that the bank restructuring plan could be announced as early as Sunday.

Uncertainty reigns about the future structure of the country’s banks and the extent of extra capital they might need in order to defend themselves against any potential future financial crises. Speculation has been rife that the capital ratio levels at the main two banks might have to increase from 8% up to maybe 12%; meaning the extra capital input needed could see the state owning both outright.

So far, talk of nationalising Bank of Ireland, on top of a near-total takeover of AIB has been denied by all relevant parties.

A strong positive yesterday came from Mohamed El-Erian — chief executive of Pimco, one of the world’s largest private investors in Government debt/bonds — who admitted bondholders should share some of the cost for financial rescues.

Speaking on the BBC World Service, Mr El-Erian said that it was “unreasonable” to expect the Irish taxpayer to bear all costs of the country’s banking rescue and unfair for us to have to pay the cost of having our banks “basically being taken over by the Government”.

His comments came on the same day that the yield/interest rate on Irish Government bonds crept back up to over 9%, despite this week’s four-year economic rescue plan.

Earlier, German Chancellor Angela Merkel said that Europe’s politicians needed to get tough and force private investors and bondholders to share more in the risk in any future debt crises.