AIB and BoI ‘will need more capital’

THE Government could end up owning up to 50% of AIB and Bank of Ireland, both of which need “significantly more capital,” the governor of the Central Bank, Patrick Honohan has said.

Mr Honohan, who was named as the governor of the Central Bank in September said the capital injection would be needed after their so-called “bad loans” are transferred to the National Asset Management Agency (NAMA).

He went to say that there were, however, other options. AIB and Bank of Ireland have claimed they will be able to resist further Government investment by raising their own funding in a variety of ways.

“They could raise funds by selling some assets. There are a number of ‘jugglings’ that could still happen,” Mr Honohan added.

He claimed to have been misquoted in a recent interview — which seemed to have him say that investors would be “scrambling” to support the main banks after they emerge from the downturn.

Mr Honohan refused to be drawn on what amount of extra funding might be needed in the banks, or if the Government needed to be involved. But, he went on to say that NAMA should be a success in stabilising bank assets and easing pressure on the banks to raise further funds.

Mr Honohan, who was addressing the Joint Oireachtas Committee on Economic Regulatory Affairs, was also asked about the prospect of Anglo Irish Bank being wound up.

Fine Gael Deputy, Kieran O’Donnell complained about the €4 billion of taxpayer’s money invested in it to keep it alive, plus the €28bn of loans NAMA is likely to buy off its balance sheet.

Mr Honohan said some of those sums could be recouped in the future, if the bank were to be sold.

However, he stressed the future of Anglo shouldn’t be a NAMA-related issue, but should be decided in the context of the business plan being prepared by the bank’s management team.

He added that the Irish economy could survive without Anglo Irish Bank, but a winding-up of the company “might not be the best option for taxpayers’ money”.