Banks get €8bn boost for reserves

A TOTAL of €8 billion is to be pumped into Irish banks to boost their capital reserves resulting in the state becoming the largest shareholders in the country’s major financial institutions.

The state will own close to 98% of Allied Irish Bank (AIB), and between 70% and 80% of Bank of Ireland (BoI) at the end of this latest refinancing exercise. This will see a total of €89bn in bad loans transferred to NAMA and an extra €13bn in capital raising by the banks. AIB has to raise €9.765bn of Core Tier 1 capital and BoI an additional €2.199bn by end-February 2011 under new requirements from the Central Bank.

In a reversal of policy as much as €16bn in non-performing development loans valued up to €20 million each will be transferred to NAMA. This will require special post-election legislation to permit the transfer of the 3,000 individual loans involved on a block by block basis as necessary to the “bad bank”.