New government likely to keep banks waiting

A NEW government is likely to wait until a fresh round of stress tests are completed before recapitalising the country’s top lenders, giving the only bank left trading on the main index more time to avoid state control.

Fine Gael — expected to lead the next government after the February 25 election — said a new administration should wait until after the central bank completes its sector review, at the end of March, before putting more capital into lenders.

“If there is no government until March 9 or beyond that, I think it is prudent for (an) incoming government to wait until stress testing before putting capital in,” Fine Gael’s finance spokesman Michael Noonan said yesterday. Bank of Ireland, Allied Irish Banks and EBS Building Society had an end of February deadline to boost their capital under the terms of an EU/IMF bailout sparked by the crisis in the banks.

With private investors steering clear of Irish banks, the Government was expected to inject up to €10 billion into the three banks before the end of this month.

But the outgoing Government shelved that plan on Wednesday arguing that without a parliamentary majority it no longer had a mandate for such a large transfer of funds, which should instead be carried out by a new administration.

The new Dáil is due to convene on March 9 with FG and Labour expected to form the Government. Both parties are campaigning to renegotiate the bailout.

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