No more black holes in banks, says banking chief

Ireland’s top banker today claimed there were no more black holes in the country’s banks as share prices jumped in the wake of the state’s €85bn rescue deal.

In a bid to reassure volatile international money markets, Central Bank governor Patrick Honohan said there was no sign of further bombshell losses.

“There has been no indication in our discussions over the past couple of weeks that there is a hole that we haven’t discovered,” Professor Honohan said.

“I think some of the people from outside came in saying ’we’ll probably find a hole’. They didn’t find a hole.”

Ireland secured the International Monetary Fund (IMF) European bailout a day after 50,000 protesters marched through Dublin against drastic austerity measures.

The Government will fund €17.5bn from the public service pension pot. Some €35bn is for crippled banks – €10bn to be drawn down immediately.

Another €50bn will keep the State running day-to-day.

Opposition politicians have roundly condemned the use of the National Pension Reserve Fund.

But in the first trading since it was unveiled, Bank of Ireland stocks were up more than a fifth to 32 cent while Irish Life & Permanent soared more than a half to 83 cent.

Allied Irish Banks proved slower to respond, creeping up almost 10% to 38 cent.

Taoiseach Brian Cowen warned that without the loan, pending tax hikes and spending cuts would be more severe.

Ireland is being charged 5.8% for the money, cheaper than what‘s on offer in the markets.

“It buys the government time and the nation time to convincingly demonstrate that we’ve got the adjustment on track,” Prof Honohan said.

The Governor, who broke rank last week to reveal the State needed a tens of billions bailout, said authorities would continue to keep a close eye on the banks for potential losses.

“We are constantly looking for holes, and when we find holes, we’re going to tell people about the holes and we’re going to deal with them,” he said.

Prof Honohan also insisted depositors have nothing to worry about following the loan.

“The concerns over the last number of weeks has been that there is going to be something big in the package,” he said.

“There’s nothing big, bad in the package for depositors. The other concern is that somehow the ECB is going to shut off the taps.”

Meanwhile, Europe’s Commissioner for Economic and Monetary Affairs Olli Rehn predicted Ireland will rebound “relatively rapidly” from its current economic woes.

Pat Rabbitte, Labour Party justice spokesman, called on the Government to clarify the legal status of the bailout deal, suggesting it should be approved by the country’s parliament.

The loans do not force senior bondholders to suffer losses but the system will be replaced in 2013 when a new mechanism will mean bondholders face funding a share of any more bailouts.

Mr Rabbitte claimed uncertainty about the status of the agreement could provoke court challenges and cause further instability.

“On the one hand it seems clear that, rightly or wrongly, the Government does not regard a programme which has been agreed with the other EU member states, as well as the IMF, as an international treaty,” Mr Rabbitte said.

He added a treaty would have to be ratified by the Dail under the Irish Constitution.

“Yet the Taoiseach and the Minister for Finance have made it clear that they will not submit this programme to a Dail vote,” he said.

Sinn Fein President Gerry Adams said the Government’s economic and banking policy was not credible.

“Not a euro more should go into the Irish banks until their debts are restructured,” Mr Adams said.

Social Justice Ireland director Fr Sean Healy: “It is totally unacceptable that the European Commission, the IMF and the Irish Government develop and implement a programme which will see Ireland’s weakest groups take the major part of the ’hit’ for the reckless actions of greedy bankers, incompetent regulators and an inept government.”

Under the deal AIB will become majority State-owned while Bank of Ireland is being given the chance to raise €2.1bn itself by February to avoid the Government stepping in.

Irish Life & Permanent said it would have to raise an extra €100m but would use its own resources.