Bank stock trading suspended as Ireland awaits stress test results

Trading in Bank of Ireland and AIB shares has been suspended for the day by the Irish Stock Exchange amid fears speculation on the stress test results could create disorder in the markets.

The full extent of the multibillion-euro black hole in Ireland's bust banks will be detailed at 4.30pm this evening.

The losses in Allied Irish Bank (AIB), Bank of Ireland, Irish Life and Permanent (IL&P) and the EBS building society will be set out as the new coalition Government attempts to finally measure the debt mountain.

The Central Bank in Dublin will publish figures compiled using forensic stress tests before finance minister Michael Noonan gives the Government's response.

It is expected to say that Irish banks need about another €30bn to remain in business.

Most of the loan losses caused by reckless lending to now broke property developers have been identified, but the skeleton in the closet is a ticking timebomb of thousands of homeowners unable to repay mortgages.

More than 44,000, or 5.7% of homeowners, are at least three months behind with their mortgages - valued at €8.6bn.

The International Monetary Fund and the European Union stepped in with loans worth €67.5bn last November. The State took €18bn from the National Pension Reserve Fund to back that up. About €10bn of the total bailout was destined for the banks.

About €46bn of State funds has been earmarked over the last two-and-a-half years to recapitalise reckless lenders.

The Central Bank is supplying loans worth about €70bn on a continuing basis and the European Central Bank is supplying about €80bn to Irish banks.

When the Central Bank details the latest - and hopefully the final - debt bill, and it is combined with sums already guaranteed or owed, Irish banking debt will be somewhere in the region of one-and-a-half times the total value of the Irish economy.

The strengthened left-wing parties in the Dáil continue to demand a share of the pain be forced on European banks in Frankfurt, London, Paris and Madrid which provided the billions borrowed and lent on by Irish financial institutions to feed the demand for property and development.

The stress tests may provide the Government with a slim opportunity to pressure the bondholders - major international investors who lent to Irish banks - to share in some of the pain.

Permanent TSB, the largest mortgage lender in the country and not covered by the September 2008 bank guarantee scheme, could be used to set a precedent for foreign lenders to accept losses rather than leave the burden with Irish finance houses and the State.

As part of IL&P - which was de-listed from the the London and Dublin stock exchanges this morning after a sudden share price collapse - it is expected to fail the stress tests by €2bn.

A Government cash injection would see it effectively nationalised and the board forced into selling its lucrative pensions division, Irish Life.

Elsewhere, Bank of Ireland is in a dogfight to stave off the need for further cash.

It has already been paid €3.5bn and there have been reports it wants to raise finance through the markets rather than State investment.

AIB is effectively in State control after €7.2bn of Irish Exchequer funds and has been told it needs at least another €4.6bn.

The EBS - which has been for sale for months - was dramatically taken off the market on the eve of the stress test report.

Mr Noonan ordered the move, angering prospective buyers in the Cardinal Capital investment group, after State agency the National Treasury Management Agency claimed the consortium's bid was not sufficiently commercially attractive.

The other high-profile parts of the domestic banking sector, aggressive lenders Anglo Irish Bank and Irish Nationwide, have been crunched together and are being wound up by the State.