21st Aug 2018

€24bn needed to regain confidence in Irish banks

  • AIB is to be merged into a new entity (Photo: Matt Buck)

Fresh stress tests conducted on Irish banks have revealed a €24 billion capital shortfall, with Dublin rapidly announcing a restructuring plan that will likely see the country's entire banking sector brought under government control.

Announcing the results of the tests on Thursday, Irish central bank chief Patrick Honohan said: "This proves to have been one of the costliest banking crises in history."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

The stress tests gauged the ability of Irish banks to withstand further losses in a deteriorating economic environment, concentrating primarily on mortgage losses.

They found that Allied Irish Banks, once Ireland's leading lender, needs €13.3 billion in additional capital. Bank of Ireland will require a further €5.2 billion, Irish Life and Permanent €4 billion and the EBS building society €1.5 billion.

The injections will be the fifth bail-out for Ireland's banks since crisis struck in September 2008 following the fall of Lehman Brothers in the US, bringing the total state support of the debt-ridden firms to roughly €70 billion.

The figure equates to more than €15,000 for each of Ireland's 4.5 million residents, with taxpayers set to shoulder the vast majority of the burden after the government announced no writedowns for bondholders as part of its latest restructuring plan.

In a joint statement on Thursday evening, the European Commission, ECB and IMF welcomed the Irish tests as "rigorous".

Speaking in the Irish parliament after the results were announced, Irish finance minister Michael Noonan said the government would restructure the sector around "two new strong universal pillar banks", centred around a much-reduced Bank of Ireland and a new entity comprising AIB and EBS.

"This radical restructuring of the banking system is designed to put the banking system on a firm footing for the future and break the bonds with our toxic banking past," he said.

The overhaul will see the banks gradually sell off assets over time, but the size of the newly-revealed hole means Dublin will require more than the €10 billion originally envisaged of the €35bn earmarked for banks under Ireland's international loan.

The former Fianna-Fail-led administration was forced to turn to the EU and IMF last November for €85bn bail-out.

Ireland's recently elected Prime Minister Enda Kenny, head of the centre-right Fine Gael party, told parliamentarians it would not be "reasonable or logical" to go after bondholders in "live banks" which depended on the markets for funding.

Finance minister Noonan said the concept of 'burden sharing' was unpopular with the ECB and a majority of EU member states, although he maintained his desire to see bondholders in Anglo Irish Bank and Irish Nationwide see a reduction in their investments.

Anglo, a commercial property lender that has so far received €29.3 billion in government funds and is set to be wound down, was not part of the stress tests. On Thursday it announced 2010 losses of €17.7 billion, on top of the €12.7 billion it lost in 2009.

Ireland's banks have been relying on ECB short-term loans since being hit by the global credit squeeze in 2008. The Frankfurt based institution had been rumoured this week to announce a new facility which would convert these into medium-term loans, but now appears to have stalled.

The central bank did indicate however that it would suspend ratings requirements for Irish government debt, meaning Dublin's bonds will be accepted as collateral for ECB loans even if they fall below investment-grade status.

The ECB made a similar concession for Greece last year.


Greece exits bailouts, but difficult path ahead

"Greece's recovery is not an event, it is a process," EU commissioner Pierre Moscovici says. Statistics, and differences of views between the country's creditors, show that the process will not be easy.

EU gets record response on 'summertime' consultation

The EU Commission has received several million responses from citizens, businesses, and organisations on whether to end the daylight summertime savings. Any tangible change would take ... time.


Women shun EU-funded site for female entrepreneurs

Wegate.eu, which received €1.2m in EU money since its launch almost two years ago, has less than a thousand registered users - from a possible target audience of at least 10 million.

EU and US kiss and make up on trade

The US will not impose tariffs on EU cars and might take back ones on steel and aluminium, according to a magical Trump-Juncker deal.

News in Brief

  1. EU Commission: efforts 'ongoing' over Italian migrant ship
  2. Italy allows boat with migrants to dock
  3. France's Total pulls out of Iran due to US sanctions
  4. Trump accuses EU and China of currency manipulation
  5. Swedish conservatives regret unsuccessful integration policies
  6. Record high measles cases hit Europe
  7. Swedish politician declares war on media
  8. Italy threatens to return migrants to Libya


Has the time finally come for 'European champions'?

Since Emmanuel Macron took the French presidency in 2017, the concept of consolidating European industries to create continental 'champions', capable of competing on a global scale, has been revived.

EU 'tax lady' hits Google with record fine

Margrethe Vestager has fined the US tech giant with €4.34bn for abusing its market dominance in mobile operating systems - but assured US president Donald Trump that it is not because she does not like America.

Stakeholders' Highlights

  1. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  2. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  3. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  4. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  5. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  6. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  7. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  8. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  9. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  10. Mission of China to the EUChina: Work Together for a Better Globalisation
  11. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  12. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma

Latest News

  1. UK sanctions appeal risks highlighting EU divisions
  2. Wind delays launch of European wind-mapping satellite
  3. Greece 'normal' again after end of crisis, EU says
  4. Putin strikes blow against Russia's isolation by Europe
  5. EU-China cooperation on CO2 storage lost in limbo
  6. Greece exits bailouts, but difficult path ahead
  7. EU gets record response on 'summertime' consultation
  8. 'Nativism' and the upcoming Swedish and Bavarian elections

Stakeholders' Highlights

  1. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  2. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  3. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  4. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  5. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  6. FIFAGreen Stadiums at the 2018 Fifa World Cup
  7. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  8. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  9. FIFARecycling at the FIFA World Cup in Russia
  10. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  11. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  12. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up

Join EUobserver

Support quality EU news

Join us