A NEW era dawns today for the Irish banking sector after last night's €24bn cash injection.
The move to radically reform the banking sector -- bringing the total cost of bailing out the banks to €70bn -- is designed to win back confidence from international money markets, which have been nervous about funding our financial institutions.
It will aim to make the banks stronger than those of Switzerland -- and among the best-resourced in Europe.
In a joint statement, the EU, the ECB and the IMF said it was "a major step toward restoring the Irish banking system to health", and said they could provide whatever money was needed "comfortably under the program supported by the EU and IMF".
Investors rushed to buy bonds in Irish banks after the new Government signalled bondholders would not be hit, as it set out a new banking landscape focusing solely on two main banks, AIB and Bank of Ireland.
All eyes will be on the markets today as they react to the changes.
But the Government was dealt a blow when its attempt to get a long-term deal to fund the banks from the ECB failed.
And fears were expressed about the exposure of the banks to heavy future mortgage losses.
Details of the restructuring include:
- EBS will now be forced together with AIB, the country's second-largest bank.
- Bank of Ireland must raise €4.2bn by mid-June or it will be nationalised like AIB.
- Irish Life & Permanent has two weeks to draw up a plan to sell its life business and shrink the group into a small bank.
- AIB/EBS and Bank of Ireland must lend €12bn to small and medium sized businesses.
- No bank bonuses to be paid in the future.
- Under the reform plans, however, thousands of jobs were under threat.
Central Bank Governor Patrick Honohan said the pumping of more taxpayers' cash into the banks "doesn't score highly on fairness", but the State was left with no choice but to rescue the banks once more.
He was speaking after the Central Bank announced that the State could end up putting as much as €24bn into AIB, Bank of Ireland, EBS and Irish Life & Permanent -- on top of the €46bn banking bailout that's already been promised.
"This is the best way forward, but there are no good ways forward," Prof Honohan said.
"It doesn't score highly on fairness, another way forward might score a few more fairness points, but it would be biting off nose to spite face."
Mr Noonan vowed that there would be "no half measures" in the masterplan to finally draw a line under Ireland's banking disaster.
In an attack on the state banking guarantee scheme, which tied the debts of six Irish lenders to the taxpayer two-and-a-half years ago, Mr Noonan said the date of its introduction would remain forever notorious.
"Tuesday the 30th September, 2008, will go down in history as the blackest day in Ireland since the civil war broke out," he said.
Mr Noonan added: "The banks were too big for the economy."
Sceptics pointed out this is the fifth time Irish people have been told over the past couple of years it would be the last payout they would have to endure.