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Sunday 4 December 2016

Package calls for extra €50bn to assist banks

Published 07/03/2011 | 05:00

THE new Government's banking reform package calls for an extra €50bn in support for the banks -- but makes no mention of where this money will come from.

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In the plan, Fine Gael and Labour say they will "seek to replace emergency lending" to Ireland's banks with "medium term, affordable, official financing".

The level of emergency lending to Ireland's banks is currently running at about €50bn -- ultimately provided by the European Central Bank when Ireland's banks pawn assets.

The source of replacement cash for that €50bn is not specified in the Programme for Government.

Fine Gael -- which will hold the finance ministry -- last night did not return calls seeking clarification on the issue.

The bailout does include a €25bn "contingency" fund earmarked for future unexpected losses at the banks but could be redirected.

The new banking programme also includes several elements that can only be carried out if the new Government can convince the European authorities and the IMF to overturn measures already agreed under the bailout.

The Programme for Government says the new administration will "end further asset transfers to Nama, which are unlikely to improve confidence in either the banks or the State".

The terms of the bailout specifically require that an additional €16bn of smaller development loans from AIB and Bank of Ireland be transferred to NAMA.

The NAMA approach would also appear to be a major boost for developer Paddy McKillen, who has been legally challenging the toxic loans agency's right to take over his loans.

Collision

The banking package also puts the new Government on a collision course with the bailout partners over the treatment of 'senior bondholders' who loaned money to banks on the understanding their cash was as safe as deposits.

The bailout terms specifically rule out sharing the cost of the banking collapse with these "senior bondholders", but yesterday's Programme for Government moots new legislation that would allow them to force losses on senior bondholders.

The new banking programme does have a number of new measures, including:



  • The creation of a strategic investment bank.
  • The introduction of a bank levy based on the size of bank's liabilities.
  • A massive restructuring of bank boards.
  • An "openly constructed" panel of "globally experienced financial services managers and directors" who can be parachuted into key roles in the banks.
  • A "fundamental review" of remuneration schemes for all banks "subject to state support".
  • A commission to review the credit union movement.


Irish Independent

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