Message from banks is 'prepare for worst'
The temporary nationalisation of AIB and BoI may have been a better option after all, says Alan Ruddock
Two statements from Bank of Ireland on Friday underscored the crisis that continues to engulf Ireland's banking system. The first came in court, where the bank was trying to pursue unpaid loans from a developer.
According to its barrister, the bank had valued two parcels of land, one in Kildare that had been worth €17.5m at the peak of the property market and one in Athlone that had scaled the dizzy heights of €31m. Today the Kildare land is worth €4m and the Athlone land just €600,000, the bank said. Even Judge Peter Kelly, who has seen it all in the Commercial Court, was shocked, saying that his experience suggested that land prices had fallen by only 70-80 per cent.
The second statement from the bank was more formal: it had decided to issue shares to the Government amounting to just under 16 per cent of the bank because it had been prevented from paying a €250m dividend by the European Commission. When those shares are issued tomorrow the Government becomes an effective 40 per cent shareholder in Bank of Ireland (it already has the right to convert its preference shares into a 25 per cent shareholding), and that's before it has to stump up more billions to cover the bank's losses on the transfer of its property loans to the National Asset Management Agency (Nama).