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Selling off assets could be 'hampered' by market conditions

EFFORTS to scale down Ireland's banks by selling off their assets could be "hampered" by prevailing market conditions, the European Commission admitted yesterday.

The Commission also warned that Ireland's banks could soon need even more capital pumped into them if loan losses rose or the economy worsened.

The commentary came in the Commission's first review of Ireland's progress in implementing the reform package agreed in exchange for our €85bn bailout.

The bank restructuring plan also involves major asset sales -- the Commission yesterday said that the process "may in turn be hampered by market conditions".

Making sure Ireland's banks have enough capital is a major aim of the package, and the existing plans allow for about €10bn to be pumped into the system to meet agreed targets.

"Additional recapitalisation needs could arise in the banking sector as a result of loan losses," the European Commission noted yesterday.

The Commission added that plans to sell off assets could also trigger losses, while the next round of stress tests in March could yield higher capital targets if the economic outlook deteriorated.

As well as the €10bn for initial injections, the bailout fund also includes €25bn for "contingencies" that arise.

Central Bank Governor Patrick Honohan has repeatedly said that he does not expect this €25bn to be used, but some commentators believe it is likely to be called upon.

Irish Independent