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Banks told to sell loans for funding

Banks will be forced to reduce the size of their balance sheets if they want to access emergency funding.

Bank of Ireland (BoI) and Allied Irish Banks (AIB) will have to sell off tens of billions of euro in legacy loans within a matter of months, according to sources who were briefed on details of Ireland's €85bn EU and IMF bailout.

The European Central Bank has been supplying short-term funding to Irish banks.

BoI and AIB have a combined loan book of €200bn and would be the two lenders most affected by forced asset sales, according to a report. The Government is expected to force the banks to reduce their loan-to-deposit ratio to make it more in line to 110-120pc by 2013 from around 150-160pc.