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BOI and AIB will need new bailouts, warns Central Bank

CENTRAL Bank governor Patrick Honohan has indicated that AIB and Bank of Ireland will require additional recapitalisation "very soon", but opposition parties have warned the Government against pumping more cash into Anglo Irish Bank.

It is expected that fresh cash will be provided to the two main Irish banks within the next two months as the toxic loans are transferred to NAMA.

However, Mr Honohan, appearing before a Joint Oireachtas Finance Committee, would not divulge the extent of the additional supplements to the banks.

Former financial regulator Patrick Neary and former Central Bank governor John Hurley are to come before Mr Honohan as part of his preliminary inquiry into the banking crisis.

The Government has already provided a total of €11bn into Bank of Ireland, Allied Irish Banks (AIB) and nationalised Anglo Irish Bank.

Separately, Taoiseach Brian Cowen has outlined that Anglo Irish Bank has put a plan to the European Commission about setting up a self-contained bad bank idea and providing for a new good bank idea.

But Fine Gael leader Enda Kenny has warned that further state funding for Anglo would lead to a "revolution in the streets".

The bank is expected to reveal losses of up to €12bn within the next few weeks.

Mr Kenny said that the Government should not put "one further cent of taxpayers' money'' into the bank unless it ensured that those who invested in a speculative fashion for return could share some of the pain caused by the crisis.

Finance Minister Brian Lenihan said decisions on recapitalisation had to be taken soon but that the taxpayer should remain the last resort.

Labour leader Eamon Gilmore asked if the Government had plans to change its policy on the banks, or were they going to have a continuation of a policy which was resulting in little or no credit to businesses, and leaving the taxpayer to dig deeper and deeper to pay to the banks.

The Government had made it clear that if further recapitalisation was required, its preference was that it should be raised from private sources in the first instance, he added.

If that was not possible, the State would provide the capital, said Mr Cowen.