A pedestrian passes Allied Irish Bank automated teller machines outside a branch in Dublin. Photographer: Aidan Crawley/Bloomberg
March 31 (Bloomberg) -- David McWilliams, a former economist for Ireland's central bank, UBS AG and BNP Paribas SA, talks about prospects for a bailout of Irish banks and the implications of stress tests on the nation’s lenders. Irish regulators instructed four banks to raise 24 billion euros ($34 billion) in additional capital following stress tests on their businesses, while the government said it plans to merge two of the lenders. McWilliams speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
March 31 (Bloomberg) -- Andrew Spence, Nobel laureate and professor of economics at New York University's Stern School of Business, and Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., talk about the European debt crisis and the economies of the U.S., Japan and China. They speak with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
A sign for the Irish Life & Permanent Plc company headquarters is seen in Dublin. Photographer: Aidan Crawley/Bloomberg
The Allied Irish Banks Plc company logo sits outside the bank's headquarters in Dublin. Photographer: Aidan Crawley/Bloomberg
A pedestrian passes the Bank of Ireland Plc company headquarters in Dublin. Photographer: Aidan Crawley/Bloomberg
As Ireland’s bill to clean up Europe’s worst banking crisis reaches as much as 100 billion euros ($142 billion), the country’s authorities are counting on their latest financing plan to be enough.
The central bank instructed four lenders yesterday to raise 24 billion euros and announced plans to merge two of them. The government already injected 46.3 billion euros into the financial services industry and set up an agency that paid more than 30 billion euros for banks’ risky property loans in the past year. The total equates to about two-thirds the size of the Irish economy.
“This is the scale of the legacy that we have now inherited,” Prime Minister Enda Kenny told reporters in Dublin yesterday after the results of stress tests were released. “I can only hope that this is the final scale of it.”
Ireland is trying to convince investors at home and abroad that it’s finally plugged all the holes in the banking system, whose collapse crippled what was once Europe’s most dynamic economy. Central bank Governor Patrick Honohan said he expects the two of the country’s six domestic banks not already owned by the government to fall under state control.
“Our initial impression is that the question of whether this is enough will continue to linger,” said Marchel Alexandrovich, an economist at Jefferies International in London. “The figure is credible enough for now and buys time to see how economic growth unfolds over the next year.”
Allied Irish
Allied Irish Banks Plc (ALBK), the largest lender during the decade-long economic boom, requires 13.3 billion euros of additional capital after its stress test, the central bank said yesterday. Bank of Ireland Plc needs 5.2 billion euros, while Irish Life & Permanent Plc must raise 4 billion euros and EBS Building Society has to find 1.5 billion euros.EBS, the fifth-largest, will be merged into Allied Irish, while Bank of Ireland will focus on being a stronger domestic bank, Finance Minister Michael Noonan told parliament in Dublin. The total bailout cost for Allied Irish almost equals its peak stock market capitalization of almost 21 billion euros in 2007.
Bank of Ireland said in a statement it planned to turn to existing shareholders and capital markets for money.
Irish banks have to sell 77 billion euros of assets, with most to be offloaded by the end of 2013, a Finance Ministry official told reporters yesterday.
“None of it came as a big surprise,” Ralph Silva, a strategist at London-based Silva Research Network, said after the results yesterday. “They put a stress test out there that shows the banking industry in Ireland is dead.”
New Government
Ireland’s new government took office last month after Prime Minister Kenny’s Fine Gael party prevailed in elections and ousted Fianna Fail, which had run the country since 1997.The state currently controls four of the six domestic lenders, including Anglo Irish Bank Corp., which epitomized Ireland’s building boom and collapsed with the bursting of the property bubble and a 15 percent decline in gross domestic product. Anglo Irish said yesterday its final pretax loss was 17.7 billion euros for 2010, a record for an Irish company.
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