Irish banks to be recapitalised

The Irish Government tonight announced support for a recapitalisation programme of up to €10 billion for credit institutions. The plan would see the Government support recapitalisation alongside private investors and existing shareholders. In a statement issued this evening, it said its objective was to ensure the long-term sustainability of the banking sector in Ireland. Minister for Finance Brian Lenihan confirmed that money from the National Pensions Reserve Fund will be used in the recapitalisation programme. State investment will take the form of preference and/or ordinary shares in the institutions receiving funds.

Mr Lenihan said State investment would be assessed on a case-by-case basis and all the institutions were being asked to submit their proposals by early next month. There is a growing acceptance among some banks of the need to accept fresh capital. Bank of Ireland is believed to have considered at one point holding a rights issue in the New Year, handled by Davy Stockbrokers and UBS in London. AIB is still insisting that it does not require an injection of state capital. As a proportion of its economy and banking sector compared to the UK, the Irish bailout represents a bigger capital injection than theirs.