Minister for Finance Brian Lenihan has today sought to downplay worries about the delay to the introduction of the National Asset Management Agency (Nama),
Mr Lenishan said Nama could still proceed on schedule unless the Government gets bogged down in a lengthy debate about it in the Dáil.
Shares in Allied Irish Banks and Bank of Ireland, which will transfer loans to Nama, rose by up to 7 per cent after falling as much as a 25 per cent yesterday.
Mr Lenihan today claimed the sharp share falls had not been caused by any delay to Nama but by international factors such as results from Santander, the euro zone's largest bank, which yesterday boosted provisions for an expected rise in bad debts.
Arriving at the Irish Bankers Federation conference in Dublin this morning, Mr Lenihan said the law establishing Nama was expected to be enacted by mid-November and it could meet a deadline to start transferring the biggest loans by the end of the year.
"If we protract the debate to much, there could be a delay until January," he said.
Bank of Ireland’s share price plunged 25 per cent yesterday while AIB fell 26 per cent in trading, before ending the session down 12 per cent on the previous day.
The decline in share values arose after Minister for Finance Brian Lenihan warned that loan transfers to the National Asset Management Agency (Nama) could be delayed until next year.
The delay and the subsequent fall in share prices is likely to make it considerably more difficult for AIB and BoI to raise their own capital from stock market investors, which both had been planning to do before the end of 2009.
Analysts remained concerned however that delays to the Nama launch could threaten the two main Irish banks' plans to raise private capital.
"(Lenihan's comments) just highlight that the process is likely to be more cumbersome than the market was previously willing to acknowledge," said Goodbody analyst Eamonn Hughes.
Investors have also been worried that this week's break-up of Dutch bancassurer ING heralded a heavier involvement by European Union regulators that could affect Ireland's bank rescue plans as well.
"People are seeing what happened this week, in terms of ING and the draconian measures that were taken," Allied Irish Banks chairman Dan O'Connor told the conference. "We don't know what will happen to our organisation, but certainly it's going to have serious consequences," he said.
Shares in AIB traded 1.8 per cent higher by 3pm today at €1.88, after ending 12 per cent lower yesterday. Bank of Ireland, which ended 25 per cent lower, was up 10 per cent this afternoon at €1.81.
Additional reporting: Reuters
