BANKS:FUNDING THE rundown of Anglo Irish Bank and a restructuring of the smaller lenders will be the focus of crisis talks around a €70 billion to €100 billion external bailout for the banking system.
While an overall bailout figure is likely to be agreed quickly, more detailed plans for a restructuring of the banks may take several weeks, according to sources.
Anglo is the source of most concern to the European Central Bank (ECB) as the State-owned bank has drawn most heavily on emergency liquidity to meet the shortfall caused by large deposit withdrawals over fears about its future and the potential €34 billion bailout of the institution.
The focus of discussions on the restructuring of the banking system has centred around the smaller financial institutions – Irish Nationwide Building Society and EBS building society, which itself is the subject of a bid from Irish Life and Permanent.
Bank of Ireland will resist any attempts to play any significant role in a wider consolidation of the sector by merging with another institution, arguing that it is better capitalised and has a stronger funding base than its main rival, Allied Irish Banks, and the other Irish lenders.
The Government announced plans last August to split Anglo into a funding bank to retain its deposits and an asset recovery bank to be run down over time.
However, the bank has continued to lose large amounts of deposits since then, increasing the prospect that the bank would require considerable Central Bank support to fund a winding down of the institution.
The ECB has expressed concerns about the growing reliance of Irish banks on Central Bank funding and emergency liquidity due to the closure of the private funding markets to Irish institutions amid concerns about Ireland’s ability to meet the potential €50 billion banking bailout and bridge the €19 billion gap in the public finances.
Irish banks expect to provide more up-to-date analysis on potential loan losses to International Monetary Fund officials when they visit Dublin over the coming days.
