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Irish banks to get more state aid Irish banks to get more state aid
(about 1 hour later)
The Irish government is expected to announce plans to invest even more money in the country's struggling banking sector later.The Irish government is expected to announce plans to invest even more money in the country's struggling banking sector later.
The plans are expected to include increasing the government's stakes in Bank of Ireland and Allied Irish Banks in which it already holds shares. The plans are expected to include increasing the government's stakes in a number of Irish banks.
Bad loans worth billions of euros will also be moved from banks into the state's "bad" bank, formed last year. They include Bank of Ireland and Allied Irish Banks and Anglo-Irish Bank.
The Irish Republic's banks continue to struggle following 2008's crisis. Meanwhile the Irish Republic's state-run "bad bank", has announced the first loans to be transferred to it from struggling banks.
The country's major banks were particularly hit by the collapse in the Republic's property sector as well as the wider global financial crisis. The National Asset Management Agency (Nama), which was created last year, will buy 1,200 bad loans from the banks for a total of 8.5bn euros (£7.6bn, $11.4bn).
Following government investment to stabilise the banking sector last year, Irish taxpayers currently own 16% of Bank of Ireland, 25% of Allied Irish Banks and all of Anglo Irish Bank. Bad loans will be transferred from a total of five institutions, Nama said, including Allied Irish Banks, Anglo Irish Bank, Bank of Ireland, Irish Nationwide Building Society and EBS Building Society.
A national "bad" bank, named National Asset Management Agency (Nama), was also set up to take on billions of euros-worth of toxic assets from the banks. We need to translate international confidence into the banking sector... and sort it out once and for all Brian Lenihan, Irish finance minister
Under plans announced last year Nama will use 54bn euros (£48.3bn, $72.8bn) in government bonds to buy toxic assets. Speaking before the announcement, Eoin O'Callaghan, European economist at BNP Paribas, said the transfer of bad loans was important progress.
"This is the start of the plan… designed to cut the vicious circle in Ireland whereby banks aren't lending in to the economy, which is making things worse and making their own loan portfolios less likely to be paid back, making the banks even less likely to lend," he told the BBC.
'International confidence''International confidence'
The transfer of the first loans into the Nama is expected to be announced later. Irish Finance Minister Brian Lenihan is also expected to announce how much the government is prepared to pay for the loans - expected to be significantly below their current value. Later the finance minister Brian Lenihan is expected to announce further measures to shore up Irish banks as they continue to struggle following 2008's global financial crisis.
Last year's government bail-out means that Irish taxpayers currently own 16% of Bank of Ireland, 25% of Allied Irish Banks and all of Anglo Irish Bank, but that is expected to increase.
Speaking to RTE radio ahead of the announcement, Mr Lenihan said the banking sector needed to be sorted out "once and for all".Speaking to RTE radio ahead of the announcement, Mr Lenihan said the banking sector needed to be sorted out "once and for all".
This is the start of the plan… to cut the vicious circle in Ireland Eoin O'Callaghan, BNP Paribas
"The Irish state has established its own credibility as a state that can manage its own finances. There is huge international recognition of that now," he said."The Irish state has established its own credibility as a state that can manage its own finances. There is huge international recognition of that now," he said.
"We need to translate all that international confidence into the banking sector as well, and sort it out once and for all.""We need to translate all that international confidence into the banking sector as well, and sort it out once and for all."
Eoin O'Callaghan, European economist at BNP Paribas, said the plan to move bad loans out of the banks and into Nama was important progress.
"This is the start of the plan… designed to cut the vicious circle in Ireland whereby banks aren't lending in to the economy, which is making things worse and making their own loan portfolios less likely to be paid back, making the banks even less likely to lend," he told the BBC.
Contrasting fortunesContrasting fortunes
Irish plans to increase taxpayer stakes in the major banks are in contrast to the position of other countries hit by the financial crisis.Irish plans to increase taxpayer stakes in the major banks are in contrast to the position of other countries hit by the financial crisis.
In the US, several bailed-out banks have recovered sufficiently to repay the government aid they received.In the US, several bailed-out banks have recovered sufficiently to repay the government aid they received.
This month the US government announced plans to sell back its 27% stake in Citigroup - one of the banks hardest hit by financial crisis.This month the US government announced plans to sell back its 27% stake in Citigroup - one of the banks hardest hit by financial crisis.
In UK, the government is expected to consider selling back its stakes in Lloyds and Royal Bank of Scotland later this year. In UK, the government is expected to consider selling back its stakes in Lloyds Banking Group and Royal Bank of Scotland later this year.
Speculation of further action by the Irish government has caused bank shares to fall again on Tuesday, following sharp falls on Monday.Speculation of further action by the Irish government has caused bank shares to fall again on Tuesday, following sharp falls on Monday.
Shares in Allied Irish Banks were down 12.5% by lunchtime, adding to a 19.6% fall seen on Monday.Shares in Allied Irish Banks were down 12.5% by lunchtime, adding to a 19.6% fall seen on Monday.
Bank of Ireland shares were also down slightly, after falling 10.4% on Monday.Bank of Ireland shares were also down slightly, after falling 10.4% on Monday.