Thursday, March 31, 2011

Irish banks stress tests results due

Irish banks stress tests results due

Irish Life building  
Irish Life & Permanent is expected to move into government ownership
The latest estimate of the cost of the Irish banking crisis is expected to be revealed later on Thursday with the release of bank stress tests results.
They are expected to show the banks need an extra 30bn euros (£26.3bn).
The Irish Central Bank has tested four lenders - Allied Irish Banks, Bank of Ireland, Educational Building Society (EBS) and the Irish Life & Permanent.
The latest capital injection is expected to leave all four institutions in majority government ownership.
Dublin already owns most of Allied Irish Banks and the EBS following a previous rescue of the banks.
Mortgage meltdown Money set aside from the EU-IMF bail-out money agreed in November is expected to be used to fund the latest recapitalisation.
If the bill is indeed 30bn euros, it would take the total amount poured into the Irish banks since the financial crisis began to approximately 73bn euros - almost half of the Irish economy's annual output.
The 85bn-euro bail-out deal at the end of last year was in response to the massive losses run up by Irish banks as well as the government's own swelling budget deficit.

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Ireland's central bank and new government will confirm on Thursday that the hole in the country's banks is even wider, deeper and darker than seemed to be the case last November”
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The deal divided the money into 30bn euros for propping up the banking system and 50bn euros to fund day-to-day government spending.
Until now, losses in the Irish banking system have stemmed from the collapse of a speculative bubble in the commercial property sector, where billions were borrowed from the banks to fund hotels and shopping malls.
However, the latest stress tests will focus instead on an emerging meltdown in the residential sector.
Mortgage-lender Irish Life & Permanent, which has escaped the crisis thus far, had to suspend trading in its shares on Wednesday amid speculation it is about to be nationalised.
Some 5.7% of homeowners are at least three months behind with their mortgage payments.
The stress tests will assume a cumulative collapse in property prices of 62% - a level already reached in some parts of the Republic.
It will also assume the unemployment rate peaking at 14.9%, an assumption criticised by some economists as too weak, given that the latest data puts the rate at 14.7% already.

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