Irish banks 'need an additional $39bn'

25 March 2011

An additional €27.5 billion ($39 billion) of aid from the Irish government is required by Irish banks, it has been claimed.

A survey of analysts and economists revealed the prediction, which would see around 80 per cent of the €35 billion fund set up last year exhausted, Bloomberg News reports.

Over the past 24 months, €46.3 billion has been injected into the country's banks, while Irish-based lenders' reliance on short-term European Central Bank money increased by 38 per cent in the year through February.

Their dependence on the Irish central bank, meanwhile, escalated to €70.1 billion.

Ireland is to soon publish test results to examine how banks would cope with bad loans and losses from forced asset sales - and Eoin Fahy, chief economist at Kleinwort Benson Investors Dublin, said: "The numbers from the stress tests, if anything, are going to be too pessimistic, simply because they have to be in order to have any chance of the market believing them."

The Irish government recently gave the go-ahead for Anglo Irish Bank and the Nationwide Building Society to transfer large deposits to Allied Irish Banks and Irish Life & Permanent in an effort to improve the country's banking situation.

By Gary Cooper

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