ECB set to offer struggling Irish banks a medium-term lifeline

THE European Central Bank is working on a plan to keep struggling Irish banks afloat in the medium term.

The new facility, which would replace the use of the Emergency Liquidity Assistance programme, would give Irish banks more time to shrink their assets and reduce their dependence on emergency funding.

Ireland’s banks have an estimated €150bn (£132bn) in loans from the ECB and Irish central bank.

And a weekend report in the Sunday Business Post suggested that upcoming stress tests on Ireland’s four main lenders will reveal a capital hole of around €20bn.

Ireland’s central bank will on Thursday publish the new stress test results from Bank of Ireland, Allied irish Banks, Irish Life& Permanent and EBS Building Society.

The central bank has declined to comment in advance of the results.

A Reuters survey of analysts showed that around €25bn out of the €35bn set aside for the banks under EU-IMF deal would be required as a result of the stress tests.

However the creation of a scheme, said to be called a “Facility for Banks Under Restructuring,” would reduce the need for panic banking sales.