IRELAND hit its banks with a hefty penalty to take loans off their hands and said they needed at least €22bn (£19.6m) in extra funds to recover from a property collapse that was worse than feared.
Last night revealed the discount on property loans Ireland’s National Asset Management Agency (NAMA) is taking from stricken banks and the scale of additional capitalisation needed as a result.
NAMA, the government’s so-called “bad bank”, said it would buy loans with a total nominal value of €81bn from what were the country’s three largest banks and two of its building societies.
The average discount on a first tranche of loans, to be transferred over the coming days, is 47 per cent – much more than the 30 per cent average estimated by the government last year for all loans acquired over the course of 2010.
The deeper discount reflects the magnitude of the property market collapse, particularly in the UK and Ireland, and finance minister Brian Lenihan acknowledged what the banks faced was huge.
“At every hand’s turn our worst fears have been surpassed,” he told parliament.
“The banks played fast and loose with the economic interests of this country,” he added, referring to “appalling lending decisions that will cost the taxpayer dearly for years to come”.
Fully nationalised Anglo Irish Bank needs the most by far – €8.3bn now and possibly a further €10bn in future.
Of the listed banks, Allied Irish Banks, Ireland’s second largest bank by market value, needs to raise €7.4bn of fresh capital, but it was given some time to sell assets before a decision on whether it needs another state bailout is made.
Even so, Lenihan said, the state might have to take a majority stake in AIB, whose shares have plunged over the past two days in anticipation of negative news.
AIB is to start selling assets immediately in the United States, Britain and in Poland, where it owns lender BZWBK, which it describes as “the jewel in its portfolio”.
City A.M. Reporter