Governor of the Irish central bank Patrick Honohan said yesterday the government will have to take additional equity stakes as part of the recapitilisation process.
Bank of Ireland and Allied Irish Banks will need fresh capital once they have transferred property loans with a combined book value of about €40bn (£35.1bn) to the National Asset Management Agency (NAMA), widely referred to as the “bad bank”, and written down related losses. The Irish government already owns 25 per cent stakes in each.
The government had previously said it would bail out two smaller participants in NAMA, building societies EBS and Irish Nationwide, which are discussing a merger, and said it would also be prepared to give more capital to the top lenders if needed.
Honohan said: “It is pretty clear the government will be acquiring additional equity stakes. It will of course be a sizeable sum, though some of what is needed may be raised by the banks themselves through such steps as asset sales, new issues of equity, and discounted debt buybacks.”