Banks could require public capital boost of €13bn

[Green_Bear]

**Banks could require public capital boost of €13bn **
Sunday, October 19, 2008 By Kathleen Barrington
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The government could end up as the majority shareholder in AIB, Bank of Ireland and Anglo Irish Bank if estimates that the three banks may need a public capital injection of as much as €13 billion prove correct.
The government could either call for a recapitalisation of the banking sector or could itself inject capital into the banks in return for stakes in the bank, according to research published by Swiss Bank Credit Suisse last week.
The three leading Irish banks would need as much as €13 billion in new capital if the bad debt experience here turns out to be as bad as it was in Britain in the 1990s, the research suggests.
‘‘Indeed, if we flex current capital ratios for the peak impairment charges seen in the UK in the early 90s, then the capital shortfall could be as much as €13 billion, increasing the potential government stake to 60 to 70 per cent,’’ according to the research circulated to investors last week.

[Green_Bear]

Banks may touch taxpayer for €13bn
Sunday, October 19, 2008 By Kathleen Barrington
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If the worst happens, and the banks are nationalised, the Financial Regulator won’t be the only one in the line of fire.
The gulf between official estimates of the scale of the problems faced by our banks and the estimates of international investors still remains alarmingly wide after Financial Regulator chief executive Patrick Neary insisted last week that all six Irish banks covered by the government’s €400 billion guarantee scheme were above their regulatory capital requirements, even taking account of their exposure to the troubled property market.
The fact of the matter is that, despite the guarantee scheme announced on September 30 and despite the regulatory assurances that Irish banks are well capitalised by international regulatory standards, shares in Irish banks have continued to fall sharply this month - fuelling intense speculation that the taxpayer may have to recapitalise the Irish banking system to the tune of as much as €13 billion in a move that would effectively see the Irish banks majority-owned by the state.

[Green_Bear]

Injection of capital into banks seems inevitable
Sunday, October 19, 2008, David Clerkin
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The ability of Irish banks to see out the credit crunch with merely a government guarantee is becoming unrealistic, writes David Clerkin, Markets Correspondent.
Last week, parents had a modern version of Jack and the Beanstalk to enthral their children - one in which Jack’s mother was horrified when he returned from the market after trading their cow for some Irish bank shares.
While the original story at least offered the comfort that Jack’s magic beans went on to grow to the sky, the growth prospects offered by the four quoted banks - AIB, Bank of Ireland, Anglo Irish Bank and Irish Life & Permanent - are showing few signs of a fairytale ending for their shareholders.

[Green_Bear]

Fahey calls for State to invest in Irish banks
MICHAEL O’REGAN
irishtimes.com/newspaper/ire … 16906.html

GALWAY WEST Fianna Fáil TD Frank Fahey has suggested that the Government invest in the banks. Irish banks were now at a disadvantage when compared to British and continental European banks. “I advocate that our Government should consider these issues. There is no risk involved in that the money will be repaid.”
Pat Rabbitte (Labour, Dublin South West) asked why the Government was opposed to taking an equity stake that would likely reward the taxpayer in the future.
“In today’s global conditions, would it not be justified for the National Pensions Reserve Fund, for example, to invest in our lead banks for an equity stake or other beneficial arrangement?”
Olivia Mitchell (FG, Dublin South) said the Government’s guarantee had done no more than buy time. “We must look now to a future strategy.”

[Green_Bear]

State intervention must not stifle banks
Sunday, October 19, 2008 By Michael Flynn
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The government guarantee scheme, aimed at solving the liquidity problem, does not come free. Aside from the €1 billion charge to the industry, specific controls on bank activities are being sought by the government.
These range from guidelines on executive pay and bonuses, to monitoring and reporting of over-exposure to one customer or sector, and new risk-management measures.
The government is right to seek a strong presence in return for such an enormous guarantee from the taxpayer.
However, the very fact that these kinds of controls are necessary at all is a reflection of the failures of the existing system of checks and balances. If the banks’ chief executives have made mistakes, then there is also a wider failure by the banks’ boards of directors in allowing that to happen.
The task of ensuring banks did not get into trouble should have been taken care of by their boards, particularly the non-executive chairmen and directors, and their regulators.
It would be interesting, from a corporate governance viewpoint, to know about the performance of the non-executive directors of the banks during those years of frantic property lending.