The flow of credit is a bluff. An attempt by the banks to roll the government into soft valuations. Hard valuations will result in a cull at the banks at senior level. Nobody wants this… eh, except anyone who is not in the banks…
What is interesting is whether the banks will now have to grow a pair and do what they should have done all along. Set up their own SPV, mark these things to myth, look for private sector recapitalisation, and work it out on the long finger. 750 million a year for fifteen years ought to do it (Random Numbers TM). This is what 75% of the banking industry in Sweden did in their bust. Only the most hopelessly insolvent (the equivalent of Anglo and INBS) were nationalised.
For the nationalised banks, it doesn’t matter what the transfer cost is. It is too late for them. The key is to squeeze as much out of the borrowers as possible and to have banks that work.
INBS should be closed down if it is insolvent. EBS and PTSB can merge with government support if that is what is required in return for equity.