The reality of recapitalisation

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The reality of recapitalisation - Jon Ihle -> tribune.ie/business/news/art … alisation/

By the end of 2009 Ulster Bank and Bank of Scotland Ireland (BoSI), the two biggest foreign banks operating in Ireland, had received capital injections from their UK parents of more than €6bn to cope with mounting loan losses in the Irish market.

It is useful to keep Ulster and BoSI in mind when considering how much money AIB and Bank of Ireland will ultimately need to deal with their own capital deficits. The two big domestic banks have a combined €264bn in outstanding loans, nearly three times that of their British-owned competitors, according to the most recent figures from 2009. Yet AIB and Bank of Ireland have been recapitalised by only €7bn so far – less than 2.7% of total loans and just slightly more in absolute terms than their much-smaller peers.

By contrast, Ulster and BoSI have taken capital support equal to 6.5% of their combined loan books of €92bn, indicating a very high level of bad debts. Despite being the smaller of the two, BoSI needed comparatively more support than Ulster, taking a cumulative €3.45bn from its owner, Lloyds, up to the end of last year. That equates to more than 10% of its loans. Ulster had received €2.6bn, or 4.3%, from RBS, which is majority-owned by the UK government.

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