problems again delay E8bn banks bailout
Wednesday, February 04 09:48:57
(BizWorld)
Progress has inched forward just a little as a result of yesterday's cabinet meeting on plans to recapitalise the country's two largest banks.
Draft heads of a Bill were agreed by ministers to allow the funds of the National Pensions Reserve Fund to be used for the purpose, it has emerged.
The government is currently planning to pump 8bn euro of taxpayers money into AIB and Bank of Ireland.
A government source has confirmed this morning that the heads of the Bill were agreed.
The source denied, however, that the government had also agreed to insure 24bn euro of bad debts at the two banks.
The banks are in favour, according to the source, but the government has not finally agreed.
The government's refusal is being seen as a bargaining stance in ongoing talks with the banks.
Also in play is the matter of extending the government's 440bn euro guarantee on all bank debts and deposits.
Banks are seeking a two year extension of the guarantee to assist them in raising loans beyond its current expiry date next year.
Originally the unveiling of the recapitalisation plan had been expected for yesterday, then for today. However, with discussions still ongoing between the banks and the government, no firm date has yet been set.
AIB-owned Goodbody Stockbrokers yesterday urged the state to stick to its pre-Christmas proposal to inject 2bn euro into each bank.
They also said there was a precedent worth following from Britain where "the Treasury expects that the fee for the insurance scheme" is paid through the issue of preference shares and other capital instruments.
If such an approach was adopted here , it would save the banks 3.7bn euro.
If this was combined with the initially proposed total of 4bn euro in a preference injection, the brokers say, it would come in total to 7.7bn euro, close to the amount the government is proposing to put in.
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Originally Posted by ray
