Ireland Lays Out “Bank Rescue” Plan – Haircuts All Around ;-)

Just in time for the Easter holiday – a day redolent in Irish history, due to the 1916 rebellion –

Ireland announced sweeping measures to tighten control over the financial sector, which has been hurt by the global economic crisis and the collapse of the Irish real estate market.

Just in time for the Easter holiday – a day redolent in Irish history, due to the 1916 rebellion –

Ireland announced sweeping measures to tighten control over the financial sector, which has been hurt by the global economic crisis and the collapse of the Irish real estate market.

Just in time for the Easter holiday – a day redolent in Irish history, due to the 1916 rebellion –

Ireland announced sweeping measures to tighten control over the financial sector, which has been hurt by the global economic crisis and the collapse of the Irish real estate market.

In a series of announcements, the financial authorities said the government would take control of two thrift institutions, inject funds into other banks and take over a wide range of problem assets at the main lenders.[br]

“The Irish banking sector is now effectively nationalized,” said Brian Lucey, an associate professor of finance at Trinity College Dublin. “This was the inevitable outcome, but why has it taken a year to get to this?”

A question that, we are sure, is going to be asked soon enough about the TBTF banks in the US,

once the losses from a) derviatives and b) unsecured credit cards are fully acknowledged – IF they are ever fully acknowledged.

“It will take years to unwind,” Mr. Lucey said, in an article in the New York Times.

The Irish finance minister, Brian Lenihan, told Parliament that the government would take control of the mortgage lender Irish Nationwide Building Society and try to sell it or merge it with another entity.

It will also take over a second thrift, the EBS Building Society, through a capital injection, which will give the government “extensive powers and full economic ownership” of the lender.

In addition, Dublin will provide 8 billion euros ($10.7 billion) in capital support this week to the Anglo Irish Bank, which was nationalized last year. Anglo Irish might require an additional 10 billion euros later, Mr. Lenihan said.

Another lender, Allied Irish Banks, must sell assets in Britain, Poland and the United States, he said, adding that the government could subsequently convert its existing preferential shares.

That process might be enough to give the government full control and would leave the Bank of Ireland as the only viable private-sector lender in Ireland.

The finance minister said the Bank of Ireland needed to raise 2.7 billion euros in equity from private sources by the end of the year to meet capital standards.

Separately, the government’s National Asset Management Agency, established last year to buy and resell problem loans, said that it would acquire more than 1,200 individual loans from the five main lenders, for 8.5 billion euros, representing an average discount of 47 percent to a nominal value of 16 billion euros.

It will take 10 billion euros from Anglo Irish Bank; 3.3 billion euros from Allied Irish Banks; 1.9 billion euros from Bank of Ireland; and less than 1 billion euros from the two thrifts.

The agency was established as a so-called bad bank to absorb additional troubled assets at a deep discount.

Its structure was approved by the European Commission a month ago. A presentation on the agency’s Web site shows that it envisions taking over 77.1 billion euros in loans at a discount from the five institutions.