Ireland to inject up to $13.5 billion in banks
Ireland to inject up to $13.5 billion in banks
By Simon Kennedy, MarketWatch
Last update: 5:20 a.m. EST Dec. 15, 2008LONDON (MarketWatch) -- The Irish government said late Sunday that it will provide as much as 10 billion euros ($13.5 billion) to recapitalize the country's banking sector.
In a statement the Department of Finance said the move is intended to "ensure the long-term sustainability" of the sector and help underpin the availability of loans to individuals and businesses.
The statement said the investment could be made through the National Pensions Reserve Fund and may take the form of preference shares or ordinary shares. Existing shareholders will also have the right to subscribe for new capital on the same terms as the government.
Shares in the Irish banking sector were higher across the board, with Bank of Ireland (IE:BIR: news, chart, profile) surging around 19%, Allied Irish Bank (IE:AIB: news, chart, profile) up 3.5% and Anglo Irish Bank (IE:CKL1: news, chart, profile) rising 6.1%.
Irish banking stocks have been some of the heaviest hit in Europe as the country faces a deep recession, driven by a collapse in property prices. Read more on Ireland's economic problems.
Even after Monday's gains, shares in Anglo Irish Bank are still down 96% this year and Bank of Ireland is down around 90%.
While the details remained sparse, the capital injections are likely to take a form similar to those that other European governments, like the U.K. and Germany, are providing to their own banking industries.
In the U.K., for example, banks are raising more than 43 billion pounds ($65 billion) in fresh capital from the government and private investors.
Government cash also tends to come with strings attached, such as restrictions on dividend payouts or management bonuses.
"A key principle in the operation of such a fund will be to secure the interests of the taxpayers through an appropriate return on, and appropriate terms for, the investment," the Department of Finance said in its statement.
"The next step in this process will be for the minister for finance to initiate detailed engagement with the credit institutions themselves in respect of specific proposals," it added.
Ireland was the first country in Europe to fully guarantee deposits at its major banks, but had previously stopped short of providing a direct cash injection. The Department of Finance said banks are being asked to submit their proposals for funding by early January.
Simon Kennedy is the City correspondent for MarketWatch in London.
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By Simon Kennedy, MarketWatch
Last update: 5:20 a.m. EST Dec. 15, 2008LONDON (MarketWatch) -- The Irish government said late Sunday that it will provide as much as 10 billion euros ($13.5 billion) to recapitalize the country's banking sector.
In a statement the Department of Finance said the move is intended to "ensure the long-term sustainability" of the sector and help underpin the availability of loans to individuals and businesses.
The statement said the investment could be made through the National Pensions Reserve Fund and may take the form of preference shares or ordinary shares. Existing shareholders will also have the right to subscribe for new capital on the same terms as the government.
Shares in the Irish banking sector were higher across the board, with Bank of Ireland (IE:BIR: news, chart, profile) surging around 19%, Allied Irish Bank (IE:AIB: news, chart, profile) up 3.5% and Anglo Irish Bank (IE:CKL1: news, chart, profile) rising 6.1%.
Irish banking stocks have been some of the heaviest hit in Europe as the country faces a deep recession, driven by a collapse in property prices. Read more on Ireland's economic problems.
Even after Monday's gains, shares in Anglo Irish Bank are still down 96% this year and Bank of Ireland is down around 90%.
While the details remained sparse, the capital injections are likely to take a form similar to those that other European governments, like the U.K. and Germany, are providing to their own banking industries.
In the U.K., for example, banks are raising more than 43 billion pounds ($65 billion) in fresh capital from the government and private investors.
Government cash also tends to come with strings attached, such as restrictions on dividend payouts or management bonuses.
"A key principle in the operation of such a fund will be to secure the interests of the taxpayers through an appropriate return on, and appropriate terms for, the investment," the Department of Finance said in its statement.
"The next step in this process will be for the minister for finance to initiate detailed engagement with the credit institutions themselves in respect of specific proposals," it added.
Ireland was the first country in Europe to fully guarantee deposits at its major banks, but had previously stopped short of providing a direct cash injection. The Department of Finance said banks are being asked to submit their proposals for funding by early January.
Simon Kennedy is the City correspondent for MarketWatch in London.
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