Scheme Hands AIB Further €18bn Loan

In his much anticipated bank recapitalisation plan, announced yesterday, the Finance Minister has invited swathes of criticism after declaring a further €18 billion in loans for crippled bank, AIB.

Brian Lenihan's banking plan was approved by 83 votes to 68 in the Daíl late last night despite containing controversial plans for the National Asset Management Agency (NAMA) to buy up 'toxic' loans from the State's banks at an average 47% discount.

Under the scheme, Allied Irish Bank will transfer €3.29 billion of assets to NAMA at a discount of 43%. Mr Lenihan added that on top of taking on the banks bad loans, the bank will also be given an €8.3 billion loan of taxpayers money before pointing out that the bank will need further capital to cover future losses with the current estimate standing at a further €10 billion future loan.

Speaking in the Daíl yesterday, Mr Lenhian said he understood why many wanted the Government to close the bank and the impulse to "obliterate it from the system".

"But I cannot, as Minister for Finance, countenance such a course of action. The realisation of the costs involved and the wider disruption to the financial system would generate enormous instability for the State with unforeseeable but potentially long-lasting damage to the overall economy.

"It is the least worst option," he added.

Brian Lenihan said Ireland was "entering the ultimate phase in the resolution of our financial crisis".

However, Fine Gael's Finance Spokesman Richard Bruton criticised the plan this morning, saying the taxpayer was now facing a bill of €40bn, and counting, for bailing out Anglo Irish Bank and the reckless debts it ran up.

Mr Bruton said over 70% of the money the Government is allocating to recapitalise our banks is now going to Anglo, which will not get one cent of new credit flowing or finance a single new job.

"The Government are throwing good money after bad with Anglo Irish Bank – to the tune of €40bn and counting. Fine Gael's policy to wind up Anglo in an orderly fashion and allow the creditors recover whatever value they can is now becoming more and more relevant.

"The Government’s argument against such a course of action is based on trying to scare people in to believing that any option but their own is too costly. This simply isn’t true," the Opposition spokesman said.

Also under the plan, Bank of Ireland will transfer €1.93 billion to NAMA, while INBS will hand over €670 million and EBS approximately €140 million.

(DW/BMcC)