The Irish banking system is to get a fresh injection of €10 billion to recapitalise them as part of an €85 billion EU/IMF rescue package for Ireland.
The €10 billion will be used to immediately to recapitalise the banks to bring them up to a core tier 1 capital ratio of 12 per cent, with a €25 billion contingency.
Further recapitalisations will take place in the first half of the next year as necessary based on the results of a detailed review.
The plan would see a fundamental downsizing and reorganisation of the banking sector so it is “proportionate” to the size of the economy, the Government said.
To achieve this, banks will be required to run down non-core assets and sell off portfolios or divisions.
Nama’s reach will also be extended to remove remaining vulnerable land and development loans from Bank of Ireland and Allied Irish Bank.
The restructuring of Anglo Irish Bank and Irish Nationwide Building Society is also to be expedited swiftly and submitted for EU state aid approval.
“The credibility and implementation of the programme is underpinned by the availability of a very substantial capital pool comprised of both national and international resources,” the Government said.
The terms of the deal, outlined in the Joint EU/IMF Programme for Ireland, requires that banks promptly and fully provide for all non-performing loans.
The programme also says legislation to provide for the immediate restructuring of the Irish banking system is being prepared.
