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30 March 2010

Irish Finance Minister announces measures to shore up banking system


Brian Lenihan revealed that Ireland’s banks could face a capital shortfall of €32 billion. He described the state of the banking sector as "truly shocking" and condemned the banks for playing "fast and loose" with the country's economy.

Having first stabilized Irish public finances, there is now a need to move to the final phase in stabilising the country’s banking system. There has been much criticism of the length of time it has taken Ireland to get to this point but Lenihan rejects such censure. Crucial pieces of the jigsaw had to fall into place before Ireland could embark on this ultimate phase of the bank rescue. He highlighted the following three points:
·         First and foremost, Ireland is in a position to do what it is doing today because as a sovereign it is now fiscally stable and credible.
·         Second, Ireland knows the extent of the losses incurred by its banks and the scale of the damage that has been done by the excessive lending and bad practices of recent years. Through its bottom-up valuation exercise, the National Assets and Management Agency is progressively valuing and removing the most impaired loans from the system.
·         Third, Ireland has now in place a regulator of international standing who has independently and rigorously reviewed the capital requirements of the Irish banking system in accordance with best international practice.
 
 




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