Irish financial institutions are to benefit from a €10 billion stimulus plan put forward by the Irish government and private investors to recapitalise banks.The programme is intended to "ensure the long-term sustainability of the banking sector in Ireland and to underpin its contribution through the availability of credit to individuals and businesses in the real economy", the Department of Finance said in a statement issued on Monday.
Full details of the plan are yet to be disclosed, but the government intends to purchase either preference shares or ordinary shares, and might also underwrite issues of new shares.
Funding for institutions will be assessed on an individual basis "having regard to the systemic importance of the institution". Participating banks will include Anglo Irish Bank, Allied Irish Bank, Bank of Ireland, Irish Nationwide, Permanent TSB and the Educational Building Society, with representatives from these firms expected to meet with finance minister Brian Lenihan at the end of this week.
Participating institutions may be required to comply with transparency and commercial conduct requirements.
The government is considering using capital from the National Pension Reserve Fund, a fund established in 2000 to build up assets, which will part-finance the cost of social welfare and public service pensions from 2025 onwards. The government decided in July 2007 to set aside 1% of Ireland's gross national product each year for the fund.
Monday's announcement is additional to the government guarantee scheme introduced on September 30, which provides a guaranteed safeguard for all deposits, covered bonds, senior debt and dated subordinated debt of the six financial institutions partaking in Monday's recapitalisation programme. The scheme will run for two years from September 29, 2008 to September 28, 2010.
More on Structured Products
Investors’ capital at risk if underlying is below barrier level at maturity
Veteran equity derivatives banker founds London-based firm Alpima
Separating market risk from credit risk in ratings methodologies makes little sense
Lookback feature aims to mitigate sudden falls in first few months of the term
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.