IRELAND'S BANKS

The Republic of Ireland is not part of the UK, but its banks are, variously in Northern Ireland and in the rest of the UK. The free movement of people and money and trade and voting rights across the boreder with the UK has meant that long before both countries joined the EC/EU they have long been intimately economically interconnected albeit. The big three Irish banks are small by HBOS or RBS comparison, if we compare Ireland to Scotland, but larger than Clydesdale & Yorkshire, Scotland's third bank. ireland led the way, however, in providing 100% gurantees for banks' depositors and bondholders.
The Irish government is investing €3.5bn in both Allied Irish Banks and Bank of Ireland to help them ride out the collapsing Irish property market, which is set to result in large-scale loan losses as developers go bust. It has already had to nationalise Anglo-Irish Bank. The €7bn ($9bn, £6.3bn) recapitalisation is by way of preference shares, paying the government an 8 % coupon, less than the 12 % charged by the UK government bank recapitalisation.
The Irish government will also take share warrants, exercisable after five years, to purchase up to 25 % of the ordinary shares of each bank. The first 15 % of the warrants will be priced at 95.7 cents for AIB and 52 cents for Bank of Ireland, with the balance priced at 37.5 cents for AIB and 20 cents for Bank of Ireland. The preference shares will be treated as regulatory capital, raising AIB’s core tier one ratio to 8 %, and Bank of Ireland to 9 %. Brian Lenihan, the finance minister, said he was satisfied that the banks were sufficiently capitalised to enable them to weather more loan losses and also to resume business lending, which has been constrained by the need to improve loan to deposit ratios and meet the market’s demand for higher capital ratios. The announcement will see the banks agree to scrap bonuses, cut directors’ total remuneration by at least 33 %, and non-executives’ fees by 25 %.
Banks have also agreed to a 12-month moratorium on pursuing house repossessions in the event of mortgage default, to ease the burden on ordinary borrowers. This is longer than RBS's voluntary 6 month moratorium. RBS owns Ulster Bank, Ireland's third biggest commercial bank.
Wednesday night’s announcement was overshadowed by continuing questions over Anglo Irish Bank, the specialist property lender nationalised in January. This followed confirmation that Irish Life & Permanent lodged €4bn in deposits at Anglo Irish last September, on the last day of Anglo Irish’s financial year. It was also just hours after the government announced a two-year guarantee for all €440bn liabilities of its six domestic lenders. Mr Lenihan said: “If there is one disappointing feature in this whole business, it is that this particular story will distract from the importance of stabilising these institutions, the two banks of greatest systemic importance to our economy.”