Dublin Takes over Bank of Ireland after S&P Downgrade

World | November 24, 2010, Wednesday // 14:00|  views

A Protestor outisde the Irish Govermnet Buildings in Dublin believes Ireland's troubles were fortold in the bible. Calls are mounting for Irish leader Brian Cowen to quit over the country's bail-out by the EU and IMF. Photo by BGNES

The rating agency Standard & Poor's has downgraded Wednesday Ireland's long-term debt from AA minus to A, with the short-term rating cut from A-1 plus to A-1.

The move was triggered by concerns over the increased borrowing due to the European Union and International Monetary Fund bail-out.

Meanwhile, Financial Times informs that the Irish government is poised to take a majority stake in the single major lender in the country, still not controlled by the State until now – the Bank of Ireland.

The move comes after the European and IMF officials agreed to help bail out the country with loans to tackle its banking and budget crisis, stabilize financial markets and prevent loss of confidence in other euro zone members, notably Portugal and Spain.

Taking over Bank of Ireland would become part of a EUR 85 B rescue package from the EU and IMF. The government currently owns 36% of its shares.

The details of the bail-out are still being ironed-out, but it will include a large capital boost of Ireland's banks, upping their main capital to 12%. This would lead to the full nationalization of Bank of Ireland, something Dublin was hoping to avoid.

Until recently, the bank was believed to be one of the most stable in the country, but had become more and more dependent from cheap loans from the European Central Bank, over the lack of other means of financing.

In addition to increasing bank capital, the rescue package would be used to cover their future eventual losses.

Ireland already nationalized Anglo Irish Bank, and it is expected State shares in Allied Irish Banks would reach 95%.

The jitters surrounding Ireland's bank system swept across European markets Tuesday with the EUR reaching its lowest level against the USD in the last two months.

The Irish government is also planning to introduce formal targets for the banks to shrink their balance sheets over the next five to 10 years.

It is expected that Dublin would present later Wednesday a plan to reduce State expenditures by EUR 15 B in the next four years.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!

Tags: banks, Brian Cowen, irish, European, European Union, Eurozone, Republic of Ireland, finance minister, Brian Lenihan, debt crisis, corporate tax rate, Irish government, International Monetary Fund, ireland, Dublin, IMF, European Central Bank, European Commission, Eurozone finance ministers, bailout, Portugal, Spain


» Related Articles: