Banks Need Another €24bn

The Irish government has announced a restructuring of the banking sector which will result in just two banks remaining in existence.

It follows the publication of the results of stress tests on Ireland's financial institutions which reveal they will require a further €24bn in capital to cope with potential losses.

The figures include €13.3bn for AIB, €5.2bn for Bank of Ireland, €1.5bn for EBS and €4bn for Irish Life and Permanent.

Central Bank Governor Patrick Honohan said the Irish banking crisis is proving to be the most expensive in history.

He said the stress test figures covered a worst-case scenario.

In that event, the tests estimate that the four banks will lose almost €37.7 billion over the next three years.

€9.5 billion of that will come from defaults on residential mortgage loans.

Finance Minister Michael Noonan said in future, Irish banks will be smaller, better funded and better capitalized.

He said there will be two universal full-service banks.

The first pillar will be based on Bank of Ireland, and the second will be a combination of Allied Irish Bank and the EBS Building Society.

Irish Life and Permanent, which for the first time is to take State money, is to be restructured including the sale of Irish Life Assurance and its profitable pensions and insurance businesses.

The amount of money required for capitalizing the banks is within the amount Ireland is receiving from the EU/IMF bailout fund, so no application for additional monies by the State is likely.