Finance Minister Brian Lenihan has told the Dáil that the State may need to pump more than €18 billion into Anglo Irish Bank.
He was outlining how much new capital the banks will need to meet targets set by the Financial Regulator earlier this evening.
The Minister said he was providing €8.3 billion to Anglo Irish Bank this week, but additional capital will be needed to help it cope with its losses. The current estimate is that this could involve another €10 billion over time, though there was still uncertainty over this figure.
The €8.3 billion will be paid over a number of years, reducing the cost to the Exchequer. He said he understood why people wanted to close the bank, but this would involve huge costs to the State, and potential damage to the State. He predicted an exit of the bank from state hands in five to seven years.
Asked if Anglo may need even more money, the Minister later told a press conference it was better to attempt some clarity on the bank's exposure rather than give no clarity at all.
Read more about the NAMA figures and the Regulator's targets here
Read the Minister's speech in full here
The Minister said that what has emerged from the NAMA process is 'shocking', and the losses were 'horrifying'. He said the worst fears about the banking system had been surpassed, and the banks had played fast and loose with the economic interests of this country. But Mr Lenihan said NAMA had carried out its valuations in a 'hard-headed' manner.
Mr Lenihan said AIB would need to raise €7.4 billion by the end of the year to meet targets. It is to start selling off assets in Poland, the US and Britain to help raise this, but the State will have to take a stake in the bank.
The Minister later told reporters he could not rule out a majority stake in AIB if that were in the bast interests of the taxpayer.
Bank of Ireland will need €2.7 billion in new capital, but it hoping to meet much if this from private sources.
Irish Nationwide will require €2.6 billion of new funds from the Government, most of which will be payable over 10 to 15 years, reducing the cost to the State. EBS will need €875m. The State will provide €100m by taking new shares in the society, which will give the Government full control.
Later this evening, the Minister told a press conference the National Treasury Management Agency will not be seeking to borrow any more money on behalf of the Government on international markets this year as a result of the re-capitalisation of the banks announced earlier this evening.
The NTMA is aiming to raise €20 billion this year, and has already raised just over half of this.
The Minister said he was ordering AIB and Bank of Ireland to lend €3 billion each to businesses this year and next year.
The National Treasury Management Agency will manage the State's stakes in EBS and Irish Nationwide, as well as Anglo Irish Bank. Stakes in AIB and Bank of Ireland will continue to be funded and held by National Pension Reserve Fund.
The Minister said he was seeking EU approval for a modified extension of the bank gaurantee scheme, which runs out in September. The extension will not cover subordinated debt.
The Dáil tonight approved the Government plan to stabilise the banking system by 83 votes to 69.
AIB confirms asset sale plans
AIB has confirmed that it plans to sell its UK business, its interest in Polish bank BZWBK and its interest in US bank M&T to help raise funds to meet financial targets set by the Financial Regulator.
The bank said it expected these sales to meet 'a substantial part' of the €7.4 billion it needs by the end of this year. AIB said it also intended to raise money from private shareholders before the end of this year, but the structure and timing of this would be discussed with the Government.
AIB also said that, if it sold its UK business, it would ask for a review of the amount of UK loans to be transferred to NAMA. It estimated that the value of these loans would be around €1.5 billion.
Irish Nationwide said it would report 'significant' losses for last year next month, and the Government's injection of funds cover these losses and the uncertainty surrounding losses it will take on loan transfers to NAMA. Chief executive Gerry McGinn said Irish Nationwide was preparing a restructuring plan to submit to the EU by the end of June.
Meanwhile, EBS Building Society welcomed the Government's commitment to recapitalise the society. It said it would aim to reduce the amount the Government needed to put in from today's estimate of €875m 'through a range of programmes and strategies'.
Irish Life & Permanent, which is not involved in NAMA, said it had been involved in talks with the Financial Regulator on its capital needs. It said that, based on initial talks, it expected that it currently had enough capital to cope with potential losses.
Opposition questions Anglo strategy
Responding to the Minister's statement, Fine Gael's Richard Bruton asked why Anglo Irish Bank is said to be of systemic importance. He said the re-capitalisation for Anglo was going into a black hole.
Mr Bruton said the Government should have considered another strategy for letting Anglo go - one that happens normally in such situations: that the creditors take over and get as much out as they can.
Labour's finance spokesperson Joan Burton said the Irish taxpayer was seeing the costs and consequences of crony Irish capitalism. She described today's recapitalisation and transfer of assets to NAMA as socialism for bankers and developers while each taxpayer was being saddled with €22,000 of debt for the Anglo Irish arrangement alone.
Deputy Burton said it was the sixth time the 'donkeys' of Fianna Fáil would ask the tax-paying 'lions' to take on the chin the mess that was made of their economy.
