The Financial Regulator has said that AIB, Anglo Irish Bank and Irish Nationwide will require more money from State.
The development will push Ireland's deficit to 32% of economic output for this year, according to the Minister for Finance. The total cost of Anglo will be €29.3 billion, but in a worst-case scenario a further €5 billion would be needed.
The Government has also accelerated the process of transferring loans to the National Asset Management Agency in order to get final figures on the costs of repairing Ireland banking system.
AIB will need a further €3 billion on top of existing state funds being converted into shares. That is likely to push the Government's shareholding to a majority stake - potentially over 90%, though the bank will retain a stock market listing. Irish Nationwide will need a further €2.7 billion, bringing its total bail-out to €5.4 billion.
Read the Minister's statement here
Read the Financial Regulator's statement here
Anglo Irish will require a total of €29.3 billion. But in a stressed scenario, with commercial property prices falling 65% and remaining that way for 10 years Anglo Irish Bank, would need an additional €5 billion.
The Government had committed €23 billion to Anglo by the end of August. The bank is to be split into an asset recovery bank and a funding bank. The Financial Regulator said the asset recovery bank would need €29 billion, while the funding bank would require €250m.
Its estimate was based on advice from the National Asset Management Agency on how much it will pay Anglo Irish Bank for the loans it is taking on.
The bank has taken discounts of 58% so far, but the regulator's assessment estimates a discount of 67% on the remaining loans.
But the regulator carried out an additional assessment based on an 'extreme' scenario, which included a discount of 70% on the rest of the NAMA loans. This led to the additional €5 billion 'extreme' estimate.
'Bank of Ireland has sufficient capital'
The Finance Minister also said today that Bank of Ireland has already met the Financial Regulator's 2010 capital requirement and needs no new funds.
The bank has transferred €3.75 billion of loan assets to NAMA at an average discount of 36%. While the final tranche of NAMA loans may have a higher discount of up to 42%, the Central Bank has confirmed that the bank has sufficient capital to meet its capital requirements.
Because of the Minister's decision to increase the threshold of a borrower's exposure from €5m to €20m in NAMA, Bank of Ireland says it estimates that the total potentially eligible assets to be transferred to the agency will not exceed €10.1 billion compared to the previous estimate of €12.2 billion.
A special cabinet meeting last night signed off on the figures. The early morning announcement was timed to secure a head start on markets that have been nervous about the scale of the State's exposure to Ireland's banks.
