WHAT THE BANKS BILL DOES - Last night, having consulted the Council of State, President Mary McAleese signed the controversial Credit Institutions Stabilisation Bill into law.
The legislation gives the Minister for Finance sweeping powers over the banks. It has been criticised by opposition parties, and the European Central Bank has expressed its strong reservations about the Bill.
The Irish banking system has been in trouble for three years now. No bank has been allowed to go bust, so though activity has been reduced, there are still the same number of banks.
The Bill is supposed to help the Minister restructure, and reduce the banking system to a more sustainable size. It also gives the Minister the power to deal with the banking issue once and for all.
Within it there is burden-sharing for the junior bond holders - which means the Minister can delay payment and suspend coupons. This is aimed at boosting the capital levels of the bank.
He can remove assets from the bank to deleverage them, get rid of directors and appoint news ones with the Central Bank's approval, and also he can appoint a manager for a six-month period. These powers over banks have not been seen before in Ireland or in Europe.
There has been speculation that AIB will be fully nationalised any day now, and that the passing of this Bill was holding that up. Whatever happens, as repeated by the Financial Regulator yesterday, the bank has to meet the new capital ratio of 12% by the end of February.
Oliver Gilvarry of Dolmen Stockbrokers said AIB had made a number of disposals to raise capital, but it still needed more. He said AIB could be fully nationalised or de-listed, and shareholders could see their holdings almost wiped out.
Bank of Ireland also faces changes. It had a successful capital raising this year and State ownership is below 40%. But there are new stress tests to be done before the end of March which could lead to more capital requirements.
Mr Gilvarry said BoI would also have to put forward detailed proposals to sell off assets, which could mean a sell-off of UK loans.
Meanwhile, Bank of Ireland's current account customers face changes. To qualify for free banking. they will now have to make nine transactions every three months on their accounts, rather than three.
