BANKS:LEGISLATION TO pass further bank losses on to the subordinated bondholders will go before the Oireachtas next week, Minister for Finance Brian Lenihan has said.
However, there was a limit to sharing losses with bondholders, he said, and reneging on senior bondholders at the banks had “never been an option during this crisis”.
“There is simply no way this country, whose banks are so dependent on international investors, can unilaterally renege on senior bondholders against the wishes of the our European partners and the European institutions,” said the Minister.
Subordinated bondholders were not bailed out, he said, but had absorbed losses of €7 billion.
The Minister rejected the suggestion that taxpayers will bear most or all of the cost of the banks’ bad loans, saying that tens of billions of bank losses out of a total of €70 billion to €80 billion from 2008 to 2012 had been absorbed by private bank shareholders.
It was clear that there had been “no taxpayer bailout for bank shareholders”, said the Minister.
“Loan losses on this scale are unforgivable,” he said. “They reflect the recklessness of lending decisions during the bubble years and the weakness of the previous regulatory framework. We must ensure they never happen again.”
Mr Lenihan said the State had to inject large amounts of capital into the banks, in return for which the State will end up owning the bulk of the banking system.
Using cash in the National Pension Reserve Fund to recapitalise “viable banks” was necessary to ensure these institutions can serve the needs of the economy, he said.
The Government would not reverse any banking policies under the €85 billion external aid plan.
“The programme builds upon and intensifies the measures introduced to date. The most senior members of the international team negotiating the programme have endorsed our policies.”