PRESSURE IS growing from stock-market investors on the Government to speed up the recapitalisation of the banks.
The State's plan to raise up to €10 billion for the main financial institutions using public and private money has received a mixed reaction. There is concern over how the plan will actually work.
Stock-market investors gave the plan a lukewarm response and Fine Gael described it as "sketchy".
Anglo Irish Bank's share price fell 4.5 per cent to 36 cent, despite rallying almost 25 per cent earlier in the day. The share price later fell below its closing price last week. This valued the bank at €273 million - a fall of 97 per cent from a high of €13.3 billion in May 2007.
The collapse of the bank's share price and mounting fears about how long-anticipated capital injections into the banking sector would affect the interests of existing shareholders prompted the Government to announce the recapitalisation plan on Sunday. The Minister for Finance, Brian Lenihan, briefed Ministers at yesterday's Cabinet meeting.
The three other public banks - AIB, Bank of Ireland and Irish Life Permanent - outperformed Anglo, as investors noted the Government said it would assess recapitalisation proposals on "a case-by-case basis", bearing in mind the "systemic importance" of each institution.
Anglo is regarded as a specialist lender to the property market, while the other quoted banks have much wider businesses affecting the broader economy.
The Government has said it will use funds from the €18.7 billion National Pensions Reserve Fund (NPRF), along with money from private investors and existing bank shareholders, for the recapitalisation fund of up to €10 billion.
However, the Government has not disclosed the size, terms and cost of the State's investment, an omission that potential investors and existing shareholders have privately criticised, as these will determine the scale and nature of their own investments. The banks have until early January to submit recapitalisation proposals to the Government.
Fine Gael described the plans as "sketchy", saying they were "little more than a restatement", given that the Government had already offered to supplement private investment in any fresh capital injections into the banks if needed. "It seems designed more to buy time for the Government rather than to actually get cash flowing again through our banks," Fine Gael finance spokesman Richard Bruton said.
The Department of Finance has refused to say if legislation needed before the banks can be recapitalised will be passed before Christmas.
The Dáil rises on Thursday and TDs are not due to return until January 27th, which could leave uncertainty in the banking system for up to two months. However, the publication of legislation in early January and the recall of the Dáil before January 27th could coincide with new tremors on international financial markets.
TDs will today deal with the final stage of the Finance Bill, which could allow the Government to make a last-minute change to legislation. Asked if this was possible, a spokesman for the department said: "We are not commenting on whether the legislation will be done before or after Christmas."
The legislation should be debated before Christmas, after the Dáil has heard an explanation from Mr Lenihan, said Labour finance spokeswoman Joan Burton. "[He] must explain to the Dáil and to the country his plans for recapitalising the banks covered by the guarantee scheme. This must happen as a matter of urgency," she said.
The NPRF has ready access to €4 billion in cash and readily saleable Government bonds, but legislation would have to change if it is to use this money to recapitalise the banks.
Two senior executives at the State's two largest banks will appear before the Oireachtas finance and public service committee today to face questions about the lack of credit for businesses.