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THE GOVERNMENT’s efforts to restore confidence in the banking industry are in danger of descending into farce. The effectiveness or otherwise of the Minister for Finance’s latest proposal for recapitalising the banks is hard to judge as it has been almost completely overshadowed by the growing controversy about back-to-back loans between Anglo Irish Bank and Irish Life Permanent. It is a controversy in which Mr Lenihan has managed to fully immerse himself.

Shares in AIB and Bank of Ireland fell 10 per cent and 16 per cent respectively yesterday. It is a matter of conjecture as to whether that decline was driven by concerns about the nature of the recapitalisation proposal itself or by a belief abroad – fostered by the latest revelations – that there is something so fundamentally amiss with Ireland’s banking culture that no amount of money can fix the problem.