The Taoiseach has today said there was no question of a bailout of Irish Nationwide for the sake of it and that the Government would consider all its options on the issue.
Brian Cowen noted the EU allows government support for financial institutions of “systemic importance” and Irish Nationwide was one such institution in Ireland.
“It’s not a question of bailing out institutions for their own sake, it’s a question of establishing financial stability in this country," Mr Cowen said.
The Taoiseach said he was not going to speculate until the Minister for Finance laid out the policy options for maintaining financial stability in the State.
Mr Cowen, speaking in Cork, added he was not aware Irish Nationwide had been making 80 per cent of its loans to property developers.
Irish Nationwide has reported an after-tax loss of €243 million for 2008 after setting aside €464 million to cover loan losses – a 10-fold increase on the previous year. This compares with an after-tax profit of €309 million in 2007.
Labour spokeswoman on finance Joan Burton said the Irish Nationwide results highlighted the "absolute failure" of the Government to regulate a building society "as it spiralled out of control".
"This is a building society which would have raised alarm bells in any properly regulated regime. An alert Government would have taken action years ago," Ms Burton said.
"The fact that Irish Nationwide has still not been wound up after two-and-a-half years after the property bubble bust and one-and-a-half years after the onset of the global credit crunch is proof positive that our current Government is incapable of resolving the banking crisis.
"Instead, they have brought about several years of economic stagnation and risk ruining the life prospects of an entire generation," the Labour deputy leader said.
The lender's bad debt charge amounts to 4.4 per cent of the loan book at the end of last year, an increase from 0.39 per cent a year earlier.
The building society said in a statement that the large increase in loan loss provisions reflected “the deterioration in economic conditions across its markets”. The lender has a heavy exposure to property development and investment in Ireland and the UK.
The building society said it reduced its loan book by 15 per cent to €10.4 billion in 2008, but that of this, €1.4 billion was due to the decline in the value of sterling. Total assets fell to €14.4 billion from €16 billion as a result.
Irish Nationwide lost €490 million in customer deposits last year.
The building society said “customer accounts” stood at €6.7 billion or 65 per cent of loans at the end of 2008 compared with 59 per cent, or €7.2 billion, a year earlier.
Mr Cowen also today insisted the Government was determined to press ahead with creating 0the National Assets Management Agency (Nama) to resolve the problems in the Irish banking system.
A number of leading academic economists argued in today's Irish Timesthat the Government should have opted for temporary but full nationalisation of the banks rather than setting up Nama.