MINISTER FOR Finance Brian Lenihan yesterday assured investors that their bank deposits were safe. He also welcomed the move by the Financial Regulator to ban short-selling of Irish bank stocks.
His comments came as the stock markets surged dramatically on the back of action by the US and Britain, as well as Ireland, to restore confidence to the market. The Irish Stock Exchange recorded a gain of 10 per cent yesterday with financial stocks jumping by more than a quarter.
"What I would say to Irish savers is that your deposits are secure and your Government will ensure the stability of our financial system," Mr Lenihan said. "We have been advised by the Financial Regulator that deposits are safe, that there is no danger to Irish banks, and depositors should be assured that the banks have ready access to funds."
The proportion of shorted stock in all four banks fell sharply yesterday as short-selling investors were squeezed by the regulators.
Shorted shares in Anglo, the most shorted stock of the four Irish listed banks, dropped significantly to 4.5 per cent of its shares yesterday from 7.13 per cent on September 3rd, according to London-based Data Explorers, which tracks the level of short-selling in companies.
Mr Lenihan said the regulator had "taken the right course of action because it's essential that we ensure there is no short-term speculation on our bank shares".
However, he acknowledged the problems facing Irish banks in relation to some elements of their commercial lending, but noted that "the banks are working through those problems".
Yesterday, it emerged that Anglo Irish Bank is exploring a move to take over Irish Nationwide Building Society. As staff at Irish Nationwide were told yesterday that the building society had yet to receive any takeover offer from Anglo Irish bank or elsewhere, Merrill Lynch analyst Richard Thomas said: Anglo would be "best placed" to resolve Irish Nationwide's property exposure because the bank's commercial property expertise is "unrivalled".
In the US, treasury secretary Hank Paulson said the plan to overcome the problem of toxic debt was likely to cost hundreds of billions of dollars. President George Bush acknowledged yesterday that the new measures meant putting "a significant amount" of taxpayer dollars on the line. "And the risk of not acting would be far higher. Further stress on our financial markets would cause massive job losses, devastate retirement accounts, and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take," he said.