Opposition unconvinced by bank-guarantee plan

 

There has been a mixed reaction to the Government’s announcement it is to invest up to €10 billion in the State's biggest banks and building societies.

In a statement last night, the Government said the requirement for public investment will be assessed on a case by case basis, having regard to the "systemic importance" of the institutions in question and the most effective and economical use of resources available to the State.

The Government plans to use money from the National Pension Reserve Fund, or an other public source, to support existing shareholders and new private investors. Legislation underpinning the pension fund will be amended, the Government said.

Fine Gael has described the Government's plans as "sketchy" and "little more than a re-statement".

"It seems designed more to buy time for the Government rather than to actually get cash flowing again through our banks," finance spokesman Richard Bruton said in a statement.

"Two and a half months after the announcement of the banks guarantee other countries are much further down the road in recapitalising their banks than we are."

Speaking on Morning Irelandtoday, Mr Bruton said: “I think you’d have to reckon there’s some anticipation of difficulties ahead, and the Minister wants to make a pre-emptive move to try and bolster confidence. This doesn’t yet represent a strategy.

“On a positive note, it does mean the Minister has moved from the view he had where he would only put money into banks as a last resort.”

Mr Bruton said he had “grave doubts” that top management at the banks could remain in place. “I think in terms of confidence and a fresh start, there will be an expectation there will be a new team in place.”

Labour finance spokeswoman Joan Burton dismissed the Government move as a “non decision” on bank recapitalisation.

“The Minister is playing for time - time that business does not have and there is an urgent need to get credit flowing to the economy again. The Bank Guarantee Scheme has been in place for more than two months, yet once again the Government has deferred action,” she said.

The Labour TD said last night’s announcement was “astonishingly short on detail” and showed “no determination to address this issue in a way that is decisive and confidence-building”.

“Any State investment or co-investment must be accompanied by conditions that will protect the taxpayers and give the state an upside once the banks return to profitability," she said.

“There must also be serious reform of the banks, including the removal of key players responsible for creating this mess.”

Sinn Féin’s economy spokesman Arthur Morgan accused the Government of “lurching from crisis to crisis”. He called for “guarantees about renewed credit for business, measures to protect people at risk of losing their homes and strict regulation of the banking sector”

However, Ibec, which represents Irish business, welcomed the recapitalisation plan.

Director general Turlough O'Sullivan said: "The successful recapitalisation of the banks will ensure their long-term stability and have a positive impact on the ability of large and small businesses to acquire finance and trade successfully.

"Given the unprecedented global financial turmoil and the knock-on effect that this is having on jobs and the wider economy, it is necessary for the government to take this decisive action."

The incentive will be among topics discussed by the Cabinet when it meets later today.

Minister for Finance Brian Lenihan is expected to meet the heads of AIB, Bank of Ireland, Irish Life Permanent and Anglo Irish Bank over the coming days to discuss the plan.