Ireland to reveal bank writedowns by July
DUBLIN (Reuters) - The Irish government will reveal the size of the writedown banks will be told to make on their property loans when it publishes legislation on its 'bad bank' scheme in July, Finance Minister Brian Lenihan said on Monday.
The size of the discount Dublin will demand for parking the loans in a state-run 'bad bank' will determine whether Bank of Ireland and Allied Irish Banks require more capital from the government, which could lead to majority state ownership.
"We will know the extent of the writedowns by the time of the enactment of the legislation," Lenihan told a news conference in Dublin.
Lenihan said on Sunday that the law establishing the National Asset Management Agency (NAMA), which will take over loans and assets with a book value of up to 90 billion euros (79.2 billion pounds), would be ready by July and parliament could be recalled from summer recess to enact it.
Ireland's major lenders are submitting a breakdown of their loan portfolios to government this week.
Lenihan has said Dublin faces "enormous practical difficulties" in setting up the 'bad bank'. Some of the loans are cross-collaterialised and their valuation has been complicated by a collapse in the local property market.
European Union guidance says that the haircut on the loans and underlying collateral should be based on their economic value over the economic cycle rather than current market estimates.
Bank of Ireland, the country's largest lender by assets, said last week that it did not believe it needed additional state capital after receiving 3.5 billion euros from the government earlier this year, giving the state a 25 percent indirect stake.
Allied Irish Banks, which also received a 3.5 billion euro state handout and has a larger exposure to risky commercial property ventures, has said it needs to raise an additional 1.5 billion euros of capital this year.
Anglo Irish Bank, which Dublin nationalised earlier this year following a collapse of investor confidence, will report interim results later this week.
Lenihan said on Sunday that its losses would be "somewhat beyond expectation" amid local media reports that it would need 3.5 billion euros in state capital to cover loan loss provisions for the first half.
Shares in Allied Irish Banks and Bank of Ireland were flat on Monday.
