Catalogue of Éires

18 November 2008 By George Hay Follow @gfhay

Despite a twoyear guarantee on deposits and liabilities, concerns over lowball capital ratios has helped halve the share prices of top Irish banks in a fortnight. Private backers are needed to avoid the Irish taxpayer funding hefty recapitalizations. They ll be hard to find.

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The Irish finance minister, Brian Lenihan, is to meet executives from Ireland's largest banks on November 20 to discuss a potential recapitalization of the country's banking sector.

The move comes just under two months after the Irish government guaranteed its banks' deposits for two years. It also guaranteed the sector's liabilities, which are worth double the value of Irish GDP.

The new move was prompted by plunging share prices at Allied Irish Bank and Bank of Ireland, the two biggest banks. Shares in both have fallen almost 50% since November 6, while both have fallen over 85% since January. AIB has seen credit default swap spreads widen from 90 basis points to 150bps, while Bank of Ireland's have widened 70bps to 170bps.

The Irish government has said it is open to all options on its banking sector. This could involve either a merger of a vulnerable bank with a larger peer, or a governmentunderwritten rights issue.

The government's preferred option is a private sector solution. It has been approached by JC Flowers with a view to the buyout group taking a stake in Bank of Ireland, according to a report in the Irish Times on November 19.

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