http://www.irishtimes.com/newspaper/breaking/2010/0330/breaking15.html

Irish banks require an estimated €22 billion to cover losses from soured property loans and this total may rise by a further €10 billion depending on the extent of impaired loans at Anglo Irish Bank, the Dáil
was told today.

The true scale of the “black hole” left in the sector by toxic property debt was laid bare today as Nama confirmed the initial tranche of bad loans would be acquired at a discount of 47 per
cent, substantially more than the Government’s initial estimate of 30
per cent.

Minister for Finance Brian Lenihan said the State would be providing €8.3 billion to Anglo Irish Bank this week alone, and that the bank may need a further €10 billion to cover its losses from bad
property loans.

Mr Lenihan acknowledged the banking system had engaged in “reckless property lending", and had "played fast and loose” with the economic interests of this country.

He described the information that had emerged from the banking sector in the course of the Nama process as “truly shocking”.

In a statement earlier, the agency confirmed the first 1,200 loans, with a nominal value of €16 billion, had been acquired for €8.5 billion.

It said the initial tranche of loans from Irish Nationwide Building Society (INBS) and EBS Building Society had been transferred yesterday.

The agency said it would transfer the first batch of loans from Bank of Ireland on Friday, and expected to complete the acquisition of the first

loans from the two remaining participating institutions - Allied Irish Banks and Anglo Irish Bank – by early next month.

It said it expected to complete the transfer of the remaining loans from all five institutions by the end of the year and no later than end
February next year, the deadline set by the European Union Commission.

The total amount of loans that will be acquired by the agency is anticipated to be in region €81 billion.

Nama chairman Frank Daly insisted the agency was a "key element" in resolving the difficulties of the Irish banking sector. Mr Daly said in
the last 24 hours Nama had transferred loans worth just under €1
billion from INBS and EBS.

“So it is the first real concrete evidence of Nama being in operation and taking across loans. By the end of the week we will have taken something like another €2 billion from
Bank of Ireland.”

Describing the process as “thorough and painstaking”, Mr Daly said the price being paid for the loans was one that the Nama team "could stand over".

In a fundamental overhaul of the banking sector, the Financial Regulator today also announced new capital levels for banks covered under the Government’s guarantee
scheme to ensure that they withstand future losses.

Banks must now meet a core equity ratio of 8 per cent by the end of the year, the regulator said.

In a statement to the Dáil, Mr Lenihan outlined the new capital requirements the banks will need to meet targets set by the regulator.

Mr Lenihan confirmed the State would be immediately providing €8.3 billion to Anglo Irish Bank, and that the lender may require a further €10
billion.

AIB would need to raise €7.4 billion by the end of the year to meet the new regulatory requirements.

The bank will immediately start selling its overseas assets in Poland, the US and Britain to help raise part of this, but the State will have to
take a further stake in the bank, Mr Lenihan said.

Bank of Ireland would require €2.66 billion by the end of the year to meet the new capital standards, some of which it plans to raise through private
sources.

Irish Nationwide will need €2.6 billion of new capital from the State, which would be paid over 10 to 15 years to reduce the cost to the State.

EBS will require €875 million in new capital, €100 million of which will be provided by the State taking new shares giving it control of the society.

In his statement, the minister insisted that winding-up of Anglo Irish bank was not an option.

Based on figures from Anglo and the Department of Finance, Mr Lenihan said shutting down its operation could run up a bill for the taxpayer
anywhere from €60 billion to €100 billion.

He said an immediate wind-up would be followed by a fire-sale of assets with an “unnecessary loss” of €30 billion  and up front cash bills of €70 billion to meet
the cost of deposits, bondholders and the liabilities due to
commitments across Europe.

Mr Lenihan also vehemently rejected calls for a long-term wind-down insisting it was not in the taxpayers’ interests and would cost €60 billion - €30 billion losses from the sale
of assets followed by a €30 billion bill to complete the shutdown.

“Finding a long-term solution for Anglo Irish Bank is by far the biggest challenge in resolving the banking crisis. The sheer size of the bank
means there are no easy or low-cost options,” he said.

“Winding-up the bank is not and was never a viable option.” He went on: “I understand why many want us to close this bank. I understand the
impulse to obliterate it from the system.

“But I cannot, as Minister for Finance, countenance such a course of action.

The realisation of the costs involved and the wider disruption to the financial system would generate enormous instability for the State with
unforeseeable but potentially long-lasting damage to the overall
economy."

The unavoidable reality is that the bank has incurred losses from its large-scale property lending and needs substantial further capital. Unpalatable as it is, only the taxpayer can provide
that capital.

“It is the least worst option.” Mr Lenihan warned, however, there were significant uncertainties over estimates that €10 billion is needed for future recapitalisation.

Details of first wave of loans: 

Institution             Book value of loans         Value of securities exchanged         Discount

AIB                         €3.29 billion                      €1.88 billion                                   €1.41 billion (43%)

Anglo                     €10.0 billion                     €5.0 billion                                      €5 billion (50%)

BoI                          €1.93 billion                    €1.26
billion                                    €670 million (35%)

INBS                       €670 million                     €280 million                                    €390 million (58%)

EBS                        €140 million                     €90 million                                      €50 million (37%)

Total                       €16 billion                      €8.5 billion                                   €7.5 billion (47%)