Day of reckoning for Ireland's banks

Strong and resolute action is being promised by the Minister for Finance Brian Lenihan as he revealed yesterday (Tuesday) the amount of taxpayers' money that will be required to be transferred to the banks to keep them alive as the Nama process begins. The final bill for further capital needed by the banks and building societies could be as high as €16 billion. The exact figures were set to be announced as we closed for press yesterday afternoon but the recapitalisation amounts will be determined by the discount on the Nama loans as well as the Financial Regulator's estimates based on non Nama-bound loans. Already, the Government has introduced a bank deposit guarantee, nationalised Anglo Irish Bank and pumped an eye-watering €11bn into the country's three largest lenders. The concensus early this week appeared to be that AIB is heading towards majority State ownership while Bank of Ireland is hoping to limit the State's involvement to less than a 50 per cent shareholding. Minister Lenihan has, however, in recent days been adopting a more uncompromising stance with the banks after 18 months of softly-softly dealings with them. Telling the bankers who don't like the idea of majority State involvement to like it or lump it is a change in tempo that will be welcomed by most taxpayers. This is what people have been waiting endlessly to see and hear. Bailing out the institutions which did so much damage to the economy and to the lives of ordinary people through their reckless lending practices has stuck in a great many people's throats, but there is a realisation that a process like Nama and recapitalisation of the banks' balance sheets are completely necessary to ensure we have a functioning banking system. Without it, we would have no economy. However, knowing that the top brass in the banks are now being told to put up or shut up in no uncertain terms is somehow mildly comforting. The banks in Ireland have had it their own way for too long considering the collosal damage wrought on the country's economy. People are now sick and tired of hearing about the massive figures being bandied about to rescue the likes of Anglo and AIB. They now want to see action. From this week, it appears the Government will be in control of the country's largest bank and its executives will be forced to dance to a new tune. The minister has spent several days engaged in tense negotiations with top banking executives and he has apparently heard enough. Mr Lenihan now needs to take the problem by the scruff of the neck, get Nama working, transfer the bad loans, clean up the balance sheets and recapitalise. Then he must force the banks to start lending again to businesses, in particular, which have been starved of credit since the financial crisis really hit in 2008. A direct challenge to the top brass in the likes of AIB has been a long time coming. In particular, this bank is opposed to majority State ownership but it is in the worse position of the big two and really has no choice. Mr Lenihan, it has been reported, has said that if those at the top of the bank cannot live with a 70 per cent State stake, then they can move on. It has already taken far too long to deal with the banking crisis while the lifeblood of small and medium enterprises - the backbone of the economy- has been strangled. This crisis has now been brought to a head and the message to Mr Lenihan this week must be a simply one: just get on with it.