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News of overhaul welcomed

News of overhaul welcomed

(1 April 2011 – Europe) The European Commission, the European Central Bank and the IMF welcomed Ireland's overhaul of its stricken banking system Thursday as a major step towards restoring the sector back to health. 'Today's comprehensive announcements by the Irish authorities are a major step toward restoring the Irish banking system to health which is crucial for sustained revival of growth and employment,' the three institutions said in a joint statement.

The European Union's executive arm, the ECB and the IMF 'share the rigorous capital needs assessment' that was identified following stress tests.

The trio 'strongly support authorities' plans to ensure that these capital needs are met in a timely manner.'

The capital needs 'can be funded comfortably' under a programme supported by the EU and IMF, which provided a multi-billion-euro bailout to Ireland late last year.

Related plans to deleverage bank balance sheets will 'reinforce the benefits of higher capital and help banks regain access to the market sources of financing needed to enable renewed lending.'

'It is understood that the banks are likely to remain reliant on central bank funding during this deleveraging period,' the statement said.

The Irish government also made 'important announcements on the future structure of banking system,' the statement said.

'We endorse this strategy to focus on the development of a few strong pillar banks with sound business models able to serve the Irish economy's needs.'

The restructuring plans for the banks must be approved by the commission under the EU competition watchdog's state aid rules.

The commission said it would 'assess the plans based on established criteria, taking into account market structures and the need to keep markets open.'

The Central Bank of Ireland ordered a drastic overhaul of the eurozone nation's banking sector as the cost of bailing out its lenders was set to top 70 billion euros (A$99 billion).

The Central Bank of Ireland said in a statement that four lenders needed to raise an extra 24 billion euros after it carried out vital stress tests on their ability to withstand another financial crisis.
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