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Overhaul ordered for Irish banking sector

Overhaul ordered for Irish banking sector

(31 March 2011 – Europe) Ireland's central bank has ordered a dramatic overhaul of the nation's stricken 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.

The additional capital would be covered by the 35 billion euros provided for the banks as part of Ireland's huge 85-billion-euro debt rescue agreed in November with the European Union and the International Monetary Fund.

The shake-up of the banking sector comes at a key stage in the eurozone debt crisis as fears mount that fellow eurozone member Portugal could be next for an international bailout, following Greece and Ireland last year.

The central bank also decided to merge two recently nationalised lenders -- Allied Irish Banks (AIB) and the Educational Building Society (EBS), and indicated it would likely have to take a majority stake in Irish Life & Permanent.

IL&P has also been ordered to sell its lucrative pensions division Irish Life while Bank of Ireland (BoI) will be forced to sell assets worth 30 billion euros by 2013.

'Collectively the four banks will be required to raise 24 billion euros in capital,' the central bank said in a statement.

Ireland has already pumped 46.3 billion euros into its battered banking sector and nationalised four financial institutions since the global financial crisis erupted in 2008.
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