LONDON -(Dow Jones)- Ireland's government Sunday said it would arrange a EUR10 billion recapitalization plan for the country's largest banks, with the government itself potentially putting up much of the cash.
Ireland was one of the first countries in Europe to support its banking sector by guaranteeing deposits, a move that forced almost every government in Europe to follow suit, but this is the first time it's bolstered its banks' balance sheets.
In a statement, the government said it wanted EUR10 billion to be added to its banks' capital. State investment would be in the form of preference or ordinary shares, with existing or new investors also having the chance to participate in new issues.
A statement said "This initiative will help to foster and encourage the flow of funds to the economy, and limit the impact of financial market difficulties on businesses and individuals."
It added "In principle, existing shareholders will be expected to have the right to subscribe for new capital on the same terms as the Government."
One key issue in other similar plans across Europe is the extent to which the government, which has sometimes emerged as a major shareholder, can dictate dividend and lending policies.
The Irish government statement said only that that "Recapitalized institutions may be required to comply with such requirements as to transparency and commercial conduct as the Minister sees fit."
Some of the government cash may come from the Pensions Reserve Fund. Banks will now start talking with the government over specific plans, with proposals due early January.
-By Gren Manuel; gren.manuel@dowjones,com; +44 (0)20 7842 9279
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Publié le 14 Décembre 2008 Copyright © 2008 Dowjones