Ireland's National Asset Management Agency yesterday said that it will today release the details of its plan to buy troubled assets from five Irish banks, including
Allied Irish and
Bank of Ireland. Shortly thereafter, Allied Irish Banks confirmed that it was in talks with its regulator regarding its capital levels, and we imagine that all Irish banks are having similar conversations. The banks' capital needs are expected to be greater than originally anticipated, as the discounts NAMA demands on the loans are expected to be higher than the 30% average initially projected. If private investors do not take up new capital stakes in the banks, something we see as unlikely, the government has said it will step up to the plate. We anticipate that the government will end up with a substantial stake in both banks, although probably higher at AIB than Bank of Ireland, and that current shareholders will be significantly diluted. We are keeping both banks unrated for now.