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Ireland's Banks Don't Need Assistance, Cowen Says

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Ireland's Banks Don't Need Assistance, Cowen Says (Update1)

By Fergal O'Brien and Maithreyi Seetharaman

July 17 (Bloomberg) -- Ireland's banks are ``very well capitalized'' and don't need government aid even after a housing slump sent shares to the lowest in more than a decade, according to Irish Prime Minister Brian Cowen.

``There is no requirement for that whatsoever,'' Cowen said in a Bloomberg Television interview in New York yesterday. ``Our banking system is very well capitalized. It's coming off a very strong performance'' over the last decade.

Irish bank shares have plunged 64 percent in the last 12 months as property prices tumbled and lending growth slowed. Bank of Ireland Plc, the country's second-biggest lender by market value, on July 8 said a deteriorating Irish economy is ``adversely impacting'' earnings.

``Irish Prime Minister Brian Cowen was batting again for the banks in New York,'' Scott Rankin, an analyst with Davy, a Dublin-based securities firm, said in a note today. ``The market wants proof, though, as there are obvious strains in the system, both liquidity and asset-quality related.''

The ISEF, an index of Irish financial stocks, rose as much as 13 percent to 5516.22, after higher-than-estimated profit at Wells Fargo & Co. sparked the biggest-ever gain in U.S. financial shares yesterday.

That gain helped stem a slide in Irish banking shares that began in May last year on concern that bad debts will rise as the economic slowdown deepens.

`Closed to Lending'

Ireland's Construction Industry Federation has said the government could boost bank liquidity by using a state agency such as the National Pension Reserve Fund to buy securitized mortgages. Lawmaker Beverley Flynn, a member of Cowen's Fianna Fail party, last week said Irish banks should have a rights offer underwritten by the National Treasury Management Agency.

``The banks are effectively closed to lending,'' Flynn said. ``Taking this action, I believe, would reverse this trend and in turn inject confidence in the economy.''

The U.S. Treasury Department on July 13 announced a plan to rescue Fannie Mae and Freddie Mac to stem a collapse of confidence in the two companies that own or guarantee about half of the nation's $12 trillion in home loans.

After a 15-year boom spurred by exports, household spending and homebuilding, Ireland's economy is set to barely grow this year as the housing slump pushes up unemployment and undermines consumer spending.

``One of the things that's been affecting market sentiment for the share prices has been a perception about exposure to the construction industry,'' Cowen said. ``It's important to point out the underlying fundamentals of the economy remain strong.''


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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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