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Mar, 2011

Concerns are growing that more money will be needed to bail out Ireland’s beleaguered banking sector, particularly AIB, when the results of stress tests are announced formally at the end of the month, The Sunday Business Post reports.

Quoting ‘several high-level sources’, the newspaper said AIB’s losses were expected to be much greater than previously anticipated but other institutions would also need additional capital, including Bank of Ireland.

The cabinet’s economic council is expected to discuss the issue this morning (Monday) before finance minister Michael Noonan goes to Brussels for a meeting of eurozone finance ministers. Later this week, a summit of EU leaders is expected to hold crunch talks on the level of Ireland’s indebtedness and the response to it.

The government is trying to negotiate a cut in the interest rate Ireland is currently paying on EU loans and to persuade its counterparts that senior bondholders must bear some of the losses rather than the Irish taxpayer attempting to pick up the whole tab.

The same senior sources told the newspaper the EU now accepted a “fire-sale” of bank assets would only make a bad situation a lot worse. However, it is acknowledged some non-core assets would have to go.

AIB has already received a commitment for €11 billion of public money and the banking system in general is currently expected to get €10 billion more. Now, it appears that will not be nearly enough.

Last week justice minister Alan Shatter said he was concerned about what the banks had ‘concealed’ from the previous government.

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