30/11/2010

Banks Shares Up, Euro Down

Shares in Irish Banks have soared in the aftermath of €85 billion bailout agreement, despite the Euro floundering at a two month low.

At one point today, Irish Life and Permanent made a 61% jump, but has now slipped back slightly. Bank of Ireland, the country’s largest lender, made a 19% recovery at 10.10am, while Allied Irish Banks, the second-largest, gained 6%.

However, continued negative news and speculation of a trouble in both Spain and Portugal's economies led the euro to a two-month low against the dollar.

Ireland's Head of Financial Regulation, Matthew Elderfield, said the measures announced in the National Recovery Plan provided an "immediate and significant strengthening" of the capital position of the Irish banking sector.

His colleague at the Irish Central Bank Governor Patrick Honohan said that the "backstop" funding now available meant market confidence would return.

"The international authorities have demonstrated their confidence that Ireland can bring its debt dynamics under control. The programme also endorses the current policy approach to banking.

"It provides the necessary assurance to achieve a convincing and rapid reconfiguration and downsizing of the banks, putting the Irish banking system on a convincingly secure footing. The Central Bank will continue to provide all necessary support to the system”.

Under the deal, the banks will get as much as €35 billion of aid while senior bondholders, who have been widely responsible for Ireland's need for a bailout, will escape being held accountable for any cost.

(DW/GK)

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