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• Two new universal banks to be created • Cost of Irish bank bailout now €70bn Ireland’s embattled banks need to be bolstered by an extra €24bn (£21bn) – some €13bn of which needs to be used to prop up the troubled Allied Irish Banks (AIB). It takes the total bill for repairing the hole in the banking sector caused by the bursting of the Irish property bubble to €70bn. All the Irish banks are now likely to be state-owned. Two new universal banks are expected to be created from existing institutions – Bank of Ireland will remain while AIB and building society EBS are to be merged. “We will also ensure that they are fully recapitalised so that the world looks at these core banks with confidence and they in turn help instil confidence in our economy,” said Michael Noonan, minister for finance. The extra funds are within the funding envelope available for this purpose in the EU/IMF programme of support announced last year. Ireland’s central bank governor, Patrick Honohan, said it was “one of the costliest banking crises in history”. He said that by forcing banks to hold even more capital, he hoped that confidence would be restored to the sector, which is reliant on the European Central Bank for day-to-day funding. He said the banks needed to be able to have enough capital to meet even the markets’ most “gloomy prognostications”. While AIB will need €13.3bn, Bank of Ireland will need €5.2bn, EBS building society €1.5bn and Irish Life and Permanent some €4bn. Ireland had previously announced a figure of €46bn for the cost of bailing out its banks. Noonan blamed the cause of the crisis on the decision made in September 2008 by the former Fianna Fáil government to guarantee the banking sector and particularly Anglo Irish Bank during the international banking crisis. Anglo and Irish Nationwide were not part of the latest stress tests and there is no “immediate need” for extra capital there. “The country has been left with an appalling legacy: a legacy of debt, of unemployment, of emigration, of falling living standards and of low morale,” Noonan said. He added that overseas banks operating in Ireland, including Ulster Bank operation of Royal Bank of Scotland, “will help maintain the competitive fabric of the market” as Ireland’s banks were restructured. He described the revamped Bank of Ireland as “pillar one” of two “pillar banks”. It will shed €30bn of assets but retain its link with the Post Office in the UK. The “pillar two” bank – the combined AIB and EBS – will deleverage by €23bn by 2013. Ireland bailout European debt crisis Ireland European banks Europe Jill Treanor guardian.co.uk