Taoiseach Brian Cowen promised last year to write whatever cheques were necessary to rescue the banks and the huge cost of meeting that promise became clear yesterday.

• Anglo Irish may yet require a further €10bn to cover future losses.
• €2.6bn will be pumped into Irish Nationwide, with the state taking ownership of the institution.
• EBS will also be effectively nationalised, with the Government putting €100 million of capital into it immediately and prepared to inject more if the need arises.
• Allied Irish Banks will need to raise €7.4bn by the end of year to plug the hole in its balance sheet and if it can’t raise the capital privately, the state will step in.
• Bank of Ireland must raise €2.7bn, but is in a stronger position than the other banks and expects to be able to raise the money privately.
• The first tranche of high-risk loans being transferred from the banks to state agency NAMA will cost €8.5bn at a discount of 47%.

At a press conference last night, Mr Lenihan described the actions as the “final, decisive steps” to resolving the problems in the sector but was unable to say what the “bottom line” would be.

Before yesterday, the Government had already injected €11bn of capital into Anglo, AIB and Bank of Ireland. Yesterday’s recapitalisation measures will add a further €11.1bn to the bill, €8.3bn for Anglo, €2.6bn for Irish Nationwide, and €100m for EBS. Anglo may yet require a further €10bn, and if AIB, in particular, cannot raise money on the markets, it too will need additional capital. Based on yesterday’s figures, meanwhile, NAMA could end up paying up to €43bn for the loans it is taking off the banks in a bid to cleanse their balance sheets.

This means the total bailout bill could reach €75bn or more, and Anglo could account for over half of it. This is because, in addition to the potential €22.3bn recapitalisation requirements for Anglo, NAMA could pay up to €18bn to acquire loans from the bank. But the Government stressed
that taxpayers will see returns for some of the massive investment. It believes NAMA will eventually achieve a profit on the loans it is taking over, while the shareholdings in the banks will also yield money to the state.

Mr Lenihan laid the blame for this mess at the door of the bankers and, to a lesser extent, previous regulators. Unfortunately, he did not have the guts to name incompetent Finance ministers and officials or the former Taoiseach as having a large culpability for this mess.

In England, the UK government owns 84% of Royal Bank of Scotland. The shares in this bank need to be 50 pence each to let the taxpayer break even. The shares ended 2009 at 29.2pm flagging a loss of £20 billion to Joe Public.

Lloyds banking group is 43% owned by the UK government. Shares in Lloyds need to be 74 pence which is the average buy-in price according to the UK National Audit Office to allow the government cover costs. Shares in Lloyds were 50.69p at year end indicating a current loss of £6 billion. Lloyds had a successful £13.5 billion rights issue towards the end of the year which saved the government further investment.

The National Audit Office calculates that for every 10p increase in RBS shares the taxpayer gains £9 billion and for a 10p rise in Lloyds, there is a gain of £3 billion.

In money terms, the British taxpayer put £45.8 billion in RBS and £20.9 billion into Lloyds and is currently nursing losses of £26 billion.

The UK Financial Investments looks after the public shareholding and the question is when and whether they can off-load these shares into the market at break even or a profit for the taxpayer. Forecasters record in finance is so bad that any further comment is speculative in the extreme. Last year the low point for RBS was 10p and 16p for Lloyds. The high was 58p and 85p respectively in the autumn. So I believe that the project is salvable.

Irish banks will go through a similar trajectory especially so near neighbour experience is relevant.