DUBLIN: Ireland, rescued by an EU-IMF bailout last year, could be forced to nationalise more banks after stress tests Thursday expected to show its lenders need billions of euros in additional funds.
The Irish Central Bank publishes the outcome of tests on already state-owned Allied Irish Banks (AIB), Bank of Ireland (BoI), nationalised Educational Building Society (EBS) and Irish Life & Permanent (IL&P) at 1530 GMT.
The tests, a requirement of the 85-billion-euro ($115-billion) EU-IMF bailout, assess capital and liquidity levels to determine whether the four lenders can withstand more macro-economic shocks over the next three years.
Ireland, a member of the eurozone, is plagued by worries over its struggling banking sector amid ongoing debt tensions across the single-currency bloc.
"Without doubt, the results will show the banking system requiring a further capital injection," said analyst Adam Cole at RBC Capital Markets.
"So far, 10 billion euros of the 35-billion-euro facility set up at the time of Ireland's bailout" has been earmarked for use.
"Expectations ... are that a further 15-25 billion euros will be needed."
Ahead of the results, AIB and BoI shares were suspended by the Irish Stock Exchange to prevent turmoil on the markets. Trading in IL&P stock was halted Wednesday amid rumours the state could take a stake in the private bank.
Anglo Irish Bank, already nationalised and not subject to the tests, posted Thursday a loss of 17.7 billion euros ($25 billion) for 2010, a record for an Irish company.
Ireland has nationalised four lenders over the past two years -- Anglo
Irish Bank, AIB, EBS and Irish Nationwide Building Society -- and taken a large stake in BoI.
The Irish Times said Thursday that the finance minister in the new government, Michael Noonan, would propose a major restructuring that could signal the "virtual nationalisation" of the entire banking sector.
The tests could prompt Noonan to adopt "a radical new approach" to the crisis, the newspaper reported citing a government source.
The Irish Independent said Noonan's shake-up of the sector could force together AIB and EBS while also helping the four banks to sell off assets.
Ireland has already injected about 43 billion euros into the battered banking sector since the start of the global financial crisis in 2008.
"Dublin is hoping that this announcement will convince investors that there will be no more negative surprises and that it can avoid a debt restructuring," said Rabobank analyst Jane Foley.
"The market is sceptical on both these points. The Irish banking/sovereign crisis will continue to play out for some time yet -- as will the fiscal crisis in Portugal," she said.
The results are due at a key stage in the eurozone debt crisis as fears mount that Ireland's fellow eurozone member Portugal could be next in line for an international bailout, following the rescue of Greece last year.
Ireland's banks were particularly hard hit by loan losses on toxic or high-risk property investments, while many homeowners are still struggling to keep up with their mortgage payments.
The Central Bank assessments are separate from Europe-wide stress tests being conducted by the European Banking Authority whose results are due in June.
Ireland -- formerly known as the Celtic Tiger for roaring growth spanning almost a decade from the late-1990s -- has contracted for the last three years.
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