Overview

The Irish Government will shortly pay in the region of e50bn (£44bn) to its banks for loan books that were previously valued at e77bn (£67bn).

The loans are largely classed as land and development loans, with around e19bn (£17bn) of them secured against UK property. This is being presented to Irish taxpayers as an absolute necessity to sustain a vibrant, independent banking sector. It will facilitate a recapitalisation of the banks’ balance sheets and should, in theory at least, enable them to start lending again for the benefit of the wider Irish economy.

Many in Ireland and internationally agree that this is a necessary move, while other commentators are warning that the purchase of these assets will burden a generation of Irish taxpayers with extraordinary levels of debt and merely postpone further nationalization of the Irish banks.

This report – written exclusively for Legal Week – asks how did the situation arrive at this point, how will the solution be implemented and what are the implications of this unprecedented intervention?

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