The full rigours of the marketplace must apply to the banking sector and private debt must never again be allowed to become sovereign debt. The first steps have been taken. The Credit Institutions (Stabilisation) Act 2010 provides for the reorganisation and restructuring of the domestic banking system in line with the recommendations of the EU-IMF programme of support for Ireland. Recapitalisation, restructuring and reorganising of assets and liabilities of the credit institutions are being implemented. Anglo Irish Bank and Irish Nationwide Building Society are being wound up or wound down, which ever the case may be. Five credit institutions are now State owned and two pillar banks are in the process of being built up to trade profitably. Most of the impaired loan portfolios have been purchased from the banks by the National Asset Management Agency at a significant haircut of 58%, although this reduction is probably on the generous side compared to the real value of the loans in question. Only €3 billion worth of loans remain to be reviewed and transferred to NAMA. It is expected that the restructuring will be largely completed by 2012, at which point the Credit Institutions (Stabilisation) Act will lapse and the legislation before us will be activated.

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