RPT-UPDATE 2-ECB nears liquidity deal for troubled banks-source

(Repeats Saturday’s story without changes)

* Plan will be unveiled in synch with Irish stress tests

* Plan will be available euro-zone wide

* Conditions will be attached on case-by-case basis

* Irish government had been seeking such a facility

(Adds newspaper report in paragraphs 12 and 13)

By Marc Jones

FRANKFURT, March 26 (Reuters) – The European Central Bank is
putting the finishing touches on a new facility that will give
troubled euro zone banks liquidity over a longer time frame,
throwing a lifeline to Ireland’s ailing banks.

A euro zone central banking source told Reuters on Saturday
that the plan will initially be “tailor made for Irish banks”
and was likely to be announced next week to dovetail with the
results of fresh stress tests on the country’s lenders.

“This will replace the ELA (Emergency Liquidity Assistance)
that is currently being provided by the Irish central bank,” the
source said speaking on the condition of anonymity.

“It will probably be similar to the SMP (ECB bond buy
programme) in the sense there will be no fixed time frame on it;
if you had put a 5- or 10-year deadline on it these people may
have been tempted to ignore the problem until the end date was

He added that although it would initially be tailored for
Irish banks, it would subsequently be available euro zone wide.

It would be under the control of the ECB’s Governing Council
which would set the conditions attached to the loans on a case
by case basis.

An EU-IMF bailout last year has failed to resolve Ireland’s
banking crisis and after an outflow of deposits and with other
banks unwilling to lend to them, Irish lenders remain dependent
on the central bank for their day-to-day operations.

The six domestic banks are estimated to have outstanding
loans of around 150 billion euros ($210 billion) from the ECB
and Ireland’s own central bank at the end of February. Around 70
billion euros was made available under the Irish central bank’s

Ireland’s new government, elected on a mandate to
renegotiate the bailout, has been in talks with the ECB for
weeks to try and secure medium-term funding for its banks and
this facility should provide some comfort to the markets when
the results of the stress tests are published on March 31.

The tests, agreed as part of the EU-IMF bailout, are
expected to show that Bank of Ireland (BKIR.I: Quote, Profile, Research), Allied Irish
Banks (ALBK.I: Quote, Profile, Research), Irish Life & Permanent (IPM.I: Quote, Profile, Research) and EBS Building
Society [EBSBS.UL] will need around 25 billion euros, a Reuters
survey of analysts showed.

The EU-IMF bailout set aside 35 billion euros for Ireland’s

The Irish Independent newspaper reported on Saturday that
the stress tests would reveal a capital hole smaller than the 35
billion euros earmarked.

Without citing any sources, the newspaper said that Allied
Irish Banks (ALBK.I: Quote, Profile, Research), which has been effectively nationalised by
the state, may need more than 10 billion euros, Bank of Ireland
(BKIR.I: Quote, Profile, Research) would need under 5 billion euros while Irish Life &
Permanent (IPM.I: Quote, Profile, Research) and EBS Building Society [EBSBS.UL] would need
single billion sums.

(Reporting by Carmel Crimmins; Editing by Ruth Pitchford)

RPT-UPDATE 2-ECB nears liquidity deal for troubled banks-source