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Noonan plan for radical shake-up of entire sector

FINANCE Minister Michael Noonan is poised to propose a radical restructuring of the banks today as the stress test results are announced.

The Central Bank tests were expected to signal the virtual nationalisation of the country's entire banking sector.

Mr Noonan is to call for an EU-wide solution to the crisis, with bondholders being forced to shoulder bank losses.

European Commissioner for Economic and Monetary Affairs Olli Rehn is attending a G20 meeting in China and was not expected to make any immediate response.

Mr Noonan's proposals -- in response to the tests on Bank of Ireland (BoI), AIB, Irish Life & Permanent (IL&P) and EBS -- are being described as a major departure from the previous government's policy.

The Cabinet met this morning to sign off on the Finance Minister's proposals.

The banks are to require up to a further €25bn, pushing the cost of bailing them out to over €70bn. Reports today stated that Mr Noonan will force EBS into AIB, sparking a shake-up that will eventually lead to Ireland having only two banks -- BoI and AIB.

The test results are being closely watched by Ireland's eurozone partners.

Recapitalise

Both the European Central Bank and the European Commission are due to issue a formal response when the details are publicly announced. The results are expected to push both IL&P and BoI into majority government control.

It is the fifth attempt to recapitalise the banks, which have cost taxpayers €46bn to date. BoI is already 36pc state-owned and is desperately trying to stave off nationalisation.

Trading in shares at BoI and AIB was temporarily suspended today for 24 hours pending the stress test results this afternoon.

Shares in IL&P were suspended yesterday after it emerged the bank was expected to be virtually nationalised. The lender was expected to need in excess of €3bn.

EBS will require about €1bn, while AIB will also need billions more despite having already availed of €4.7bn of taxpayers' money.

The developments come as the Government announced it was not going ahead with the sale of EBS to a private consortium.

The National Treasury Management Agency said the process was ended because Mr Noonan decided the bid was "not sufficiently commercially attractive to the State to merit continuing with the sale process".

comurphy@herald.ie