SHARES IN the four Irish banks fell sharply yesterday as concerns grew that they would need to raise extra capital and may require further Government support.
Minister for Finance Brian Lenihan refused to rule out that the State could be forced to buy stakes in the banks as other European countries inject state capital to rescue their banks.
Speaking after a banking conference in Dublin yesterday morning, Mr Lenihan said State investment in the banks was "certainly the last option" and that he would prefer that the banks try to raise any extra capital requirements by private means first.
Mr Lenihan said he would be in a better position to see the banks' capital requirements once they sign up to the State's bank guarantee by the end of this week.
"The State would like, of course, the private sector to capitalise the banks in the first instance but clearly, in a changing banking landscape, we have to keep the position under constant review," he said.
Global stocks fell sharply as it was announced that the first in a series of emergency summits involving the world's leading industrialised countries would take place in the US on November 15th to discuss the financial crisis and identify ways to stop it recurring.
Leaders from the G20 group of nations, the world's leading industrialised countries, will attend the meeting. It will be held in the Washington area and consider an overhaul of the global financial system.
Bank shares and commodity prices slumped yesterday due to rising fears that the global economy was in the throes of a recession. The UK's leading share index, FTSE 100, fell 4.4 per cent, while the top European index, the FTSEurofirst 300, declined 5.4 per cent.
The Irish stock market fell almost 6.5 per cent, with financial stocks being hit particularly badly, amid fears that the banks do not have enough capital to absorb rising losses on property loans and would have to turn to the State for additional capital to protect them.
Bank of Ireland dropped 14 per cent to €1.65, falling to its lowest level since 1994. Anglo Irish Bank declined 13 per cent to €1.80, it lowest price since November 2001. One stockbroker said Mr Lenihan's comments were "generally unhelpful" as investors were reluctant to buy shares in a bank that may end up being nationalised, diluting the value of their interest.