The Irish Congress of Trade Unions (Ictu) has called on the Government to nationalise the Irish banking system as a means of addressing the current financial crisis and the lack of credit for small businesses.
Trade unions said that nationalisation was their preferred option, however the Irish Bank Officials Association (IBOA) and Unite gave a cautious welcome to the report this morning that the investment subsidiaries of AIB, Irish Life Permanent and Bank of Ireland and a number of other Irish and international institutions are developing a plan to recapitalise the domestic banking system as co-investors with the State.
The proposal, tabled to Minister for Finance Brian Lenihan in talks yesterday, could see them invest in excess of €2 billion in funds they manage for clients into the six institutions covered by the State guarantee scheme: AIB, Bank of Ireland, Irish Life Permanent, Anglo Irish Bank, the Educational Building Society and Irish Nationwide Building Society.
Ictu economic advisor Paul Sweeney said that, preferably, the Government should borrow the money required to pay for this investment rather then using the national pension reserve fund.
Ictu and trade unions in the banking sector said that they were was totally opposed to the Irish banks being bailed out or "seized" by venture capitalists or private equity funds.
Ictu said that if "vulture capitalists" were allow to take shares in the Irish banks the taxpayer would lose, Wall St would gain and that there would be massive job losses.
The trade unions Unite and the IBOA, which represent around 40,000 staff in the banks, warned that there would inevitably be industrial relations conflict if they were taken over by venture capitalists or private equity funds.
The unions also gave a "cautious welcome" to reports that the investment subsidiaries of AIB, Irish Life Permanent and Bank of Ireland and a number of other Irish and international institutions were developing a plan to recapitalise the domestic banking system as co-investors with the State.
Mr Sweeney said that Ictu was concerned that the banks would be bailed out by venture capitalists who would become involved in the process for the short term and who would expect to make returns of 60 or 70 per cent over a couple of years.
He said that the main banks were under-valued. He said that on Monday the total market capitalisation of AIB, bank of Ireland, Anglo-Irish and Irish Life and Permanent was only €4.31 billion. He said that the net profits recorded by these banks last year was almost €6 billion.
In a policy statement Ictu said that it was unacceptable that the Irish taxpayer should incur all of the risks of the bank guarantee scheme while all the gains went to foreign venture capitalists who took little risk.
"If the Irish Government borrowed the money to invest in the banks, it could do so at four per cent interest and lend it on at 12 per cent, making a handsome profit for the taxpay on shares. If the Irish government took ordinary shares, it could – but not necessarily – eschew interest but would share in the upside when the banks' shares recover", the Ictu document states.