Ireland yet to agree bank ratios - source

DUBLIN Thu Jan 6, 2011 11:59am GMT

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DUBLIN (Reuters) - The European Commission, European Central Bank and International Monetary Fund have extended a deadline for Ireland to agree new loan-to-deposit ratios for its banks, a source familiar with the situation said on Thursday.

Under the terms of an 85 billion euros (£72 billion) EU/IMF bailout, Ireland was meant to set "ambitious" loan-to-deposit ratios for its banks, in consultation with Europe and the IMF, by the end of 2010.

A source said the troika had requested the extension to allow more work on targets which have to be met by the end of 2013. The source said no decision had yet been taken on whether the goals would be made public.

A crisis in Ireland's banking sector, brought to the brink of collapse by years of reckless property lending, forced the government to seek external assistance in November.

In return for 35 billion euros additional capital for its banks and 50 billion to cover sovereign funding costs, Ireland pledged to radically shrink and restructure its lenders and will unveil its plans at the end of March.

The central bank said on Thursday it had hired three external advisers to assist it in its review of the banks' capital and liquidity requirements this quarter. These reviews will help establish target funding ratios for each of the banks and underpin their restructuring plans.

BlackRock Solutions, The Boston Consulting Group and Barclays Capital (BARC.L) will advise on the banks' asset and data quality, on banking sector structure issues and will provide project management resources, the central bank said.

Irish banks have uncomfortably high loan-to-deposit ratios due to a heavy reliance on borrowed funds and a recent outflow of corporate deposits.

The country's largest lender Bank of Ireland (BKIR.I) said in November its loan-to-deposit ratio had risen to 160 percent from 145 percent after a 10 billion euros outflow of corporate deposits in the third quarter.

Allied Irish Banks (ALBK.I), which was effectively nationalised late last year, said in November it had lost 12 billion euros in deposits since the end of June. It said its loan-to-deposit ratio was 159 percent at the end of September.

Bancassurer Irish Life & Permanent's (IPM.I) loan-to-deposit ratio was 240 percent in the first half of last year, highlighting its reliance on borrowed funds in the absence of a big deposit network.

(Additional reporting by Yara Bayoumy; Editing by David Holmes)

($1 = 0.7609 euro)