Shares in UK banking giants Barclays and RBS both slipped on news that economic analysts are predicting Ireland may be in need of financial help from either the IMF or the EU.
UK financial service institutions have been fighting an increase in anxiety levels when Ireland recently made the admission that there was a serious, rapid rise of the costs of its borrowing.
Industry experts have commented that it’s simply a matter of time until Ireland will need aid from either the IMF or the European Union due to the country’s long-term borrowing rates rocketing through and over their current levels of 9 per cent.
Upon the news, shares in both Barclays and RBS tumbled as a result. RBS lost nearly 3 per cent to end at 41p, which translates to a loss in excess of £9 billion on their 84 per cent stake of the business bank account provider. The investment banking sector is the primary holder of Irish debt, and two of the most prominent lenders in Ireland, Bank of Ireland and Allied Irish Bank, saw their share prices fall both 7 per cent and 6 per cent respectively. Additionally credit default swaps, or the price of insurance against failure of the two banks, rose steadily to record-breaking highs as well.
The high credit default swap rates are concerning with any banks that choose to trade with AIB, sources say. Additionally some have speculated that Irish banks are finding it harder to obtain overnight funding from any rival banks.
AIB was hardest hit. The bank, which has expectations to be bought out by more than 90 per cent by the government after a £4.2 billion (€5 billion) cash call, saw the cost of its credit default swap raise to €90,000 for every €1m of its debt.