BANK OF IRELAND said yesterday it has “recently seen preliminary signs” of better liquidity conditions in international markets.

The creation of the Government’s National Asset Management Agency (Nama) and the extension of a State guarantee for some bonds “should result in further improvements in liquidity conditions for Bank of Ireland”, it said in a statement.

The statement was issued after a request for a comment in response to a report from RBC Capital analysts saying that Irish banks are in a “vegetative state”.

The analysts cut their ratings on AIB and Bank of Ireland lower tier two and tier one debt to “underperform” from “sector perform”.

“Earnings power is in atrophy and free capital to unsecured debt holders is low to non-existent,” the analysts said.

Report author Hank Calenti, an analyst with RBC, said AIB, Anglo Irish Bank and Bank of Ireland appear to be on a life support from the European Central Bank.

“The ECB appears to be acting as the lender of last resort for the Irish banks as their funding models have collapsed,” the report stated. – (Bloomberg)