The €7 billion recapitalisation of Allied Irish Banks (AIB) and Bank of Ireland announced tonight by the Minister for Finance, Brian Lenihan, has drawn criticism from Labour.
Fine Gael finance spokesman Richard Bruton TD said the proposals announced were "a €7 billion gamble on the wrong horse".
"Taxpayers are now in danger of putting in the huge sum of €7,000 million, but only have banks nurse along dodgy property loans, while continuing to starve viable businesses of access to credit. This will pump capital into unreformed and unreconstructed banks with bad debts," Mr Bruton said.
He said tonight's Government announcement "has barely moved on from the announcement made in December".
Mr Bruton added he regretted a flat income cap was not imposed on executive pay "and the same team that brought us into this mess is apparently going to remain in place”.
Joan Burton, Labour spokeswoman on finance, said the recapitalisation plan was a missed chance to deliver "real bank reform".
"On virtually all the crucial issues it appears that, yet again, the banks have been allowed to dictate the terms," she said.
It is difficult to identify with any certainty what the upside, if any, for the taxpayer will be in respect of owning a stake in each bank. The maximum stake would be 25 per cent of ordinary shares, too low a threshold for what the taxpayer is paying and the risk involved. The complex formula in respect of a 25 per cent stake may in the end turn out to be nothing at all.
Ms Burton said although there will be some cut in levels of pay, "the remuneration packages will still be far too generous having regard, for instance, to limits being set in the United States and to the role that many executives played in creating our current problems."
"There is to be no general clean out at board level and the government will only be in a position to appoint 25 per cent of directors." The Labour TD said many of those who had "steered the banking ship onto the rocks will remain at the helm".
She added it was also "disappointing" the Government "has apparently backed down in the face of pressure from the banks and that only a 12 month, conditional moratorium will be applied to repossession orders on the family home."
"This is the fifth attempt the government has made since last September to sort out the banking crisis. I hope that the recapitalisation programme will succeed but I have no confidence that it will do so."
Sinn Féin Finance spokesman Arthur Morgan TD called the terms and conditions of recapitalisation "tokenistic gestures".
"The banks have said they will put a one year moratorium on mortgage repossessions yet only today the Master of the High Court said there will be an avalanche of mortgage repossessions.
“The banking executive's pay cut of 25 per cent is nowhere near sufficient. They should only be getting 25 per cent of their salary rather than a 25 per cent pay cut. Bonuses have only been postponed for one year – again a completely tokenistic gesture. Sinn Féin feels that executives who received bonuses over the last three years should be forced to give them back."
He said the clearing groups that are to be set up as a conduit between SMEs and the banks were "toothless entities without the power to ensure credit streams to SMEs".
However, Bank of Ireland tonight welcomed the package announced by the Government. "The package of measures will enable Bank of Ireland to play a full role in supporting our customers and aiding economic recovery," it said.