New Financial Regulator Matthew Elderfield

THE haircut on the first batch of loans being transferred to the National Asset Management Agency (Nama) is as high as 50% for some banks.

The agency, which is buying €80bn of toxic debt, will tomorrow announce the first detailed haircuts banks are facing. It is understood that the haircut varies substantially by institution, but for some it could be up to 50%, according to sources.

It is thought that the haircuts on Bank of Ireland and EBS loans will be lower than that faced by Anglo Irish Bank, AIB and Irish Nationwide Building Society.

After the stock market closes tomorrow Nama will announce the first haircuts on the biggest loans being acquired from the Irish Nationwide and EBS building societies. Bank of Ireland's will follow later in the week, while AIB's and Anglo's loans won't emerge until a week later.

As part of the government's plans to get credit flowing to businesses, it is expected to set lending targets for banks, details of which will be announced this week, and also force them to explain to individual customers why loans have been refused.

Finance minister Brian Lenihan will also this week publish legislation to establish the powerful Central Banking Commission to replace the existing Central Bank and Financial Regulator.

Lenihan will deliver a major speech on the future of the banking sector on Tuesday as part of the highly choreographed move involving Nama and the regulator.

The speech will come a day before the nationalised Anglo Irish Bank finally publishes its 2009 annual report, which will show the biggest loss of any company in the history of the state of about €11bn.

The bank is seeking a further government bailout after swallowing €4bn of taxpayers' cash last year. Chief executive Mike Aynsley said last week that it may need €9bn.

Government sources said that the recapitalisation of Anglo will be funded by the Exchequer directly from borrowing or its cash reserves rather than raiding the National Pension Reserve Fund and that the capital won't be required in a single tranche.

The new Financial Regulator Matthew Elderfield will tell the banks how much of a capital cushion they require and how quickly they have to raise the cash. Davy stockbrokers said if Elderfield sets a 7% core equity ratio it would mean AIB will have to find €5bn and Bank of Ireland €2.7bn.

Bank of Ireland will also reveal its 2009 loss this week with results for the nine months to the end of December on Tuesday. NCB Stockbrokers analyst Ciaran Callaghan is forecasting a loss of €1.5bn.