THE GOVERNMENT will gain the power to introduce massive changes to the banking system – including the right to sack directors and change the management of banks – under a new Bill to be debated in the Dáil today.

The Credit Institutions (Stabilisation) Bill 2010, to be rushed through the Dáil today and then trucked through the Seanad tomorrow in order to ensure an early enactment, allows the Minister for Finance to transfer loans and deposits between institutions and overseas – giving the minister the power to almost singlehandedly reduce the size of the banking system.

The Irish Times reports that the Bill will also give the Minister the power to appoint special managers to a bank if there is “an imminent threat” to its viability; such managers will have the ability to sack members of the board, and overturn the decisions of a bank’s shareholders.

As the Irish Independent adds, the Bill also paves the way for subordinated ‘junior’ bondholders of banks to be forced into taking further deductions in the value of their investments, and allows the state to proceed with drawing down €10bn in banking recapitalisation funds from the EU-IMF bailout.

It also makes it illegal for banks in receipt of emergency state funding to pay bonuses to their staff.

The Bill also kickstarts the process of winding down Anglo Irish Bank and Irish Nationwide Building Society, both of which were already set to be wound down by the state, and would allow the National Pension Reserve Fund to be invested in companies not listed on the stock exchange.

This, the Irish Times suggests, would allow the government to further recapitalise AIB after it had taken 100% ownership in the institution and removed it from public listings.

The new powers would remain in place until December 2011, and is intended to supplement the Four Year Plan and the bailout agreement.

Finance minister Brian Lenihan said the bill would allow the state to restructure the banking system as it needed to, which was a “key pillar” of the agreement with the EU and IMF.