The Taoiseach says the massive losses reported by Allied Irish Bank shows NAMA is making banks face up to their realities.

The country’s biggest bank today reported losses of €2.4 billion for last year after writing off €5.3 billion in bad loans.

The bank is likely to need substantial recapitalisation and is expected to announce cost cutting measures, including job losses.

In the Dáil, Brian Cowen claimed the losses show the Government’s policies on the banks are working.

“Everybody knows the banks lent far too much to speculative property development” he said.

“NAMA is making the banks take the losses on these property loans up-front, and that’s what reflected in the large losses that AIB are reporting”.

“Without NAMA the banks would have inevitably tried to do what the Japanese did in the 1990s, which would be to spread out the losses over the next decade to the detriment of lending to viable small businesses and households” he added.