December 17, 2010 / 6:11 PM / 9 years ago

UPDATE 1-Irish president may refer bank law to Supreme Court

* President decides whether or not to agree with Council

* Opposition had criticised wide powers to finance minister

(Adds details, background)

DUBLIN, Dec 17 (Reuters) - Ireland’s president may refer new legislation giving the government sweeping powers to restructure the banking sector to the Supreme Court, raising doubts about the constitutionality of the bill.

Parliament this week passed the law, which will also impose losses on subordinated bondholders in state-supported lenders, however for the bill to become law President Mary McAleese needs to sign it.

McAleese, a barrister and former law professor, rarely objects to legislation though she has the right to refer it to the Supreme Court.

McAleese will convene a meeting of the Council of State — a body that includes, among others, the country’s Prime Minister, Attorney General and High Court President — to be held on Dec. 21, her office said on Friday.

Opposition lawmakers in Ireland’s centre-right Fine Gael party and centre-left Labour party had criticised the bill for giving the finance minister wide powers over the banking sector.

Political lecturer Theresa Reidy said McAleese reserved the right to agree or disagree with the Council of State’s recommendation.

“The main reason the council will meet is to discuss the constitutionality of the bill, if the president has any concerns the bill is in conflict with any element of the constitution, she can refer the bill to the Supreme Court,” political lecturer Theresa Reidy of University College Cork said.

“The president is usually quite careful. It’s rarely used, because once a bill is referred to the Supreme Court, if it is upheld, then it cannot be challenged.”

A president has referred a bill to the Supreme Court on only 15 occasions since 1937.

Ireland has agreed to a radical overhaul of its banks as part of an 85 billion euro ($113.1 billion) EU/IMF package designed to prevent future loan losses at its lender that could tip the economy over the edge and damage the wider euro zone.

The law, which applies to banks that have received state support, building societies and credit unions, will enable the government to force losses on holders of junior bank debt on a case-by-case basis via the High Court.

The new law will also allow the finance minister to transfer banks’ assets and liabilities and “take or prevent any actions in order to support the government’s banking strategy”. Given the exceptional nature of the powers, they will expire at the end of 2012. [nLDE6BD1LA] (Reporting by Padraic Halpin; writing by Yara Bayoumy)

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