Here are some interesting questions from an Irish MEP which boil down to this: How come Allied Irish Banks passed the European bank stress test in July and three months later the Irish authorities stepped in to announce a €3 billion capital injection? Alan Kelly, an opposition Labour MEP, has written to European competition commissioner Joaquín Almunia, who oversees state aid programs, posing three questions, The Wall Street Journal Real Time Brussels blog reported. Was the bank giving a truly accurate assessments of its projected losses?

Financial regulator Matthew Elderfield called for an urgent review of Ireland’s bankruptcy laws as international ratings agency Moody’s reported a growing number of Irish mortgage holders are in arrears, The Irish Times reported. Reform of the bankruptcy regime could allow borrowers to earn a fresh start by discharging their debt over a reasonable period of time, Mr Elderfield said. However, he cautioned against debt forgiveness for the thousands of mortgage holders currently behind with payments on their loans.

Former Anglo Irish Bank chief executive David Drumm has filed for bankruptcy in the United States after the State-owned bank rejected his proposal to settle its legal action in the High Court in Dublin over loans of €8.5 million, The Irish Times reported. Mr Drumm applied for bankruptcy in a Boston court in Massachusetts near his US home at 3pm Irish time yesterday in advance of the bank’s case starting on October 26th.

The High Court has appointed an interim examiner to Pierse Contracting and Pierse Building Services, two companies in the Pierse Group, one of Ireland’s biggest construction firms, InsolvencyJournal.ie reported. Mr Justice Brian McGovern appointed John McStay of McStay Luby as interim examiner to the businesses after hearing that an independent accountant believes that they have a reasonable chance of survival. In a statement the companies’ directors said that they supported the appointment of Mr McStay.

Galway-based Airline Aer Arann has signed an investment agreement which should ensure the survival of the company as a going concern, the High Court heard yesterday, InsolvencyJournal.ie reported. Speaking at a hearing on the progress of Aer Arann’s examinership process, counsel for the Examiner, Rossa Fanning said that a signed investment agreement had been executed. The plans should result in Aer Arann leaving examinership. The agreement is with the Stobart Group, a listed UK logistics company, which announced that it was heading a consortium that was investing in the airline.

Aer Arann looks set to be taken over by a group comprising its current owner Pádraig Ó Céidigh and an overseas listed company, The Irish Times reported. It is understood that the airline’s examiner is in the final stages of negotiations with the parties about a multi-million-euro investment package into the cash-strapped regional airline. This is likely to be presented to the High Court on Monday for approval. A scheme of arrangement would then be put to the company’s creditors. If given the green light, this investment would save up to 300 jobs at the ailing airline.

Ireland’s Financial Regulator Matthew Elderfield told an Oireachtas committee today that there should be caution about imposing losses on holders of senior debt in insolvent Irish financial institutions, Finfacts reported. Elderfield said the Government has made its position clear on this matter and it does not intend to impose losses on senior bond holders. However, this does not rule out the possibility of some negotiations or a liquidity management exercise agreed by consent.

Taoiseach Brian Cowen insisted he did not know Anglo Irish Bank was facing insolvency the night the Government issued a blanket bank guarantee, despite attending an earlier meeting at which officials discussed the bank’s situation, The Irish Times reported. Mr Cowen told Labour Party leader Eamon Gilmore “No, I didn’t” when asked if he knew about Anglo’s insolvency that night in September 2008 when the guarantee was issued. Bank of Ireland and AIB had emergency talks with the Government after Anglo told Bank of Ireland it was facing insolvency and sought a takeover.

A legal mechanism for imposing reduced terms on a secured creditor is theoretically possible but would present significant practical difficulties, the High Court has heard, InsolvencyJournal.ie reported. In a hearing yesterday Mr Justice Frank Clarke continued the examinership of several companies in the McInerney home building group after concluding that one of three possibilities outlined in a report prepared by the examiner allowed for a realistic chance of the companies’ survival.

Ireland’s economic outlook worsened on Monday as the country’s central bank cut its growth forecast for this year, with gross domestic product now set to increase 0.2 per cent against previous forecasts of 0.8 per cent, the Financial Times reported. The slowing economy will compound the challenges the Fianna Fáil-led government faces in framing this year’s budget, which is critical to restoring investor confidence in Ireland’s fiscal consolidation plan.