Ireland had hoped that the European Central Bank (ECB) would announce a new funding plan on Thursday just after the results of stress tests on Ireland’s banks were made public.

Such an announcement would have presented the problem and solution in a neat package, meant to reassure markets that Ireland did indeed have a handle on its debt woes at last. However, Reuters reported that, while the ECB did suspend ratings requirements from Irish banks, it did not announce the comprehensive medium-term funding facility that Dublin had hoped for. Still, on Friday Ireland’s banks’ senior debt made a strong showing in early trading after the announcement by Ireland’s finance minister that haircuts would be unwise.

The long-awaited stress tests, as previously reported by AdvisorOne, revealed that Irish banks still had deep debt to deal with. The hoped-for funding facility fell victim to disagreements within the governing council of the ECB; the lack of a plan raises the specter of another severe downgrade from Standard & Poor’s.

Nonetheless, the suspension of ratings requirements acted as a lifeline for the banks. The ECB issued a statement that said in part, "The ECB has decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements … in the case of marketable debt instruments issued or guaranteed by the Irish government." The statement continued, "The suspension applies to all outstanding and new marketable debt instruments. It will be maintained until further notice." A similar arrangement was made for Greece’s debt.

That news, and the announcement by Michael Noonan, Ireland’s finance minister, that the new Irish government would give up its plan to make senior unsecured bondholders of Allied Irish Bank and Bank of Ireland accept losses, led to a strong market for Irish bonds early Friday, with yield falling as well.