The Government on Thursday secured a
High Court order allowing it to inject an additional €3.7bn of State funds into
Allied Irish Banks (AIB) from the National Pensions Reserve Fund in the latest
rescue that effectively nationalises the bank that was founded in 1966. The
court also ordered the de-listing of Ireland's former top bank from main markets
of Irish and London stock exchanges.
The application was made under the Government’s new bank rescue legislation, The
Credit Institutions (Stabilisation) Act, which was signed into law by the
president this week.
The Government applied to the court to circumvent applying for shareholder
approval as AIB requires a further State injection cover higher losses on
property loans and to comply with an end-of-year deadline set by the Financial
Regulator to increase its capital.
The Government will hold 49.9% the shares in AIB to facilitate the sale of a 70%
stake in Poland's Bank Zachodni WBK to Spanish bank Banco Santander.
Following completion of the sale, the Government's convertible non-voting shares
will be transferred into ordinary shares giving the State 92.8% of the shares in
The High Court has said AIB must de-list from the main market of the Irish Stock
Exchange (ISE) and the London Stock Exchange (LSE). The court has directed that
it list on the junior Irish market, the Enterprise Securities Market instead.
AIB will be required to raise a further €6.1bn of core tier 1 capital prior to
the end of February.
The State now controls AIB, Anglo Irish Bank, Irish Nationwide Building Society
and EBS building society, leaving Bank of Ireland and Irish Life & Permanent
outside State control.
The European Commission approved the further injection of €3.7bn for AIB on
Tuesday and has approved a further €6.1bn injection into AIB so the bank can
meet a higher 12% capital ratio by the end of February.
AIB posted a loss of €2.3bn after
tax for 2009 and including a bad debt charge of €5.4bn. It was formed in 1966,
through a merger of the Provincial Bank of Ireland, Royal Bank of Ireland, and
Munster & Leinster Bank. The loss in 2009 was the first full-year loss incurred
by the bank.
THe board of AIB said today: "The
Capital Increase by year-end is, in the opinion of AIB’s Board of Directors,
critical for the continued activities of the Company and cannot be fully
completed while AIB remains listed on the main markets of the ISE and LSE. Given
the current financial position of AIB, the Capital Increase is required to
ensure that AIB complies with the minimum regulatory capital requirements of the
Central Bank of Ireland at 31 December 2010. Failure to complete the transaction
prior to year-end would likely prompt further action from the Irish State,
including the possibility of full nationalisation. As a result, the Company
believes that cancellation of the main market listings is in the best interests
of AIB and its stakeholders as a whole."
SEE Finfacts article and video, May 2009: Irish Financial Regulator’s failure to control
property bubble contributed to economic crash and consumer wealth losses
are resilient and have good shock absorption capacity to cope with the current
situation" - - Patrick
Neary, Chief Executive, Irish Financial Regulator, September
19, 2008: - two days after the collapse of US investment bank Lehman Brothers.
Statement from Department of Finance