Brussels, 15/07/2010 (Agence Europe) - On Thursday 15 July, the European Commission approved under EU state aid rules the restructuring plan of Bank of Ireland (BOI), which foresees that BOI will pay a significant proportion of the restructuring costs, reduce its presence in certain segments of the market and through divestitures, in an effort to facilitate the entry of new market challengers, promote customer mobility and strengthen competition. As regards the restructuring plan, the Commission concluded that it fulfilled the criteria of the Restructuring Communication, as it will lead to a restoration of viability of Bank of Ireland, since there is sufficient own contribution and burden sharing by the bank and since there are sufficient measures limiting the distortion of competition.
Approval of the plan was a condition for the definitive agreement by the Commission of the €3.5 billion recapitalisation of the bank by BOI (EUROPE 9870) in 2009 (provisionally authorised in 2009) and other state aid assistance (state guarantees, loan transfer aid, etc.).
In practice, the bank will notably significantly reduce its presence in the UK corporate lending market after two of its current loan portfolios will be run down. In Ireland, it will sell its New Ireland Assurance Company plc, its mortgage brokering business ICS Building Society and the 17% stake it owns in Irish Credit Bureau. In order to enhance competition, the bank will also offer certain services to new entrants or to small banks already active in Ireland to reduce the cost for competitors to develop business in Ireland.
The Irish authorities committed to a number of market opening measures in order to enhance competition in the Irish banking market by: facilitating the entry and expansion of competitors; increasing consumer protection in the financial sector and enhancing customer mobility between banks by being able to compare costs and furthering electronic banking.
The Commission considers that the proposed measures are appropriate to ensure the bank's viability, by exiting risky portfolios and by implementing more prudent risk management practices. The plan also ensures a fair burden sharing of past losses and that the bank and its capital providers significantly contribute to the financing of the restructuring costs. The plan has therefore been approved and the aid provided in 2009 definitively accepted. (F.G./transl.fl)