Brussels, 26/06/2009 (Agence Europe) - On Friday 26 June 2009, the European Commission approved an emergency recapitalisation worth €1.5 billion that the Irish authorities intend to grant Anglo Irish Bank. The Commission found the measure to be in line with its Guidance Communications on state aid during the current financial crisis (see IP/08/1495 and IP/08/1901). The Commission believes the measure constitutes an adequate means to remedy a serious disturbance in the Irish economy while avoiding undue distortions of competition and is therefore compatible with Article 87.3.b. of the EC Treaty, explaining that the measure is limited in scope, requires an adequate remuneration and provides safeguards to minimise distortions of competition. The aid has been approved given its nature as a temporary bailout. Ireland has pledged to submit a bank restructuring plan by the end of November 2009.
On 15 June 2009, the Irish government notified the Commission of its plan to recapitalise Anglo Irish Bank to the tune of €4 billion. This capital injection takes the form of ordinary shares that will qualify as core tier 1 capital. The capital will help provide the bank with sufficient own tier 1 capital resources, even if the assets fall in value again. The bank has been 100% state owned since 21 January 2009, and the new capital injection will not change the structure of its share ownership. The new ordinary shares will have the same priority as the ordinary shares already owned by the state. Moreover, Anglo will use some of the €4bn in injected funding to buy back some of the subordinated debt it issued in previous years at a reduced rate, which will also strengthen the bank's supply of category 1 own resources.
Anglo Irish Bank has an important role within the Irish financial sector - a loss of confidence in this institution could have led to a further disturbance of the current financial situation and harmful spill-over effects to the economy as whole. The discretionary remuneration of 10% per annum is consistent with the Commission's Recapitalisation Communication. The Commission also took into account that the probability of return for the state is reinforced through the possibility of combining the dividend payment in cash and ordinary shares. The Commission explains that recapitalisation is needed to solve the bank's solvency problems and maintain confidence in the Irish financial system, and “the package foresees sufficient behavioural rules to prevent an abuse of the state support… as well as the submission of a restructuring plan within 6 months for Commission's assessment and approval.” (O.L./transl.fl)