Dublin prepares to inject €3.7b into AIB
DUBLIN: The Irish government took a step on Thursday towards effectively nationalising Allied Irish Banks, the country's second largest general lender, as it prepared to inject €3.7bn into the bank.
Brian Lenihan, finance minister, will seek permission later on Thursday from the Dublin High Court to make the new capital injection from the country's National Pension Reserve Fund, national broadcaster RTE reported.
The Irish government had battled for the last two years to limit its ownership to no more than 75 per cent, even as AIB sold billions of euros in commercial property loans at average discounts of as much as 59 per cent to the National Asset Management Agency, the government's "bad bank". Nama was set up last year to take over €87bn in loans that five lenders recklessly advanced to property developers during Ireland's economic boom.
But majority state ownership became a certainty after the European Union and International Monetary Fund last month pledged €67.5bn in rescue loans to Ireland and said that the country's banks would require higher recapitalisation amounts than those the Irish authorities had targeted.
Despite widespread market scepticism, AIB had repeatedly stated that its so-called "self help" policy of selling most of its operations outside the republic would keep it free of majority state control, even as loan losses escalated in the Irish property crash.
The government already owned 18.6 per cent of AIB's ordinary shares after it injected €3.5bn in preference shares into the bank early last year. Anglo Irish, Irish Nationwide Building Society and EBS Building Society were taken into full state ownership last year.
AIB said last month that the Central Bank of Ireland had calculated it would need to raise an additional €9.8bn to help it meet the EU-IMF requirement to boost its core tier 1 buffer reserves. The lender also said the €3.4bn raised from the agreed disposals - its 70 per cent owned Bank Zachodni WBK in Poland to Spain's Santander and the sale of its 22 per cent stake in M&T Bank in the US - would also help it reach the new target. AIB's effective nationalisation is expected to trigger the long-delayed restructuring of Irish banking system. -PB News