EC agrees €17.5bn banks injection
EUROPEAN regulators yesterday rubber-stamped government plans to pump another €17.5bn into three banks.
But the European Commission demanded that some investors in Anglo Irish Bank, AIB and Irish Nationwide share the pain with taxpayers.
The State is planning to put €4.95bn into Anglo imminently and also wants to put "up to" €9.8bn into AIB as well as €2.7bn into Irish Nationwide.
The bulk of the cash will be funded by the €85bn IMF/European bailout, while some of the AIB cash will come directly from the National Pension Reserve Fund.
In a statement last night, the European Commission stressed that while it "welcomed" the programme of support for Ireland, any aid to the bank remained subject to European state aid rules.
The bailout passed the first European hurdle last night when Brussels gave the plans "temporary" approval, subject to full business plans being submitted for all three institutions.
A joint plan for Anglo and Irish Nationwide will detail how they will be wound down, while AIB's bosses have six months to submit a plan showing how the bank will be restructured.
In a statement, the European Commission said AIB's long-term plan would only get the thumbs up if Brussels was satisfied it "will be commercially viable in the long term without further injections".
The Commission also wants guarantees that the bank's shareholders and its so-called subordinate bondholders (who loaned money to the bank at high interest rates) will make a "significant contribution" to AIB's rehabilitation.
A spokeswoman for Competition Commissioner Joaquin Almunia declined to be drawn on whether Brussels wanted AIB's shareholders to be entirely wiped out.
"The Commission does not have a level of pain-sharing for shareholders but we are careful that when a state acquires shares in a new bank, the state does not overpay . . . because this would be an undue benefit for shareholders," she added.