Irish

Thursday 31 July 2014

Top executives may face axe in €10bn rescue deal

Massive clearout of senior management to form part of recapitalisation plan

John Mulligan

Published 19/12/2008|00:00

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Shares in three of the four listed banks fell further yesterday, with Anglo Irish Bank leading the rout and tumbling 18pc to just 32 cent

A massive clearout of top banking executives is likely to be part of any deal on the Government's €10bn plan to recapitalise the country's leading financial institutions.

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Significant tranches of top management at AIB, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent, Irish Nationwide and EBS are likely to see their jobs axed once the money is injected into the institutions in an effort to shore up their balance sheets and place them on a firmer financial footing.

Blueprint

The Irish Independent also understands that a formal blueprint could be in place for the recapitalisation plans within the next few days, with negotiations understood to be already at an advanced stage.

Finance Minister Brian Lenihan announced the Government's intention last Sunday to provide the capital infusion.

Both the Government and the Mallabraca private equity consortium will embark on a cull that will result in significant blood-letting amongst the senior echelons of top brass at the banks and building societies.

It's almost certain that the Government will not countenance anything but a root-and-branch reform at executive level within the institutions. It's believed the issue of which executives will go has been a considerable sticking point between the Government and the financial institutions as they hammer out a deal.

Mandarins at Leinster House intend to establish the €10bn fund from a mixture of cash from the National Pension Reserve Fund, private equity groups and existing shareholders.

But precise details of how the recapitalisation scheme will be engineered have still not been revealed.

Mallabraca has indicated it has at least €5bn to pump into the financial sector and is currently in talks to invest in Bank of Ireland. In addition, existing institutional shareholders in the listed banks have indicated that they have a few billion euro to co-invest.

AIB has previously said it does not require any money to recapitalise.

However, in October, NCB analyst Christopher Wheeler said AIB would need to raise €3.8bn to increase its core tier one ratio from 6.2pc last June to 9pc.

The core tier one capital is money institutions can set aside to cope with unforeseen losses.

At the time, Mr Wheeler added that Bank of Ireland would require a €3.9bn injection and that Anglo Irish Bank's capital requirement would come to €2.8bn.

Shares in three of the four listed banks fell further yesterday, with Anglo Irish Bank leading the rout and tumbling 18pc to just 32 cent. Bank of Ireland slumped over 12pc to 76 cent, while AIB retreated 4.3pc to €1.76.

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