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Thursday 23 February 2017

State will take control of AIB by end of year

Bank is unlikely to raise €7.4bn needed to meet capital reserve rules

DANIEL McCONNELL Chief Reporter

Allied Irish Bank is to be "effectively nationalised" by the end of the year as the State will be required to cover its funding deficit, the Sunday Independent can reveal.

The Department of Finance has confirmed that, even after the sale of assets and a rights issue, it expects AIB will not have sufficient capital by December to meet the strict new funding criteria set down by Financial Regulator Matthew Elderfield.

The bank needs to raise €7.4bn to meet the new capital reserve rules.

The Government is committed to helping AIB to meet those financial requirements "at all costs". Finance Minister Brian Lenihan has said he does not want to nationalise another bank -- but he will do so if necessary.

As a result of transferring preference shares into ordinary shares to meet the capital reserve rules the State's stake in the bank will increase substantially, with expectations of between 65-80 per cent State ownership.

Despite putting prized assets such as its Polish and UK operations up for sale, AIB last week announced losses of €2bn, with bank boss Colm Doherty calling on the Government to extend the €440bn State bank guarantee.

The decision to extend the guarantee will be taken in the autumn at EU level, but Mr Lenihan and his department are adamant that they want to "wean" the banks off State support.

Mr Doherty said he expected the EU to sign off on AIB's restructuring plan before the final three months of the year.

Meanwhile, the National Asset Management Agency (Nama) is taking a large proportion of its property development loans, and AIB hopes to announce potential buyers for its Polish and UK businesses by the end of next month. After that, it will engage in a cost-cutting plan, which will involve significant job losses.

To date, the State has given €3.5bn to AIB.

Meanwhile, Anglo Irish Bank's chief executive Mike Aynsley also said the bank guarantee would have to be extended as the financial system had not yet stabilised.

He said he could understand why so many were annoyed with the bank, but he added that the constant beating of Anglo in the media simply reinforced negative perceptions about the bank.

Mr Aynsley said he was frustrated that he was unable to give a final figure of costs to the taxpayer. He said it depended on discounts applied by Nama to loans which will transfer from the bank.

The Anglo chief added that he had brought in a new management team with international experience to stabilise the bank and create a viable lender. Some 800 workers have already left the bank, but 200 new staff were also brought in.

Mr Aynsley said closing Anglo would only see its loans transferred to other parties, and he believed that most of the bank's €50bn of foreign funding would leave if Anglo were closed down.

Sunday Independent

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