15pc bank stake 'makes perfect sense: Lenihan
Finance Minister Brian Lenihan insisted a 15pc shareholding taken by the state in Bank of Ireland today makes perfect sense.
The 184 million shares will go into the national pension fund after the European Union stalled plans for a €250m cash dividend.
Mr Lenihan said the stock deal was part of the Government's €3.5bn recapitalisation plan if the banks could not pay.
"We have had the Bank of Ireland as an institution of this country for more than two centuries," the minister said.
"Banking has gone through a very difficult period. It will revive, and whatever the value and the increased value the taxpayer has in the bank will benefit pensioners in the future in Ireland.
"In terms of the sense of this arrangement, it makes perfect sense that the state should get a return of this kind."
The state now holds a 15.7pc stake in Bank of Ireland - 184 million shares. This is on top of the 25pc voting rights it took following recapitalisation last February.
The bank's share price dipped by more than 10pc in early morning trades but settled at about €1.17.
The transfer, which requires Bank of Ireland to issue new ordinary shares and therefore affects other shareholding values, is the result of a European Commission ban on the bank making certain interest payments.
The state had been due a €250m cash dividend for recapitalisation.
But Mr Lenihan said the shareholding should be seen as an investment for the state.
"It's not an issue of realising the shares next week or cash needed for expenditure next month," the minister told RTE Radio.
"It is a pension fund that is not being realised for several decades and the pensioners of the country will have the benefit of this in their pension fund."
The European Union is expected to make its decision on Ireland's bank restructuring plan in the coming weeks.
Mr Lenihan also said a dividend was due from Allied Irish Banks in May on the back of recapitalisation and he insisted the Government would have a far clearer picture by then of how the banks were progressing.
The first tranche of loans transferred to the bad-bank NAMA should be fully valued and the size of discounts should be known by then.
Joan Burton, Labour Party finance spokeswoman, said the Government's bank strategy was running aground and dismissed the minister's claim that shares were as good as cash.
"As they say, a bird in the hand is worth two in the bush," she said.
"The Government is hiding behind the delay in EU approval of the banks' restructuring plans.
"It is clear, however, that the delay in EU approval arises because, despite the minister's rhetoric, the Irish banks are in an extremely weakened state."