Sunday 15 September 2019

AIB seeks approval for new structure

AIB headquarters in Ballsbridge
AIB headquarters in Ballsbridge
Donal O'Donovan

Donal O'Donovan

AIB has applied to the High Court for approval to overhaul its corporate structure to comply with European rules designed to protect savers from future bank failures.

With court backing the bank is expected to convene an EGM within the next two months for formal investor approval for the plan. Once that is secured AIB will establish a separate holding company in early 2018 at the latest.

The changes mean shareholders own their stake in the bank through a new entity that will sit at a remove from the part of the bank that holds customer deposits. The bank's main debt will also be at a remove from savers - so that bondholders can absorb losses that don't also fall on ordinary savers.

Bank of Ireland has already completed the same process and was inundated last month by investor demand for new bonds.

Meanwhile, in the UK international banks operating there will have to hold more capital in the British unit to guard against losses, under plans being drawn up by the Bank of England.

The implications for Irish lenders are not expected to be great however, because banks here already hold large capital reserves at group level, which could be shared out to UK subsidiaries if needed without raising fresh funds.

Bank of Ireland is the only bank that still has a substantial share of its overall business in the UK.

The Bank of England has proposed a 2019 start date for requirements intended to ensure that UK subsidiaries of foreign banking groups can fund their own restructuring in a crisis, averting any need for public bailouts.

Irish Independent

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