ANGLO Irish Bank and Irish Nationwide will be able to hang on to some deposits and continue limited lending for as long as 10 years -- despite yesterday's move to shut down the two institutions.
The news follows the High Court's decision to approve the imminent merger of Anglo Irish Bank and Irish Nationwide's loan books and the sale of their €14bn deposit books.
The court order, which will see both institutions' names vanish within months, heralds the most significant restructuring of the banking sector since the financial crisis first hit in autumn 2008.
The Department of Finance told the court that the sweeping measures were necessary to address an "imminent threat" to the financial stability of the institutions -- and of the State.
Both Anglo and Nationwide have been haemorrhaging deposits in recent months and the State feared further withdrawals if their futures were not resolved.
The court also heard that the European Commission (EC) and the IMF had "pressed very strenuously" to have the various measures put in place urgently.
Yesterday's move will see the National Treasury Management Agency (NTMA) auction off the two institutions' deposit books, as well as "associated assets" to support those books.
Everything that is then left will be transferred into a "new entity" that will be regulated by the Central Bank of Ireland and will be 100pc owned by the State.
Court documents confirm that plans for the "new entity" include "a series of targets and commitments in relation to deposit taking and lending by the merged bank".
It had been expected that neither Anglo nor Nationwide would be allowed to lend again or hold any deposits. Sources confirmed last night that plans submitted to Brussels would see the new entity carry out new lending and holding deposits, though this would be "significantly limited".
The new lending is believed to be limited to cases where the bank feels it has a better chance of recouping an existing loan if it advances more cash to complete a project.
The deposit function will be confined to cases where the merged bank holds both deposits and loans for one client and wants to retain the right to "offset" one against the other.
Yesterday's court documents also show that Anglo will have to draw up a "detailed plan" to "rationalise" its international footprint, including offices in Vienna, Dusseldorf, Jersey and the UK.
The plan must be submitted by March 31 and is expected to see the closure of Vienna, Dusseldorf and Jersey, as well as the closure of some regional UK offices. Anglo's London base is expected to remain open.
Affidavits reveal that Central Bank governor Patrick Honohan "identified a number of inherent risks associated with a transfer process such as this, particularly when conducting it in an accelerated manner".
The Department of Finance said it was "satisfied that plans and procedures had been put in place to mitigate the risk identified by the governor".
In almost identical statements, the bosses of both Anglo and Irish Nationwide yesterday welcomed the court order and they "acknowledged the continued support of the State".
Both institutions consented to the order and pledged to "comply fully" with it.