Business Irish

Saturday 18 November 2017

Pressure mounts to sell pensions business

Joe Brennan

The European Commission changed tack in recent weeks in putting Bank of Ireland under pressure to sell its life and pensions business -- having previously targeted the group's UK business banking unit.

The move came as Brussels sought a "headline grabber" in terms of extracting pain out of the bank in its domestic market for receiving a €3.5bn state bailout last year.

Market sources said the development has led many to conclude that AIB, which is also having a state-aid restructuring plan reviewed by the EU, may be told to dispose of its 24.99pc stake of a life and pensions joint venture with Aviva.

The Department of Finance, which led the talks with Brussels, has won a hard-fought argument that neither BoI nor AIB be directed to lower their loan book shares to the small- to medium-sized market, as foreign-owned banks retrench.

BoI also secured a crucial concession that its own restructuring last year -- including the decision to run down its €30bn-plus UK broker-sourced mortgage book and a €5bn corporate lending portfolio -- form part of the EU's consideration.

Yesterday, the bank said it will "attempt to accelerate the wind-down of these portfolios by way of sale, but will not have an obligation to sell these portfolios at less than book value."

BoI has promised Brussels that if it has not run down or sold the UK broker-sourced book by the end of December 2013, it will ensure the size of its entire loan book would not exceed its level of deposits plus wholesale funding of over a year in maturity. The bank is also set to agree to sell its US foreign exchange businesses, FCE, and its stakes in California-based Paul Capital asset management business and the Irish Credit Bureau.

Group chief executive Richie Boucher said yesterday that its talks with the EU will not conclude until the middle of the year and that the preliminary announcement carries "a health warning".

Irish Independent

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