Outrage at 'secret raid' to rescue AIB

Clodagh Sheehy

Finance Minister Brian Lenihan has provoked anger after he used new powers to effectively nationalise AIB behind closed doors.

Mr Lenihan has been given High Court approval to inject €3.7m into the bank, which was once the largest in the country.

The injection will virtually wipe out AIB's shareholders, who have already lost tens of millions of euro in share investments over the past two years.

The High Court Order was secured under new emergency legislation signed into law by the President on Tuesday which allowed the order without the approval of bank shareholders.

Labour's Joan Burton said the minister had raided the pension reserve funds to prop up AIB, while barring journalists from court proceedings.

DEPLORE

"Secret court hearings are anathema in a democratic society and I deplore the minister's recourse to this device," said Ms Burton.

"He has raided the Pension Reserve to provide the new funds for AIB."

However, legal experts said the secret hearing was in accordance with the Irish Constitution which allows for the use of in-camera proceedings in exceptional circumstances.

Academic lawyer David Gwynn Morgan said: "Given the times that are in it, I should expect that the notion of commercial sensitivity would be sufficient to amount to a 'special and limited case' and so justify a departure from the norm."

The move will mean the State's shareholding in the bank is brought to 49.9pc and this will increase to 92.8pc once the bank sells off its Polish subsidiary to Santander in the new year.

The bank will then be effectively nationalised, bringing four of the country's six banks and the majority of the banking system under Government control -- AIB, Anglo Irish and the Irish Nationwide and EBS building societies.

The €3.7bn injection comes from the National Pension Reserve Fund and its transfer was approved by the European Commission earlier this week.

This is the second time AIB has received a State bailout, having got €3.5bn from the taxpayer last year. Mounting losses have seen its capital requirement more than double to over €15bn.

Mr Lenihan said: "We wouldn't have had Allied Irish Banks on January 1 if this investment wasn't made."

AIB's board said in a statement that it believed that the money was "critical for the continued activities of the company".

csheehy@herald.ie