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Brussels, 14 January 2009

State aid: Commission approves recapitalisation of Anglo Irish Bank

The European Commission has approved, under EC Treaty state aid rules, an emergency recapitalisation worth €1.5 billion that the Irish authorities intend to grant to Anglo Irish Bank. The Commission found the measure to be in line with its Guidance Communications on state aid during the current financial crisis (see IP/08/1495 and IP/08/1901). The measure constitutes an adequate means to remedy a serious disturbance in the Irish economy while avoiding undue distortions of competition and is therefore compatible with Article 87.3.b. of the EC Treaty. In particular, the measure is limited in scope, requires an adequate remuneration and provides safeguards to minimise distortions of competition.

On 19th December 2008, the Irish authorities informed the Commission of their intention to recapitalise Anglo Irish Bank with €1.5 billion. On 8th January 2009, the Irish authorities formally notified this measure.

Due to the current financial crisis, even banks that meet the regulatory solvency ratios may experience distress and be required to reinforce their capital. In addition to difficulties caused by the global financial crisis, recent developments with regard to the Anglo Irish Bank's corporate governance increased the need to reassure the financial markets of the bank's stability. Against this background, the Irish authorities decided to inject €1.5 billion into Anglo Irish Bank.

The shares to be issued will qualify as core tier 1 capital and will produce a dividend of 10% payable annually, at the discretion of the bank and in priority to dividends on ordinary shares. Dividends on the shares are payable in cash, or (if the bank is not able to pay in cash) in ordinary shares on the basis of the average daily closing price over the previous 30 trading days. The shares will carry 75% of the voting rights in Anglo Irish Bank. The bank can repurchase the shares at par during maximum five years. After that period, shares can be repurchased at 125% of par. No dividends on ordinary shares are allowed when no dividend on the shares to be issued is paid to the state.

The Commission concluded that the measure complies with the conditions laid down in its Guidance Communications (see IP/08/1495 and IP/08/1901). In particular, the measure meets the following criteria:

  • Necessity: Anglo Irish Bank has an important role within the Irish financial sector - a loss of confidence in this institution could have led to a further disturbance of the current financial situation and harmful spill-over effects to the economy as whole
  • Appropriate own contribution: a discretionary remuneration of 10% per annum is consistent with the Commission's Recapitalisation Communication. The Commission also took into account that the probability of return for the state is reinforced through the possibility of combining the dividend payment in cash and ordinary shares
  • Avoidance of undue distortions of competition: the package foresees sufficient behavioural rules to prevent an abuse of the state support, e.g. prohibition of advertising of the aid, restrictions on the payment of dividends, restrictions on executives' remuneration, nomination of public interest representatives to the bank's board., as well as the submission of a restructuring plan within 6 months for Commission's assessment and approval.

The non-confidential version of the decision will be made available under the case number N9/2009 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News

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