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IP/10/400

Brussels, 31 March 2010

State aid: Commission temporarily clears support for Anglo Irish Bank and INBS and opens in-depth investigation on Anglo Irish Bank

The European Commission has authorised under EU state aid rules an emergency recapitalisation worth up to € 10.44 billion in favour of Anglo Irish Bank and €2.7 billion in favour of the Irish Nationwide Building Society (INBS) for reasons of financial stability. The Commission approved the measures for a period of six months. At the same time, the Commission opened an in-depth investigation into the total aid received so far by the Anglo Irish Bank and its accompanying restructuring plan. Interested third parties have now the possibility to comment on the measures concerned. The opening of an investigation does not prejudge the outcome of the procedure.

Commission Vice-President for Competition Joaquin Almunia said: "There is no doubt that both Anglo Irish Bank and INBS need a significant recapitalisation to meet their obligations. The measures are also necessary to preserve financial stability in Ireland. However, INBS needs to establish a viable restructuring plan and Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued State support.

Earlier this year, Ireland notified a capital injection of €8.3 billion in favour of Anglo Irish Bank, one of Ireland's largest banks, to be paid in successive tranches over 10 years. This will cover the capital needs of the bank as of end March 2010. For the future, as a contingency the Irish authorities furthermore notified a potential €2.14 billion increase in the recapitalisation, thus leading to a maximum amount of €10.44 billion for Anglo. This increase of the aid amount can be granted under strict conditions if the price paid by the National Asset Management Agency (NAMA- see IP/10/198) for the first tranche of loans is below estimates (i.e. in case the so-called "haircut" exceeds estimates).

The Irish authorities also sought approval under the Commission Communication on the recapitalisation of financial institutions in the current financial crisis for a €2.7 billion capital injection into INBS, a building society.

Both capital injections will help the institutions to preserve an adequate level of Core Tier 1 capital and cover impairments and losses on their assets.

The necessity to provide these institutions with a recapitalisation is caused by the fact that in recent years they did a lot of risky lending to commercial real estate developers and investors. This sector accounted for the largest part of their loan portfolio, which led to very large losses when the property market started to rapidly worsen.

The Commission authorises these measures until 22 June 2010 (i.e. six months from the day the aid was firmly committed by the authorities) as emergency aid to remedy Anglo Irish Bank's and INBS' financial difficulties and maintain confidence in the Irish financial markets.

The Commission in 2009 already approved emergency capital injections totalling €4 billion for Anglo Irish Bank (see IP/09/1045) and requested a restructuring plan that ensured the return to viability. Today, the Commission opens an in-depth investigation into the plan and all the State aid received. The bank will have to submit a revised restructuring plan taking into account the increased aid amount before end May 2010.

As regards INBS, the Irish authorities now have until 22 June 2010 to submit a restructuring plan for the building society.

Background

At the height of the financial crisis, the Commission adopted a Communication on the recapitalisation of financial institutions (see IP/08/1901) for Member States to be able to inject emergency support into banks in order to safeguard financial stability.

Under the Communication the Commission adopts the emergency support temporarily, for six months, and requests a restructuring plan that ensures the bank's viability and compensation for the distortion of competition.

For an overview of the decisions adopted by the Commission in the framework of the financial crisis as well pending decisions (for which the Commission has already opened an in-depth analysis) see Memo/10/52.

The non-confidential version of the Anglo Irish Bank and INBS decisions will be made available respectively under the case numbers C11/2010 and NN11/2010 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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