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European Commission - Press release
State aid: Commission approves second restructuring plan of Bank of Ireland
Brussels, 20 December 2011 - The European Commission found the second restructuring plan of Bank of Ireland (BoI) to be in line with EU state aid rules. In particular, the restructuring plan contains a major restructuring effort ensuring that BoI will refocus its business model and will considerably reduce its dependence on wholesale funding. The plan ensures a sustainable future for the bank without continued state support and includes appropriate measures to minimise distortion of competition.
Commission Vice-President in charge of competition policy Joaquín Almunia commented: "Bank of Ireland has embarked in an ambitious plan to downsize and refocus its activities to better serve the Irish economy. This plan has attracted private investors and significantly reduced the need for public support. Thanks to the fruitful collaboration between the Irish authorities, the bank and the Commission, the plan includes the necessary safeguards to ensure that competition in the Irish financial markets will be enhanced in the coming years".
Today's decision grants definitive approval to the various support measures in favour of BoI (recapitalisation, guarantees and asset relief). As regards the restructuring plan, the Commission concluded that it fulfilled the criteria of its communication on the restructuring of banks during the crisis (see IP/09/1180). The plan will restore the bank's viability by exiting risky portfolios and by implementing more prudent risk management practices. In particular, Bank of Ireland will substantially deleverage its balance sheet to reduce its dependency on wholesale funding, and will refocus its business model on balanced-risk lending in Ireland and the United Kingdom. The plan also ensures a fair burden sharing of past losses and that the bank and its capital providers significantly contribute to the financing of the restructuring costs by selling several businesses and portfolios. Finally, the restructuring plan contains sufficient measures limiting the distortion of competition brought about by the significant state support. In order to enhance competition, the bank will also offer certain services to new entrants or to small banks already active in Ireland, to reduce the cost for competitors to develop banking business in Ireland.
In addition, the Irish authorities committed to a number of market opening measures in order to enhance competition in the Irish banking market by facilitating the entry and expansion of competitors and by increasing consumer protection in the financial sector. These measures apply to the banking sector in general and not only to Bank of Ireland. This will include for example measures enhancing customer mobility between banks, cost comparison support to facilitate consumer decision making, enhance of electronic banking, promotion of financial inclusion as well as other measures strengthening corporate governance in the financial sector.
A first restructuring plan was approved on 15 July 2010 (see IP/10/954). However, in view of the degradation of the economic situation in Ireland, this first restructuring plan proved to be insufficient.
On 28 November 2010, the Irish government announced that a Programme for Support had been agreed with the Commission and the International Monetary Fund in liaison with the European Central Bank. The programme provided specific measures to support banks, including the provision of adequate capital to respect increased capital ratio requirements, and to facilitate the deleveraging of the banks' balance sheets. On 11 July 2011, the Commission approved Ireland's participation in BoI's capital raise, subject to the presentation of a restructuring plan, which the Irish authorities submitted on 29 July 2011.
The non-confidential version of the decision will be made available under the case number SA.33443 in the State Aid Register on the DG Competition website once any confidentiality issues are resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News