European Commission - Press release
State aid: Commission approves resolution of Anglo Irish Bank and Irish Nationwide Building Society
Brussels, 29 June 2011 - The European Commission has cleared under EU state aid rules a joint plan for Anglo Irish Bank (Anglo) and Irish Nationwide Building Society (INBS) whereby they will be merged and resolved over a period of 10 years. The two Irish financial institutions received massive state support during the crisis after they overexposed themselves to the commercial loan and property development sector, which eventually caused their downfall. Their exit from the market deals with the distortions of competition caused by the support.
Commission Vice-President in charge of competition policy Joaquín Almunia said: "Today, the state aid chapter on Anglo Irish Bank and INBS has been finally closed. I am satisfied that the distortions of competition caused by the enormous aid they have received is satisfactorily addressed by their exit from the market. Today's decision allows us and the Irish Government to focus on the future of the Irish banking system."
The joint plan fulfils the EU criteria on restructuring aid for banks (see IP/09/1180) as it: (i) provides for an orderly resolution of both institutions, (ii) contains appropriate measures to ensure that burden-sharing is achieved by their stakeholders and (iii) limited the distortion of competition through the complete exit of Anglo and INBS from the markets in which they operate (mostly Ireland, UK and US).
Anglo Irish Bank and INBS together have received a total of €34.7 billion in capital injections to cover the losses on their impaired property loans. Both institutions furthermore benefitted from guarantees and an impaired asset measure. These measures were necessary because of the very poor quality of the loans resulting from risky lending practices in the past and the drop in prices on the commercial property market combined with the ongoing crisis on financial markets. After several rescue measures in favour of the two institutions and the submission of several individual restructuring plans by the Irish authorities, a joint restructuring plan for Anglo Irish Bank and INBS was submitted to the Commission on 31 January 2011 in the context of the Programme for Support for Ireland.
The plan sets out in detail how the two institutions' loan books will be resolved over the ten year period. To ensure that the assets are managed in a way consistent with the resolution of both institutions, several commitments have been put in place, for instance a commitment that the merged Anglo Irish Bank and INBS entity cannot enter into new activities.
The Commission has therefore approved all aid measures granted to Anglo, INBS and to the merged entity as restructuring aid and closed its investigation into the restructuring of Anglo Irish Bank.
To date, the Commission had approved four emergency capital injections for Anglo (€4 billion in 2009 - see IP/09/1045; €10.44 billion in March 2010, of which €10.3 billion were effectively granted – see IP/10/400; up to €10.054 billion in August 2010, of which €8.851 billion have been granted, while the balance was injected by the end of 2010– see IP/10/1046 and €4.946 billion in December 2010 – see IP/10/1765). INBS has received two recapitalisations of €2.7 billion each in March 2010 and December 2010 (see IP/10/400 and IP/10/1765).Therefore, Anglo has been effectively recapitalised for an amount of €29.3 billion and INBS for an amount of €5.4 billion.
Anglo and INBS furthermore benefit from a guarantee on their liabilities (Eligible Liabilities Guarantee scheme - see IP/09/1787) as prolonged on 1 June 2011 (IP/11/673). Anglo also receives a guarantee covering certain off-balance sheet liabilities. Finally, Anglo and INBS benefitted from the transfer of their commercial property loans to the National Asset Management Agency (NAMA) under the Irish impaired asset relief scheme (see IP/10/198).
The non-confidential versions of the decision will be made available under case number SA.32504 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