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Ireland to inject 5.5 billion euros into three banks
(Agencies)
Updated: 2008-12-22 08:53 DUBLIN – The Irish government on Sunday said it was injecting 5.5 billion euros (7.6 billion dollars) into three of Ireland's major banks as part of a rescue package, taking a controlling stake in one.
Two billion euros each will also be provided to Bank of Ireland and Allied Irish Banks (AIB) and the government will take 25 percent of voting rights on directorial and board appointments, the finance ministry said in a statement. The capital injection for Anglo Irish Bank is likely to take place after an extraordinary general meeting in mid-January, and for AIB and Bank of Ireland by the end of the first quarter of 2009. The government encouraged AIB and Bank of Ireland to also access private capital, but said it would be prepared to help further. "The government is prepared to underwrite further issuance of core tier one capital and both Allied Irish Banks plc and Bank of Ireland have indicated an interest in such an underwriting in an amount of up to one billion euros each," the ministry said. Dublin "will continue to reinforce the position of Anglo Irish Bank and will make further capital available if required so that it remains a sound and viable institution," it added. The government's move follows revelations last week that Anglo Irish's chairman and former chief executive officer Sean FitzPatrick failed to disclose an 87-million-euro loan from the bank. FitzPatrick, who had been the bank's chief executive for almost two decades before becoming chairman in 2005, resigned on Thursday. Over a period of eight years to 2007, FitzPatrick temporarily transferred loans with Anglo Irish Bank to a building society so they did not show up in the bank's report in the note relating to directors' loans. "This transfer of loans did not breach banking or legal regulations. It was, however, inappropriate from a transparency point of view," FitzPatrick said. On Friday, Anglo Irish's group chief executive David Drumm stepped down, saying news of the concealed loan made it "appropriate" for him to quit. Ireland was one of the first countries to respond to the global credit crisis with a two-year unlimited guarantee scheme for banks that involves a contingency liability of 485 billion euros. Asked at a press briefing Sunday if he was rewarding reckless lending by the banks, Finance Minister Brian Lenihan replied: "Far from it, I mean heads have already started to roll, that's very clear. "As far as reckless lending is concerned, this is a new beginning. We have to have proper lending, responsible lending, lending for the real needs of the economy. That is what I am determined to see happening." The government also announced measures to improve credit flow to businesses and individuals, including a 10 percent increase in lending for small and medium firms, help for those in mortgage arrears and for first-time buyers. The package will include a new code of practice for business lending, more transparent charges and a 100-million-euro fund to support environmentally friendly investments aimed at reducing Ireland's carbon footprint. |
