STATE-CONTROLLED Educational Building Society (EBS) has secured approval from the European Commission for a €875 million capital commitment from the Government but must submit a viability plan under state-aid rules.
The Government injected €100 million into EBS last week, giving Minister for Finance Brian Lenihan a majority say in the running of the lender and extinguishing control over the society held by 450,000 members.
A further €775 million will be injected by the Government over a period of years by way of a promissory note, effectively an IOU, to meet new capital rules if EBS cannot first raise cash privately.
“EBS needs a significant recapitalisation to comply – and to continue to comply in the coming years – with capital requirement rules,” said European Competition Commissioner Joaquin Almunia.
EBS requires cash to fill the capital deficit created by the losses incurred from selling €1 billion in loans to the National Asset Management Agency (Nama) and on loans remaining at the society.
The building society is in talks about a possible investment from Irish-led private equity consortium comprising Cardinal Asset Management and backed by US firm JC Flowers.
The Government will await the outcome of the talks before committing the further capital to meet the €875 million requirement set by the Financial Regulator.
