BANK OF Ireland has agreed to offer services to new entrants into Irish banking or to small banks already operating in Ireland as part of EU approval of the bank’s second restructuring plan.
The European Commission approved the plan, under which the bank will shrink in size to reduce its reliance on wholesale funding and return to viability without State support.
“The plan will restore the bank’s viability by exiting risky portfolios and by implementing more prudent risk management practices,” the commission said.
The Government’s restructuring of the banking sector around two rival “pillar banks” has raised concerns about the effect on competition in Irish banking.
To increase competition, the bank will 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”, the commission said.
This covers the cost of clearing and related operational services.
The authorities have agreed to “market opening measures” by attracting new entrants into the market and increasing consumer protection, the commission said.
The measures include helping customers switch banks, showing cost comparisons between banks and making basic services more widely available to the public.
Bank of Ireland’s second restructuring plan includes “necessary safeguards to ensure that competition in the Irish financial markets will be enhanced in the coming years”, EU competition commissioner Joaquin Almunia said.
The bank had embarked on an ambitious plan to downsize, which has “attracted private investors and significantly reduced the need for public support”, he said.
The State has injected €4.2 billion into the bank and holds a 15 per cent stake after the sale of a 35 per cent stake to private investors for €1.1 billion in July.
EU approval was another step in the strategy of “returning the banking system to long-term viability and profitability”, Minister for Finance Michael Noonan said.
The bank received EU approval for a first plan in July 2010 but had to submit a second plan following the need for further recapitalisation under the EU-International Monetary Fund bailout.
A plan to sell ICS building society was reversed by the bank in June when Brussels approved the second plan in principle to facilitate further capital-raising.
The bank is reducing its loan book from €114 billion to €90 billion by the end of 2013.
