The chances of a private equity investment in Bank of Ireland have not been fully extinguished, Pat Molloy told shareholders at an extraordinary general meeting in Dublin this morning.

Speaking to shareholders ahead of a vote on a proposal to raise €1.9 billion by issuing new shares, Mr Molloy said that extensive discussions with “private equity interests” had not reached a successful conclusion.

“That is not to say that they have totally gone away,”  said Mr Molloy, who is also the bank's governor.

The bank had changed the terms of the capital-raising plan to allow the placing of a stake of 15 per cent to the State’s wealth fund, the National Pension Reserve Fund, that could be sold on to private equity investors.

The bank is seeking to raise €4.2 billion in cash and a further €1 billion in contingent capital after being directed to meet a higher capital bill by the Central Bank following the stress tests of the banks last March.

It has generated €1.96 billion by repaying subordinated bondholders at a fraction of what they are owed in a heavily discounted cash or shares deal and expects to raise a further €510 million from further so-called “burden-sharing” with bondholders by the end of the year.

One shareholder questioned why €150 million was being paid in fees on the rights issue. Mr Molloy said that €100 million would be paid to the State and the remainder would be paid to advisers and sponsors of the rights issue.

“It is a huge amount of money I have to accept but that is the cost of capital raising I’m afraid,” he said.

Independent TD Shane Ross, a shareholder in the bank, said that the fees being paid were “absolutely outrageous”. Mr Molloy said that he was “pretty shocked” at the fees to be paid but “that is what we are confronted with”.

He said: “These people don’t, I’m afraid, come cheap."

John O’Donovan, finance director of the bank, said that the fees were in line with the “market norm”.

Mr Ross asked Mr Molloy why the bank was paying the market norm when the bank was close to liquidation.

If no shareholders take up their rights to buy 18 new shares for every five held in the rights issue, the State, which is underwriting the share sale, would be left with a stake of 69.7 per cent, up from the current holding of 36 per cent.

Asked why the bank would not hand over the College Green branch to the State as requested by the Minister for Arts Jimmy Deenihan, Mr Molloy said that the branch was “of considerable value” to the shareholders.

Richie Boucher, chief executive of the bank, said that he believed that loan losses have peaked and that they will “move progressively downwards in 2011 and 2012”.

Before the meeting, the European Commission granted temporary approval for the State’s recapitalisation of Bank of Ireland of up to €5.35 billion.

Final approval of the emergency aid was conditional on the bank returning to long-term viability, an "adequate participation in the restructuring costs by shareholders and subordinated debt holders" and proper measures to limit the distortion of competition created by State support.

The recapitalisation was “necessary to increase the bank’s solvency ratios and maintain confidence in the Irish financial markets”, said the Commission.

Mr Molloy said that an embargo on the payment of dividends – in place since the first State bailout in 2009 - was likely to be extended further beyond September 2012 given that a revised restructuring plan must be submitted to Brussels.

Asked whether shareholders would be asked to inject further capital, Mr Molloy said that the bank was hit by an "extraordinary tsunami" last year with the freezing of the funding markets.

The latest Central Bank stress tests considered potential losses under an adverse stress scenario "which hopefully is a scenario that will not materialise" and this set higher capital levels that the bank had to meet.

"The goal posts have changed, the bar has been raised and we have to go back and raise that," said Mr Molloy.