The European Commission has today granted approval for an emergency recapitalisation of over €10 billion for Anglo Irish Bank.
This is the third emergency injection of funds approved by the commission, following €4 billion in 2009 and €10.44 billion in March.
The Government announced in June that it planned a capital injection of to €8.581 billion in Anglo to be paid in annual tranches over 10 years. This covers the capital needs of the bank as of end of June 2010 until December 31st 2010 and will help the institution to preserve an adequate level of Core Tier 1 capital.
The amount can be increased by a further €1.4 billion to €10.01 billion, depending on the valuation of the bonds issued by the National Asset Management Agency (Nama) in the accounts of Anglo.
The decision means the Government has the option of increasing the amount of capital it can pump into Anglo to as much as €24.5 billion, surpassing the €22billion estimate suggested by the Minister for Finance Brian Lenihan earlier this year.
A spokesman for Minister for Finance Brian Lenihan said the move was essential to ensure the bank continues to meet its regulatory capital requirements while the commission examines a restructuring plan.
“The capital figure has been estimated by the bank and has been assessed by the NTMA, the Minister’s advisors on banking matters,” he added.
The commission said it had approved the new measure pending a final decision on the bank's restructuring plan. It said the recapitalisation is "indispensable to remedy Anglo's financial difficulties and maintain confidence in the Irish financial markets."
Approval was granted despite the commission’s reservations about the Government's survival plan for the State-owned lender.
In March, EU competition commissioner Joaquin Almunia raised fundamental questions about the viability of the original plan to separate Anglo into "good" and "bad" banks to manage its performing and non-performing businesses respectively. He called for revised restructuring proposals.
In a statement today, Mr Almunia said recapitalisation "was necessary to preserve financial stability in Ireland."
However, he added: "There is no doubt that Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued State support.”
