The Government has taken the first steps to effectively nationalise Allied Irish Banks and take a fourth bank into State control as it made legal preparations for a further bailout of the troubled bank.
Legal groundwork was laid today in advance of the Minister for Finance Brian Lenihan making a High Court application tomorrow to pump a further €3.7 billion of State cash into the bank from the National Pension Reserve Fund.
The Minister will use the Government’s new sweeping bank rescue legislation for the first time for this second bailout of AIB.
The bank requires further Government cash to protect against higher losses on property loans and to meet the end-of-year deadline set by the Financial Regulator last March to bolster its capital.
A court application is expected to be made under the new Credit institutions (Stabilisation) Act, which was signed into law last night, seeking a court order, paving the way for the latest bailout, with a final injection to be made before the end of February.
The Government may seek to “de-list” AIB from the Irish stock exchange as a condition of the bailout in the court application.
Spokespeople for the Department of Finance and AIB had no comment to make.
The Government is applying to the court to avoid seeking shareholder approval, which it is allowed under the new legislation.
The move will bring AIB into State control, effectively nationalising the bank with the Govenrment taking almost full ownership. This will put the bank alongside Anglo Irish Bank, Irish Nationwide Building Society and EBS building society in State hands.
Mr Lenihan may choose not to wipe out existing AIB shareholders fully, as he could apply to move the existing shares to a secondary or so-called “grey market” where they can still be traded.
The Government had planned to retain a small shareholding on the market, known as a “free float”, but stock exchange rules which force a single shareholder in control of 75 per cent of a company to take it over, ruled this out.
The European Commission approved a further injection of €3.7 billion for AIB on Tuesday, setting up the latest bailout.
