EU approves bail-out of three Irish lenders

The European Union has given the go-ahead for the bail-out of three of Ireland’s troubled lenders, paving for the way for the full recapitalisation of the country’s indebted finance sector.

Anglo Irish Bank will receive £4.2bn as well as guarantees for some of its off-balance sheet assets Photo: PA

By Harry Wilson

Anglo Irish Bank, Allied Irish Banks and Irish Nationwide Building Society (INBS) will each receive several billion euros in new funding and two of them will be put into run-off as part of an agreement with EU regulators.

Anglo will receive €4.95bn (£4.2bn) as well as guarantees for some of its off-balance sheet assets, Allied will be allowed to start fund-raising and INBS will get a €2.7bn capital injection.

Joaquin Almunia, EU competition commissioner, said Anglo and INBS would each have to submit plans for their wind-down early next year, while Allied will have to produce a revised restructuring plan.

In total, the EU, through the European Financial Stability Mechanism, will put €11.7bn into Ireland as part of a €85bn rescue package for the country.

Last week, Ireland was downgraded five notches by ratings agency Moody’s and many major Irish lenders also had their credit ratings cut subsequently, as Moody’s warned of a worsening outlook for the country.

Meanwhile, Anglo has won a key vote of support for a debt restructuring. More than 90pc of holders of two outstanding sets of bonds, subordinated bonds due in 2014 and 2016, had agreed to participate in an exchange offer that would see them receive at most 20pc of the face value of their claims.