By ine Kerr
Bank chiefs ‘won’t have to resign’ in huge bailout
THE Government last night outlined details of radical plans to bail out three major Irish banks with a cash injection worth upwards of €7.5bn.
Struggling Anglo Irish Bank will have an “initial” €1.5bn ploughed into it, with the State taking control of 75pc of the voting rights to take the bank under majority State ownership.
Under the first round of recapitalisation, Bank of Ireland and Allied Irish Bank will also issue €2bn of perpetual preference shares to the State, with the future potential of another €1bn each to underwrite loans.
Other banks covered by the Government’s guarantee scheme are still in discussions with the Government.
In exchange for the State’s multi-billion intervention using the taxpayers’ National Pension Reserve Fund, the shares in Anglo Irish Bank will provide a fixed annual dividend of 10pc, while the other two banks will provide returns of 8pc.
Crucially, banks will have an […] 30pc extra capacity to lend to first time buyers. […] struggling mortgage holders who fall into arrears, they will be given at least six months from the time they first enter debt before the enforcement of any legal action on repossession.
Taoiseach Brian Cowen stressed that the purpose of the recapitalisation is to send a “strong signal” about the stability of the Irish financial system and to ensure that the lines of credit are reopened.
However, he said the Government was not making the resignation of bank chiefs a precondition of the bailout. Instead, the board of the bank will be “reconstructed”.
Mr Lenihan said
“The State has established a framework here which enables the banks themselves to capitalise themselves in terms of their ordinary shareholders and the State is underwriting that so if there isn’t a private interest, the State will underwrite.”
A restructuring plan will be devised in six months for Anglo Irish Bank following advice and consultation with the European Commission.