Allied Irish and Bank of Ireland in €8bn bail-out
by Gill Montia
Story link: Allied Irish and Bank of Ireland in €8bn bail-out
The Irish Government is proposing to invest up to €4 billion each in Allied Irish Bank and Bank of Ireland.
The need for the recapitalisation of the Republic’s two leading banks has been pressing for some weeks and following discussions over the weekend, both banks will now receive injections of cash plus guarantees to cover potential losses on bad debts arising from constructions projects and land deals.
For their part, the banks are expected to raise a further €1 billion from shareholders in rights issues that will be underwritten by the Government.
Full details of the scheme have yet to emerge but the extent of the rescue will be considerably more than the €2 billion government take-up of preference shares set out in an earlier recapitalisation proposal.
Meanwhile, Anglo Irish Bank, the Republic’s third-largest bank, is in the process of being nationalised after shares in the lender plummeted recently, on the news that its chairman, Sean Fitzpatrick, had temporarily transferred loans of €87 million with Anglo Irish to another bank, before the group’s financial year end.
The government of Ireland plans to inject €4 billion each into the Bank of Ireland and the Allied Irish Bank.

An insurance scheme to underwrite bad debts would also be created and the banks will attempt to raise €1 billion from shareholders. The two banks have been in need of recapitalization for several weeks. The government had previously offered €2 billion. The deal will see the government take on up to €24 billion of risk from speculative property loans by the banks.

The government has already moved to nationalize the country's third largest bank, Anglo Irish.