AIB, Bank of Ireland agree on govt bailout: paper
Allied Irish Banks and Bank of Ireland have agreed terms with the government over a 7 billion euro ($8.97 billion) capital injection into the two groups, the Irish Times said on Saturday.business Updated: Feb 07, 2009 20:23 IST
Allied Irish Banks and Bank of Ireland have agreed terms with the government over a 7 billion euro ($8.97 billion) capital injection into the two groups, the Irish Times said on Saturday.
Allied Irish Banks and Bank of Ireland declined to comment on the report, which did not cite sources. A finance ministry spokesman declined to comment. "Any recapitalisation proposal must be considered by the government," the spokesman added.
The Irish Times said final technical details were only agreed on Friday with Bank of Ireland first to sign up to the package.
Prime Minister Brian Cowen said on Saturday the government would be finalising arrangements "in the coming days".
"We will be putting more directors in there, we will be taking voting rights in relation to the banks -- these are all detailed issues that will emerge when the final decisions are taken," Cowen told public broadcaster RTE in an interview.
"We are going to get preference shares, we will insist on getting our money back in due course -- paying a coupon for it in the meantime," he said without giving further details.
Cowen said this week new executives hired to work at Bank of Ireland and Allied Irish Banks should face at least a 25 percent cut on current remuneration levels and their salaries should be capped at that level.
He said on Saturday the recapitalisation was not a "present" to the banks.
"We will seek to ensure also that we are in a position to take up shareholdings at a price negotiated now which will be a different price in five years' time," he said.
The Irish Times said under the plan, which has to be signed off by the cabinet, the government will receive legal warrants entitling it to buy a 25 percent ordinary share interest in each lender in five years' time at their current low prices.
The banks will provide these warrants in return for an upfront state investment of 3.5 billion euros in preference share capital in each institution -- shares which will carry an annual interest coupon of 8 percent, the Irish Times said. In December the government said it would inject 5.5 billion euros into the country's three main lenders and would also underwrite Bank of Ireland and Allied Irish Banks' plans to raise 1 billion euros each.
In January it fully nationalised third-biggest lender Anglo Irish Bank instead and it is now expected to boost the injection for the two top institutions from the original sum of 2 billion euros each.
Ratings firm Moody's on Thursday warned it might cut the ratings on debt issued by Irish banks and backed by the government to reflect the negative outlook it put on Ireland's 'AAA' sovereign rating last week.