Irish government to take control of a 4th bank

[December 23, 2010]  LONDON (AP) -- The Irish government is preparing to take majority control of a fourth bank, Allied Irish Banks, as it struggles to fix the nation's ravaged financial sector, according to news reports Thursday.

The Irish Times and broadcaster RTE said Finance Minister Brian Lenihan will go to court to seek permission to pump another euro3.7 billion ($4.85 billion) from the National Pension Reserve Fund into Allied Irish Banks.

That may make the government the majority shareholder immediately, although state control is seen to be inevitable. AIB became 19 percent state-owned last year after receiving euro3.5 billion in state funds.

The Department of Finance declined to comment on the reports, but noted that Finance Minister Brian Lenihan had previously said he would act to insure that AIB met new, higher requirements for capitalization.

The cash injection is the latest chapter in Ireland's massive banking and financial crises.

The government plans spending cuts of euro4 billion and additional taxes of euro2 billion next year as part of a Nov. 28 bailout deal to borrow up to euro67.5 billion ($90 billion) from European Union partners and the International Monetary Fund.

The government already controls Anglo Irish Bank, and the Irish Nationwide and EBS building societies.

The European Commission approved the capital injection for AIB on Tuesday, along with recapitalization of up to euro4.95 billion for Anglo Irish Bank and euro2.7 billion for Irish Nationwide Building Society.

"With regard to Allied Irish Bank, the final decision will depend on the commission being satisfied that the bank will be commercially viable in the long term without further injections of taxpayers' money, that there is a significant contribution by the bank's shareholders and subordinated debt holders to the restructuring costs and that the bank will reduce its activities to offset the distortion of competition caused by the aid," the commission said.

The commission also approved a further cash injection from the government of up to euro6.1 billion to meet higher capital requirements.

[Associated Press]

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