(Updates with Bank of Ireland comment in fifth paragraph.)
Dec. 20 (Bloomberg) -- Bank of Ireland Plc won European Union approval for Irish government help after it agreed to reduce reliance on wholesale funding and focus on “balanced- risk” lending in Britain and Ireland.
The European Commission authorized Irish government recapitalizations, guarantees and asset relief after the bank made plans to “substantially deleverage its balance sheet to reduce its dependency on wholesale funding,” exit risky portfolios and implement better risk management, regulators said in a statement today. The bank will also offer services to small Irish banks to reduce rivals’ costs.
“Bank of Ireland has embarked on an ambitious plan to downsize and refocus its activities to better serve the Irish economy,” EU Competition Commissioner Joaquin Almunia said in the statement. “This plan has attracted private investors and significantly reduced the need for public support.”
Regulators must approve large state payments to lenders that needed help during the financial crisis and has required banks to shrink balance sheets and change the way they do business to compensate for any harm to competition. Bank of Ireland and Allied Irish Banks Plc, the country’s two biggest lenders, require “close surveillance” because they will control the Irish market after receiving bailouts, Almunia said in June.
The bank said in June that it intended to reverse plans to sell its ICS Building Society unit under its revised EU restructuring program. It also said it would delay the sale of its New Ireland life assurance unit. The EU ordered the bank to sell both divisions as part of its original restructuring blueprint, approved in July 2010.
Bank of Ireland said the today’s EU requirements “are consistent with those set out in the prospectus published on June 18” and that the lender “continues to make good progress in implementing the commitments” of its restructuring plan, according to an e-mailed statement.
The Irish government has “committed to a number of market opening measures in order to enhance competition” in Irish banking, including ways to help customers to move between banks, the EU said.
The Brussels-based commission separately approved a resolution program for Irish credit unions until the end of June 2012. The program ensures that credit unions contribute to the wind-down costs and will prevent a buyer from gaining “an undue economic advantage through the acquisition of underpriced assets,” the EU said.
Bank of Ireland is alone among the country’s six largest lenders in escaping government control, after the state agreed July 27 to sell a 34.9 percent stake to five investors, including Toronto-based Fairfax Financial Holdings Ltd. and WL Ross & Co., the New York-based investment firm. The bank was ordered to raise 5.2 billion euros of capital following stress tests in March.
--With assistance from Joe Brennan in Dublin. Editor: Anthony Aarons, Peter Chapman
To contact the reporter on this story: Aoife White in Brussels at firstname.lastname@example.org.
To contact the editor responsible for this story: Anthony Aarons at email@example.com.