December 23, 2010

Ireland to Nationalize Allied Irish Banks

Government wins court approval for 93% stake

In what feels like a case of "what's old is new," Ireland's woes continue.

The latest news to come from the Emerald Isle is that the Irish government gained court approval Thursday to nationalize Allied Irish Banks, the fourth bank taken over by Ireland amid a financial crisis brought on by speculative real estate lending.

AP reports the government, through the National Pension Reserve Fund, is immediately injecting $4.85 billion into the bank and will initially get a 49.9% share of the AIB's ordinary share capital. Following the conversion of nonvoting shares already held by the government, taxpayers will own 92.8% of the bank, Ireland's Department of Finance said in a statement.

"This capital is essential to allow AIB to fulfill its role in supporting the Irish economy," said Finance Minister Brian Lenihan.

According to the wire service, the court also ordered Allied Irish Banks to delist its shares on the Irish Stock Exchange and the London Stock Exchange.

The cash injection is Ireland's latest attempt to deal with its massive banking and financial crises−the government already controls Anglo Irish Bank, and the Irish Nationwide and EBS building societies.

The Irish government plans spending cuts of $5.24 billion and new taxes of $2.62 billion next year, conditions it agreed to as part of a bailout deal to borrow up to $90 billion from the European Union and the International Monetary Fund.

Thursday's ruling by the High Court in Dublin came two days after the European Commission approved the plan to bolster AIB's balance sheet to meet higher capitalization requirements. The EU commission also said the Irish government could inject up to $8 billion into AIB next year.

The European Commission approved the capital injection for AIB on Tuesday.

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