This represents the death knell for Anglo as we know it as 120,000 customers and 210 staff will transfer to AIB.
The total amount of deposits moving across to the bank is about €9 billion, AIB said.
The bank will pay Anglo €3.5bn for use of those deposits.
AIB said the deal involves the transfer of about €7.1bn deposits in Ireland and Britain, the purchase of senior NAMA bonds and the purchase of 100% of Anglo’s operations in the Isle of Man for €2 million.
AIB said that as well as the immediate positive benefits arising from the deal, the transfer “represents a significant business development opportunity for AIB.”
Anglo Irish Bank’s group chief executive Mike Aynsley said after the deal was announced “the existing terms and conditions applying to the deposits will be maintained following the transfer and depositors will continue to have the same level of protection.”
In a further development Irish Nationwide Building Society, which is also owned by the state, has been ordered to sell on roughly €4bn of deposits to Irish Life & Permanent involving a payment of €2.3bn by IL&P to the former building society.
Up to 237 Irish Nationwide staff will also transfer to IL&P as part of this transaction, a statement from Irish Life said.
The chief executive of Permanent TSB, David Guinane, said he welcomed Irish Nationwide deposit customers and reassured them that the lender “truly values” their business and fully respects the terms and conditions which they had at Irish Nationwide.
Between the two banks roughly 450 staff are affected and will be consulted before the jobs are transferred.
Gerry McGinn, chief executive of Irish Nationwide Building Society said there were “compelling reasons why it has been necessary to transfer our deposit business in this way.”
The moves were sanctioned by Judge Brian McGovern in Dublin yesterday.
The press was restricted from reporting the order until after 5pm yesterday evening.
Overall there were eight bidders for the deposits the court heard.
In response to the news the Central Bank stepped in to reassure customers they have nothing to worry about.
It said was “no action” is required by depositors at this point in the wind down.
“There will not be any immediate change in how depositors deal with their accounts,” it said.
“Deposits can be accessed as normal through the relevant institutions and depositors can continue to do business as normal with Anglo Irish Bank and Irish Nationwide, it said.
Depositors remain protected under the Credit Institutions Eligible Liabilities Guarantee Scheme 2010 and the Deposit Protection Scheme, the Central Bank said in a statement.
Finance Minister Brian Lenihan sought the order under the tough laws he introduced late last year to help reduce the size of the country’s banks.
Anglo Irish and Irish Nationwide will be merged as part of a restructuring plan, subject to European Commission approval.
The National Treasury Management Agency said it was “very pleased” with the outcome.
“It was encouraging to see domestic and international interest in the transaction and we believe the transfers represent an important step forward in terms of the longer term restructuring of the Irish banking sector,” the NTMA said.