Commission temporarily approves recapitalisation of EBS

The European Commission has authorised under EU state aid rules the €875m emergency recapitalisation of EBS building society.

In a statement the Commission said it had approved the measure temporarily for a period of six months as urgent rescue aid.

EBS now needs to submit a restructuring plan, to address its difficulties in the long-term and to become viable without continued state support.

"EBS needs a significant recapitalisation to comply – and to continue to comply in the coming years – with capital requirement rules," Competition Commissioner Joaquín Almunia said.

"The measure is therefore appropriate to preserve financial stability in Ireland and can be approved for six months to that end. During this period, EBS needs to establish a restructuring plan to identify the reasons for its problems and to restore its viability."

Finance Minister Brian Lenihan had on April 30 announced the proposed €875m capital injection into EBS, to meet regulatory requirements, in particular regarding core tier 1 capital.

EBS, a mutual company is owned by its members, had a balance sheet of €21.5bn at the end of 2009.

Since 2005, EBS significantly developed its lending to the commercial real estate sector and was, as a consequence, severely affected by the financial crisis, and, in particular, by the commercial real estate crisis.