EC approves €3.8bn recapitalisation of ILP

The European Commission has granted temporary approval, under EU state aid rules, to a government recapitalisation worth up to €3.8bn for Irish Life & Permanent.

In a statement, the Commission said: "The recapitalisation is necessary to increase the bank's solvency ratios, thereby enabling it to resist potential stress situations and preserving stability on the Irish financial markets.

"The Commission will take a final decision on the state measures in favour of IL&P on the basis of the new restructuring plan that Ireland committed to submit by the end of July to take account of this additional state support."

The EU-IMF bailout included a capital assessment review of all banks subject to the programme.

The review carried out by our own Central Bank identified capital needs of €4bn for IL&P. In a first stage, to be implemented by July 31 this year, the Government will buy ordinary shares in IL&P for €2.3bn and contingent capital notes for €0.4bn.

In a second stage, the Government will provide up to €1.1bn of additional capital if the capital raising measures recently launched by IL&P fail to raise the remaining amount of capital needed to satisfy the requirements identified by the central bank review.

€200 million of capital will be provided by the group itself.

Irish Life and Permanent will hold an emergency meeting of shareholders this morning to discuss a recapitalisation plan for the bank.

Shareholders are being asked to approve the €3.8bn cash injection from the Government, which would result in 99% of the bank's ownership transferring to the Government. It is reported they may reject the bailout.