EC may curb business activities of EBS

THE EBS Building Society may be asked to curtail its business activities as part of its restructuring plans to justify keeping the €875 million it received from the state.

The European Commission has opened “an in-depth investigation” into the restructuring of the EBS, currently the country’s biggest building society and one of only two left, both in state hands.

The building society is currently for sale and the search for a buyer will continue in tandem with the commission’s investigation, a spokesperson for the Department of Finance confirmed, adding that the sale process will move to its final stage in the coming days. The sale will be narrowed down to Irish Life & Permanent and one leveraged buyout firm, according to sources.

Finance Minister Brian Lenihan will sign off on the two names being drawn up by EBS and the National Treasury Management Agency, which is running the auction, after he returns to Ireland this week from a trip to the US, said the sources.

A spokesman for the Department of Finance declined to comment.

EBS spokesman Gerry O’Sullivan and Irish Life spokesman Ray Gordan also declined to comment

Competition Commissioner Joaquin Almunia, announcing the investigation, said: “Ireland has taken decisive action to strengthen EBS. The amount of aid received by EBS, however, justified that we give interested third parties the opportunity to comment on whether the distortions of competition are adequately addressed.”

In June, the commission temporarily authorised the state injection of capital which resulted in its nationalisation, and the EBS also received aid through asset purchases by NAMA, as well as being covered under the guarantee schemes.

A restructuring plan was submitted at the end of May and yesterday the commission said they have doubts that the distortions of competition caused by the aid to EBS are sufficiently addressed by the plan. In other comparable cases the commission has requested financial institutions to reduce its activities and it is understood they wish to explore why they should not ask EBS to do the same.

The Irish authorities say there is no need for this on the basis that there is a shortage of lending on the Irish mortgage market. The commission also says it wants further information to underpin the state’s claim that the EBS will not need further state aid and will restore its viability on the basis of the current plan.

EBS chief executive Fergus Murphy last month said the building society was on the path to viability though reporting pretax losses of almost €250 million for the first half of the year. It has taken close to €2 billion in deposits since the start of 2008, offering some of the highest deposit rates in the country, raising further issues about distorting the market. It is understood it is preparing to look for €500m to €700m from the markets before the end of the year.