FACTBOX-Key points in Ireland's bank rescue plan
Feb 11 (Reuters) - Ireland unveiled a beefed-up rescue programme for its two main lenders on Wednesday to try to turnaround its banking sector, unfreeze credit, and restore confidence in the country's economy. [ID:nLB782624]
Below are key features of the plan.
CAPITAL INJECTION
- The government will provide 3.5 billion euros (US $4.53 billion) each in Core Tier 1 capital for Allied Irish Banks (ALBK.I) and Bank of Ireland (BKIR.I)
- The injection will take the Core Tier 1 capital ratio of Allied Irish Banks to around 8.5 percent and Bank of Ireland's to more than 9 percent.
- The state does not intend to take control of the banks and does not see further capital injections into these banks as necessary.
PREFERENCE SHARES, CORPORATE GOVERNANCE
- The government will get preference shares with a fixed annual dividend of 8 percent payable in cash or ordinary shares. The preference shares can be repurchased at par up to the fifth anniversary of the issue and at 125 percent of face value thereafter.
- The finance minister can appoint a quarter of the directors to both banks, and the government gets 25 percent of ordinary voting rights in respect of change of control or board appointments.
- The preference shares have warrants that give the government the right to acquire a 25 percent stake in each of the banks after five years.
- If either bank redeems up to 1.5 billion euros of preference shares from privately sourced capital this year, the government would only be able to acquire a 15 percent stake.
- The strike price of the warrants representing the first 15 percent of the existing ordinary shares (core tranche) of the banks are 0.975 euros for Allied Irish Banks and 0.52 euros for Bank of Ireland.
- The strike price for the balance of the warrants granted to the government is 0.375 euros for Allied Irish Banks and 0.20 euros for Bank of Ireland.
EXECUTIVE PAY
- Total remuneration for all senior executives will be reduced by at least 33 percent. No performance bonuses will be paid for these senior executives and no salary increases will be made in relation to 2008 and 2009.
- Non-executive directors' fees will be reduced by at least 25 percent.
BOOSTING LENDING
- The banks commit to increase lending to small and medium enterprises by 10 percent and provide an additional 30 percent capacity for lending to first time (home) buyers in 2009.
- If customers show willingness to try to pay mortgages, banks will not start proceedings to repossess a principal private residence until after 12 months of arrears.
PLANS FOR BAD DEBT
- The government will examine a number of proposals to reduce the banks' risk from exposure to the property and construction sectors. It will investigate setting up an insurance scheme and the possibility of a "bad bank" or "legacy bank" to park bad debts. But the finance minister said the disadvantage of taking the "bad bank" route is that it would require billions of euros of additional investment.
OTHER BANKS AND BUILDING SOCIETIES
- The government is also in talks with Irish Life and Permanent (IPM.I), the EBS Building Society and Irish Nationwide Building Society about their capital positions. These institutions are covered by the government's blanket guarantee for bank liabilities. Anglo Irish Bank has been fully nationalised and will continue as a going concern.
GOVERNMENT GUARANTEE SCHEME
- The government said it was examining how its two-year guarantee scheme for the liabilities of Allied Irish Banks, Bank of Ireland, Irish Life & Permanent, the EBS and Irish Nationwide could be revised to support longer-term bond issuance by those institutions.
- Under its original guarantee scheme, launched in September 2008, the government agreed to back the issue of covered bonds that mature in September 2010 or earlier. (Reporting by Andras Gergely; Editing by Toni Reinhold)
