AIB seeking IBRC indemnity against €80m in claims

STATE-CONTROLLED AIB wants State-owned IBRC, formerly Anglo Irish Bank, to indemnify it against €80 million of claims from potential losses on loans and litigation arising from the former Anglo subsidiary on the Isle of Man.

AIB acquired the former Anglo subsidiary on the Isle of Man with Anglo’s €8.3 billion of deposits last year and renamed the operation AIB International Savings. The deposits were moved out of Anglo in February 2011 as part of the rundown of the nationalised bank.

Under the agreement covering the deposit transfers, Anglo provided AIB with an indemnity against which the bank and its subsidiary, AIB UK, could make claims on the bank now known as Irish Bank Resolution Corporation.

AIB’s potential claim against another State-owned bank appear in the half-year accounts for IBRC, which were published last week.

The bank said in the accounts that it was in discussions with AIB about the indemnity it was seeking on potential liabilities arising from the transfer of the deposits and the Isle of Man subsidiary.

“The AIB Group has put the bank on notice of possible claims totalling approximately €80 million, but it is not yet possible to confirm whether this is an accurate figure, or whether the bank is, in fact, liable in respect of each of the amounts comprising that total,” said IBRC in the accounts.

The former Anglo Irish Bank said it was told by AIB there were a number of matters for which it was expecting to seek an indemnity under the terms of the February 2011 deposit-transfer deal.

“The bank is working with the AIB Group to establish whether those matters are within the scope of the indemnity,” IBRC said.

The bank said the two lenders were working on whether there were any limitations or exclusions from the indemnity given by IBRC and if there were not, what steps AIB must take “as a precursor to a successful indemnity claim”.

IBRC said these could include “reasonable steps” taken by AIB to mitigate any such liability and the use of any “reasonable endeavours” to recover “any amounts due in respect of certain exposures”.

The Isle of Man subsidiary provided loans prior to 2006 when it focused solely on deposit-taking.

The indemnity sought by AIB relates to specific losses that could arise from the loans advanced by the Isle of Man business and any litigation arising over those loans.

A spokeswoman for AIB said that it would not comment as it was “a commercial matter between ourselves and IBRC in relation to the [deposits] transfer”.

A spokesman for IBRC declined to elaborate beyond what the bank disclosed in the half-year accounts, citing “commercial sensitivities”.

Providing legal indemnities is commonplace when assets and liabilities are transferred from one financial institution to another.

Under the transfer agreement, AIB notifies IBRC of potential losses it believes are covered under the indemnity as the losses arise.

Anglo Irish Bank, into which the Government has committed €29.3 billion of public funds, was nationalised in 2009 and renamed IBRC last year. AIB has received a capital injection of €20.7 billion and is 99.8 per cent owned by the State.