Bill will change pension fund rules on AIB outlay

INVESTMENT REGULATIONS:ALLIED IRISH Banks can be recapitalised as a non-listed financial institution using cash from the National Pension Reserve Fund under sweeping new legislative powers to repair the banks.

The new Bill, the Credit Institutions (Stabilisation) Bill, will change the investment rules of the fund, allowing it to invest in non-listed credit institutions.

The Bill will allow the Minister for Finance “to effect, in part, the injection of capital into Allied Irish Banks prior to year-end as necessary” to bring the bank up to regulatory capital levels, the Department of Finance said.

AIB said last night it was “reviewing the draft legislation and would continue to hold discussions with the State authorities regarding the receipt of capital”.

A further update will be provided following the conclusion of the discussions, the bank said.

AIB must raise an additional €9.8 billion to cover loan losses and boost capital under the EU-IMF plan to over-capitalise the banks.

The lender, which is 18.6 per cent-owned by the State, is heading for effective or full nationalisation following the receipt of further Government cash.

This could push the State’s shareholding to full 100 per cent ownership or a stake of close to this level, should the Government choose not to retain a nominal listing on the stock market which would allow the State to sell down its interest in the bank over time.

The fund has so far only been used for the first €7 billion bailout of AIB and Bank of Ireland last year, but some €10 billion is being drawn from it for the further recapitalisation of the banks under the €85 billion EU-IMF aid package.

The new powers will allow for the restructuring of Anglo Irish Bank and Irish Nationwide Building Society, which will be merged and run down, and for their deposits to remain State-guaranteed as they are transferred to other financial institutions.