BofI raises €750m from bonds that would ‘bail in’ investors

Senior bonds issued by bank holding company established under new rules

Bank of Ireland raised €750 million in funding through the sale of a first batch of senior bonds where investors could suffer losses if the bank ran into trouble in the future, under new European rules.

The bank, led by chief executive Francesca McDonagh, will pay an annual coupon, or interest rate, of 1.38 per cent on the five-year bonds, according to market sources. It had hired JP Morgan, a unit of Royal Bank of Scotland, Nomura and UBS on Tuesday to market the senior unsecured debt.

The fundraising marks the first issuance of senior bonds by a holding company set up by Bank of Ireland last year under new rules designed to minimise taxpayer bailouts in the event of a repeat of the financial crisis a decade ago.

Debt – both junior and senior – issued by such holding companies can be “bailed in” if needed, before banks can apply for government support in the event of Europe’s Single Resolution Board having to step in to overhaul or wind down an ailing lender in future.


The establishment of such holding companies allows for banks to hold customer deposits in their existing operating banks, where they would enjoy greater protection.

‘Further momentum’

Stephen Lyons, an analyst with Davy, said Bank of Ireland bond sale on Wednesday showed "further momentum" towards the bank building up a targeted pool of €13.5 billion of equity and debt funding by early 2021 that would face initial losses in the event of another crisis. These funds are known as minimum requirement for own funds and eligible liabilities (MREL).

The holding company, which had about €7.2 billion of regulatory common equity Tier 1 capital on its balance sheet at the end of June, sold about €750 million of junior bonds in September last year in its first debt offering. The combined €1.5 billion of debt sales means the bank is well under way to meeting its own target of selling up to €5 billon of MREL securities in the coming years.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times