A Bank of Ireland petition to reduce its share capital by €3.92 billion to €1.97 billion has been approved by the Commercial Court.
The proposed reduction in the bank's share premium account was approved by shareholders last June and by the Minister for Finance but also required court approval.
Yesterday, Ms Justice Mary Finlay Geoghegan said she was satisfied to grant the application.
The court previously heard the share capital reduction would not affect the regulatory capital of the bank.
In an affidavit, Bank of Ireland chief executive officer Richie Boucher said the reserve created from the reduction was to be treated as profits available for distribution and was intended to ensure the bank had sufficient distributable reserves, after accounting for potential losses, to enable it to make distributions and declare dividends to stockholders.