Bank of Ireland shareholders have voted to participate in the National Asset Management Agency (Nama) by an overwhelming majority.
Despite voicing their anger at the bank's management and their dissatisfaction with members of the board of directors, some 99.9 per cent of shareholders backed the Government's bad bank plan.
At an extraordinary general meeting in Dublin today, shareholders also passed resolutions which will allow certain measures announced by the board to be passed by an ordinary resolution, which requires a majority agreement by shareholders, instead of by special resolution, which requires 75 per cent approval.
The meeting was called to vote on the bank's proposed participation in the Nama. Bank of Ireland said it expects to receive a 30 per cent discount on €16 billion of loans it transfers to Nama.
Mr Molloy today told shareholders in Dublin that transferring the loans "will bring greater certainty" to the bank's remaining loan portfolio.
"It improves our prospects of raising capital in the future. It will restore confidence," he said.
However, shareholders vented their anger and called for answers from the board.
“At the moment you have no credibility whatsoever,” one shareholder told the board, adding that there were “far too many fat cats” in the bank.
Peter Matthews, a shareholder and former ICC executive, said the board “should be full of fresh new faces” and added that the bank should support Central Bank governor Patrick Honohan’s call for a full inquiry into the collapse of the Irish banking sector.
“We want to know how the mess occurred,” Mr Matthews said.
“We are where we are,” Bank of Ireland governor Pat Molloy responded to shareholders. He said “quite a bit of progress” had been made on the replacement of former board members and “more will continue”.
Since the banking crisis, four directors have left the Bank of Ireland board and four new directors have been appointed.
However, Senator Shane Ross questioned Mr Molloy’s decision to take up his position as governor in July 2009 without first demanding the resignation of directors who were in key positions during the period of reckless lending. These directors include the current chief executive Richie Boucher, he said.
Mistakes had been made, Senator Ross said, addressing Mr Molloy. “The problem is you have 13 of those mistakes sitting beside you.”
Mr Molloy added that the bank was “committed to remaining independent”, after several shareholders asked if the bank was destined to be nationalised.
Shareholders were told there is a range of internal and external options open to the bank to enhance its capital position, and it is "actively exploring" these.
Another shareholder said the bank’s board seemed to be oblivious to problems in the Irish economy, which he said could lead to a fresh wave of defaults on home mortgages.
“You don’t seem to know what’s going on outside the four walls of the bank,” the shareholder said.
The egm attendees said this meant small shareholders would be sidelined, as 55 per cent of the bank’s stock is held by institutional shareholders.
Mr Molloy said the resolution was a “two-edged sword” for the board because it would allow for the removal of directors if 51 per cent of the shareholders vote in favour, rather than the current 75 per cent requirement.
Nama is buying as much as €80 billion of property loans from Ireland's banks and expects all of the transactions to be completed by the third quarter of 2010.
Transfer of Bank of Ireland's loans is expected to be completed by the middle of this year and it will reduce customer loans by as much as €14.6 billion, Mr Molloy said.
"There are significant benefits to Bank of Ireland arising from our participation in Nama," he said.
"Firstly, the removal of those property related loans from our balance sheet which are giving rise to the greatest level of concern in the market will bring greater certainty to our remaining loan portfolio and reduce the residual risk of future impairments against those loans transferring to Nama.
"Secondly, we will no longer have to hold capital against those particular loans. Thirdly, this further progresses our objective of de-leveraging our balance sheet, thereby enhancing our liquidity and funding position.
"Finally, it improves our prospects of raising capital in the future, should the board deem it appropriate to do so."
Bank of Ireland fell as much as 11 cent, or 6.7 per cent, to trade at €1.52 as of 3.38pm in Dublin.
Additional reporting - Bloomberg