GOVERNMENT PRESS BRIEFING:The State's National Pension Reserve Fund will get €500m-a-year in dividends following the Government's move to take control of Anglo Irish Bank and invest billions in the country's two biggest banks, the Minister for Finance Brian Lenihan said this evening.
Following meetings in Government Buildings today led by Taoiseach Brian Cowen, the Government will invest €1.5 billion to buy preference shares in Anglo. The shares will give the State 75 per cent of the voting rights in the troubled bank, which lost its chairman and chief executive in recent days.
In return, the bank will pay 10 per cent a year interest to the State, while Bank of Ireland and AIB will pay 8 per cent interest for the State's €2 billion investment in them.
The State's National Pension Reserve Fund will get €500m-a-year in dividends from the three banks, which is an acceptable return, said Mr Lenihan at a press briefing tonight.
The Government had decided not to charge the banks more for the money because the British government had charged higher rates only to find that their banks struggled to meet the repayments.
He said he had made it clear from the outset that he would not be rushed into recapitalising Irish banks "in haste", as happened elsewhere. "Other countries have proceeded in haste and made mistakes. I believe that we have got it right," he told journalists in the Department of Finance shortly after 8pm.
The Minister said he was confident that the Anglo proposal will meet with European Union State Aid rules when it is formally notified to Brussels in due course.
Taoiseach Brian Cowen said: "The objective of these decisions is to ensure that the financial system in Ireland meets the everyday financial needs of individuals, businesses and the overall economy."
Extra State money will be put into Anglo "if required so that it remains a sound and viable institution", Mr Cowen said, in a detailed statement.
The Minister for Finance said the Government wanted to "make it clear that we stand behind Anglo Irish" and "make it that it is taken into majority State ownership".
The State's shareholding in all three banks can be bought back by them at the purchase price at any point over the next five years, or for an extra 25 per cent if bought back later on.
The injection of capital into Anglo will take place after it holds its emergency general meeting in January, and by the end of the first quarter in Bank of Ireland and Anglo.
The Government is equally prepared to underwrite a €1 billion rights issue for both Bank of Ireland and AIB, but not in Anglo.
The banks, in return, have committed themselves to increasing credit for business; to ease off repossessing houses and offer loans for environmental equipment purchases.