HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 139/18
EN
Official Journal of the European Union
26.5.2012
COMMISSION DECISION
of 29 June 2011
on the State aid No SA.32504 (2011/N) and C 11/10 (ex N 667/09) implemented by Ireland for
Anglo Irish Bank and Irish Nationwide Building Society
(notified under document C(2011) 4432)
(Only the English text is authentic)
(Text with EEA relevance)
(2012/269/EU)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
notify a restructuring plan to the Commission by the
end of November 2009 ( 4 ).
Having regard to the Treaty on the Functioning of the European
(3) On
30
November
2009,
Ireland
notified
a
restructuring
Union, and in particular the first subparagraph of Article 108(2)
plan to the Commission ( 5 ) (hereinafter referred to as ‘the
thereof,
initial Anglo restructuring plan’) prepared by Anglo. On
24 November and 18 December 2009, the Commission
sent information requests to Ireland regarding the initial
Anglo restructuring plan.
Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,
(4) On
17
February
2010,
Ireland
notified
the
Commission
of its intention to inject additional capital of up to EUR
10,44 billion into Anglo (hereinafter referred to as ‘the
second recapitalisation’).
Having called on interested parties to submit their comments
pursuant to the provisions cited above ( 1 ),
(5) By
Decision
of
31
March
2010
( 6 ), the Commission
approved the second recapitalisation on a temporary
basis until the final decision by it on Anglo’s restruc
turing plan. The Commission also decided in that
Whereas:
Decision to initiate the procedure laid down in
Article 108(2) of the Treaty on the Functioning of the
European Union (hereinafter referred to as ‘the Treaty’)
on the initial Anglo restructuring plan and the associated
1. PROCEDURE
aid measures by Ireland (hereinafter referred to as ‘the
opening decision’). The opening decision was published
1.1. Anglo Irish Bank
in the Official Journal of the European Union on 7 August
2010. The Commission invited interested parties to
(1) By
Decision
of
14
January
2009,
the
Commission
submit their comments on the aid. No comments were
temporarily approved a recapitalisation of Anglo Irish
submitted by third parties.
Bank (hereinafter referred to as ‘Anglo’) ( 2 ). That recap
italisation was not implemented as Ireland decided to
nationalise Anglo instead. By Decision of 16 February
(6) On
31
May
2010,
Ireland
submitted
a
revised
restruc
2009, the Commission concluded that the nationalisation
turing plan for Anglo Irish Bank (hereinafter referred to
did not involve State aid ( 3 ).
as ‘the second Anglo restructuring plan’).
( 4 ) Commission Decision in Case N 356/09, Recapitalisation of Anglo
Irish Bank by the Irish State (OJ C 235, 30.9.2009, p. 3).
(2) By
Decision
of
26
June
2009,
the
Commission
auth
( 5 ) According to recital 40 of the Commission Decision in Case N
356/09 (see footnote 4 of this Decision), the adoption of a restruc
orised emergency aid to Anglo in the form of a capital
turing plan is consistent with paragraph 28 of the Credit Institutions
injection of EUR 4 billion (4 000 million) on the basis of
Financial Support (CIFS) Scheme (the Irish guarantee scheme for
Article 87(3)(b) of the Treaty establishing the European
credit institutions) and paragraph 30 of the Commission’s
Community for a period of six months and the
approval of the CIFS Scheme. See also Commission Decision in
Commission took note of Ireland’s commitment to
Case NN 48/08, Ireland — Guarantee Scheme for banks in Ireland
(OJ C 312, 6.12.2008, p. 2). In the context of CIFS, the Minister for
Finance has required a restructuring plan to be produced if a partici
( 1 ) OJ C 214, 7.8.2010, p. 3.
pating institution’s solvency ratio falls below the minimum regu
( 2 ) Commission Decision in Case N 9/09, Recapitalisation of Anglo
latory standards applicable to it on a material basis.
Irish Bank by the Irish State (OJ C 177, 30.7.2009, p. 1).
( 6 ) Commission Decision in Case NN 12/10 and C 11/10 (ex N
( 3 ) Commission Decision in Case N 61/09, Change of ownership of
667/09), Second rescue measure in favour of Anglo Irish Bank
Anglo Irish Bank (OJ C 177, 30.7.2009, p. 2).
(OJ C 214, 7.8.2010, p. 3).

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/19
(7) On
2
June
2010,
the
Commission
sent
an
information
italisation’) and State guarantees in respect of certain
request to Ireland regarding the second Anglo restruc
liabilities in favour of Anglo.
turing plan. Those questions were discussed in a
meeting on 24 June 2010 between Commission officials,
the Irish authorities and representatives of Anglo.
Moreover, the Irish authorities replied to those
(15) By
Decision
of
21
December
2010
( 9 ), the Commission
questions in writing on 9 and 12 July 2010.
approved the fourth recapitalisation and guarantees in
respect of certain liabilities in favour of Anglo on a
temporary basis until the approval of Anglo’s final
restructuring plan.
(8) On
28
June
2010,
Ireland
notified
the
Commission
of
another capital injection of up to EUR 10 054 million in
favour of Anglo (hereinafter referred to as ‘the third
recapitalisation’) ( 7 ).
1.2. Irish Nationwide Building Society
(16) By Decision of 30 March 2010, the Commission
(9) By
Decision
of
10
August
2010
(
temporarily approved a EUR 2,7 billion recapitalisation

8 ), the Commission
approved the third recapitalisation on a temporary
of Irish Nationwide Building Society (hereinafter
basis until the final decision by it on Anglo’s final
referred to as ‘INBS’) for six months as of the date the
restructuring plan.
recapitalisation was put into effect (22 December 2009),
or, if Ireland submitted a restructuring plan before that
date, until the Commission had adopted a final decision
on INBS’s restructuring plan (hereinafter referred to as
(10) On
31
August
2010,
Ireland
submitted
a
new
proposal
‘the first INBS recapitalisation’) ( 10 ).
to the Commission on the restructuring of Anglo which
set out a split and wind-down of the bank over 10 years.
(17) Furthermore,
on
30
March
2010,
the
Irish
Minister
of
Finance announced that, in the light of the reduction of
(11) In light of a detailed assessment of the prospects of
INBS’s balance sheet resulting from transfers to the
Anglo, the Irish Minister of Finance announced on
National Asset Management Agency (hereinafter referred
30 September 2010 that the resolution of Anglo
to as ‘NAMA’), that institution did not have a future as
would require in total a cumulated capital injection of
an independent stand-alone entity.
EUR 29,3
billion under base projections, and an
additional EUR 5 billion under a stress scenario.
(18) On
22
June
2010,
Ireland
notified
a
restructuring
plan
(12) On
26
October
2010,
Ireland
submitted
a
work-out
plan
for INBS to the Commission (hereinafter referred to as
for Anglo (hereinafter referred to as ‘the third Anglo
‘the INBS restructuring plan’). That plan envisages the
restructuring plan’), explaining in detail how it would
continued management of the society as a going
implement the work-out of the entity which had been
concern in anticipation of a sale to a trade buyer.
presented for the first time in its submission of
31 August 2010.
(19) In
the
following
weeks,
Ireland
informally
informed
the
Commission that it was assessing other options for the
(13) In the subsequent weeks, the Commission services
future of INBS. In particular, Ireland was planning to test
requested some clarifications and sought additional
the market appetite for acquiring parts of INBS.
information on 29 October 2010. The Irish authorities
replied in a number of e-mail exchanges and conference
calls.
(20) On
30
September
2010,
the
Irish
Minister
of
Finance
made a public statement on the situation of the Irish
banking sector and announced that INBS needed an
(14) On 8 December 2010, Ireland notified to the
Commission an additional recapitalisation of EUR
additional recapitalisation of EUR 2,7 billion (leading to
4 946 million (hereinafter referred to as ‘the fourth recap
a total recapitalisation of EUR 5,4 billion). That capital
injection (hereinafter referred to as ‘the second INBS
recapitalisation’) was notified to the Commission on
( 7 ) Originally, the notification also covered an individual State guarantee
12 October 2010.
on Anglo’s short-term liabilities (after the expiry of the Irish Eligible
Liabilities Guarantee scheme on 29 September 2010). However, on
4 August 2010 Ireland withdrew the notification of the individual
( 9 ) Commission Decision in Case SA.32057 (2010/NN), Ireland —
State guarantee and only maintained the notification of the third
Temporary approval of the fourth recapitalisation and guarantee
recapitalisation.
in respect of certain liabilities in favour of Anglo Irish Bank (OJ
( 8 ) Commission Decision in Case NN 35/10 (ex N 279/10), Ireland —
C 76, 10.3.2011, p. 4).
Temporary approval of the third recapitalisation in favour of Anglo
( 10 ) Commission Decision in Case NN 11/10, Ireland — Rescue
Irish Bank (OJ C 290, 27.10.2010, p. 4).
measures in favour of INBS (OJ C 143, 2.6.2010, p. 23).

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L 139/20
EN
Official Journal of the European Union
26.5.2012
(21) By
Decision
of
21
December
2010,
the
Commission
had become known in the meantime. A further update
temporarily approved the second INBS recapitalisation
was received on 21 April 2010.
for a period of six months or, if Ireland submitted a
restructuring plan before 31 January 2011, until the
Commission had adopted a final decision on the restruc
turing plan of that bank ( 11 ).
2. DESCRIPTION OF THE AID
2.1. The beneficiaries and their difficulties
1.3. Joint procedure
2.1.1. Anglo Irish Bank


(22) On
28 November
2010, an
agreement
was
reached
(26) Measured
by
balance
sheet
size,
Anglo
is
one
of
the
between Ireland and the European Union, the European
largest banks operating in Ireland. As at 31 December
Central Bank (hereinafter referred to as ‘ECB’) and the
2010, it had a balance sheet size of EUR 72,2 billion ( 14 )
International Monetary Fund on a Programme for
and a loan book of EUR […] (*) billion. In terms of its
Support for Ireland (hereinafter referred to as ‘the
business model, Anglo was a ‘monoline’ bank specialising
Programme for Support’). As part of the Programme
in commercial real estate lending in three core markets:
for Support, Ireland agreed to undertake certain bank
Ireland, the United Kingdom and the United States. Since
recapitalisation and reorganisation measures under a
the beginning of the financial crisis, Anglo registered
Programme for the Recovery of the Banking System
heavy losses mainly driven by impairment charges on
(hereinafter referred to as ‘the Banking System
its commercial loan book. Anglo was nationalised by
Programme’). In the context of the Banking System
Ireland on […] 2009.
Programme, the Memorandum of Economic and
Financial Policies (hereinafter referred to as ‘MEFP’) sets
out measures which are necessary to restore the viability
(27) A
detailed
description
of
Anglo
and
its
difficulties
was
of the financial sector in Ireland ( 12 ). Point 10 of the
provided in Sections 2.2 and 2.3 of the opening decision
MEFP states that: ‘swift and decisive action will be
of 31 March 2010.
taken to resolve the position of Anglo Irish Bank
(Anglo) and Irish Nationwide Building Society (INBS) in
a way that protects depositors and strengthens the
banking system. To this end, by end-January 2011, we
(28) Anglo’s
business
model
proved
to
be
unsustainable
and
will submit to the European Commission a revised
led to unprecedented financial difficulties and losses in
proposal developed in collaboration with IMF to
the context of the global financial crisis. Anglo’s business
resolve Anglo and INBS’ ( 13 ).
model was overly concentrated on commercial property
lending and led to excessive exposures to that sector of
the economy which was particularly hard-hit during the
financial crisis: commercial property prices decreased
(23) On
12
January
2011,
Ireland
provided
information
to
peak-to-trough by more than 62 % in Ireland, 37 % in
the Commission regarding the planned sale of deposits
the United Kingdom and 45 % in the United States ( 15 ).
by Anglo and INBS. Further information regarding the
In addition, Anglo’s lending was partly financed by
sales process was submitted on 2 February 2011 and
wholesale funding, a source of funding which dried up
21 February 2011.
as a result of the financial crisis.
(24) On
16
January
2011,
Ireland
submitted
information
to
(29) Risk management in Anglo was not sufficiently
the Commission regarding the contemplated resolution
developed and allowed uncontrolled balance sheet
of the businesses of Anglo and INBS. On 31 January
growth combined with risky lending practices (such as
2011, Ireland notified the Commission of a joint restruc
high loan-to-value lending and interest-only lending), in
turing and work-out plan for Anglo and INBS (here
particular during the years of the Irish property boom.
inafter referred to as ‘the joint restructuring plan’).
Between 1984 and 2008, the Bank’s balance sheet grew
at a compound growth rate of approximately 30 % per
year, reaching a balance sheet of EUR […] billion in
2008. The loans-to-deposit ratio (hereinafter referred to
(25) On
5
April
2011,
Ireland
updated
the
joint
restructuring
as ‘LtD’) increased from 100 % pre-1990 to an average of
plan by including the impact of the deposits and NAMA
217 % in the period from 2008 to 2009.
bond transfers which had taken place in the meantime
and by replacing the forecast results and balance sheets
of Anglo and INBS for 2010 by the actual ones, which
(30) Anglo
benefited
from
four
recapitalisations,
an
asset
relief
( 11 ) Commission Decision in Case NN 50/10 (ex N 441/201) Ireland —
measure which allowed it to transfer around EUR
Second emergency recapitalisation in favour of Irish Nationwide
35 billion of impaired loans to the NAMA and State
Building Society (OJ C 60, 25.2.2011, p. 6).
guarantees on most of its liabilities (see recital 66).
( 12 ) The documents that make up the Programme for Support for
Ireland can be found at the following website: http://ec.europa.eu/
economy_finance/articles/eu_economic_situation/2010-12-01-
( 14 ) As compared to EUR 101 billion at the end of 2008.
financial-assistance-ireland_en.htm
(*) Confidential information.
( 13 ) Point 10 of the MEFP of 28 November 2010.
( 15 ) Figures quoted in the restructuring plans.

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/21
2.1.2. INBS
2.2. The individual restructuring plans
(31) A
detailed
description
of
INBS
was
provided
in
Section
2.2.1. The initial Anglo restructuring plan
2.1 of the Commission Decision of 30 March 2010
concerning the first recapitalisation of INBS. A short
(37) The
initial
Anglo
restructuring
plan
was
notified
to
the
summary is therefore provided in this Section.
Commission on 30 November 2009. A comprehensive
description of the initial Anglo restructuring plan can be
found in Section 2.4 of the opening decision, in which
the Commission raised a number of doubts as to whether
that plan complied with the conditions laid down in the
(32) INBS is a building society and had a balance sheet total
Restructuring Communication
( 17 ). In particular, the
of EUR 12,1 billion as at 31 December 2010. Before the
Commission questioned whether the plan would lead
financial crisis, it was the sixth-largest Irish financial insti
to a restoration of the long-term viability of Anglo,
tution in terms of balance sheet size. It offered traditional
would limit the restructuring costs to a minimum and
retail banking products to its members (namely, savings
would limit distortions of competition. Therefore, the
and mortgages). In the years preceding the financial crisis,
Commission initiated the procedure laid down in
INBS aggressively increased its activities in risky
Article 108(2) of the Treaty with regard to that plan.
commercial property lending, which became its main
At the same time, the Commission requested the
activity. INBS was predominantly active in Ireland,
submission of a revised restructuring plan by 31 May
where it had a branch network of 50 branch offices
2010.
and 40 branch agents, and in the United Kingdom
where it had no branch offices.
2.2.2. The second Anglo restructuring plan
(38) On
31
May
2010,
Ireland
submitted
a
revised
restruc
(33) INBS’s
loan
book
as
at
31
December
2010
had
a
value
turing plan which set out a significantly revised approach
of EUR 1,9 billion following the transfer of EUR
to restructuring Anglo.
8,5 billion of loans to NAMA ( 16 ). Retail deposits
amounted to EUR 3,9 billion as at 31 December 2010.
INBS recorded a loss of EUR 3,3 billion in 2009.
(39) As requested in the opening decision, the second Anglo
restructuring plan presented a number of possible
restructuring scenarios: (i) liquidate 100 % of Anglo
over 12 months; (ii) wind-down 100 % of Anglo over
(34) INBS’s
difficulties
were
caused
by
its
overexposure
to
10 years; (iii) wind-down 100 % of Anglo over 20 years;
poorly underwritten Irish commercial property loans
(iv) stabilise the whole of Anglo and keep it as a going
(approximately 80
% of INBS’s total loan book).
concern; and (v) a split which included the wind-down of
Consequently, when the financial crisis hit and property
80 % of Anglo through the creation of an asset
prices, especially commercial property prices, fell
management company while the remainder would
dramatically in both Ireland and the United Kingdom,
continue to do business (a good bank).
INBS was highly exposed to losses in its loan book.
Those losses have forced it to take significant
impairments in 2009 and 2010.
(40) The split scenario, referred to in (v) of recital 39, was
presented as the preferred option of the Irish authorities.
In that scenario, the asset management company would
hold ‘lower quality assets’ that would not be transferred
(35) INBS
benefited
from
two
recapitalisations,
an
asset
relief
to NAMA or the good bank (book of EUR 13,6 billion at
measure which enabled it to transfer around EUR
split), and would be managed to maximise asset recovery
8,9 billion of impaired commercial property loans to
values while minimising State funding. The asset
NAMA and State guarantees on most of its liabilities
management company would not conduct any new
(see recital 67).
business and would be liquidated in 2020.
(41) The
good
bank
would
become
a
significantly
smaller
(36) Prior
to
the
first
recapitalisation
by
Ireland,
INBS
was
State-owned commercial bank which could deliver
owned by its members. As a result of the first recap
long-term viability with a sharply reduced balance sheet
italisation of INBS, the State has taken full control of
having a lower risk profile. It was envisaged to privatise
the bank. The members have thus lost control of INBS
the good bank within a five-year timeframe, providing a
and have lost all economic ownership rights.
partial return to the State of its investment in Anglo.
( 16 ) INBS will in total transfer EUR 8,9 billion of loans to NAMA. To
( 17 ) Commission communication on the return to viability and the
date, EUR 8,5 billion have been transferred, while EUR 400 million
assessment of restructuring measures in the financial sector in the
are awaiting transfer.
current crisis under the State aid rules (OJ C 195, 19.8.2009, p. 9).

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L 139/22
EN
Official Journal of the European Union
26.5.2012
2.2.3. The third Anglo restructuring plan
for Anglo and INBS. The joint restructuring plan
foresees the merger of Anglo and INBS, after the sales
(42) On
26
October
2010,
elaborating
on
its
submission
of
of their respective deposit books, into one single entity
31 August 2010, Ireland submitted a substantially
(hereinafter referred to as ‘the merged entity’) which will
revised proposal on the restructuring of Anglo. The
be licensed, fully regulated and 100 % State-owned. The
third Anglo restructuring plan sets out the broad lines
joint opening balance sheet after the merger will amount
of a split of Anglo into two legally independent State-
to EUR [60-70] billion.
owned entities, namely a Funding Bank and a Recovery
Bank, which would result in the wind-down of Anglo
over a period of approximately 10 years. Further State
aid would be needed in the form of capital injections,
persistent Central Bank funding and a comprehensive
(48) The merged entity will: (i) work out the legacy
structure of State guarantees over the lifetime of the
commercial property loan book of Anglo over a period
two Banks. The plan forecast a capital requirement of
of 10 years through redemptions and sales; (ii) work out
EUR 29,3 billion in the base case and EUR 34 billion
the retail mortgage book of INBS over a period of […]
in stress case.
years […]; and (iii) rely […]. The merged bank will only
hold a small amount of deposits and will not engage in
any new lending or other activities.
(43) Ireland indicated that the new approach to the restruc
turing of Anglo, which foresees that it would cease to
operate as a lender, was triggered by deteriorating market
(49) The
merged
entity
will
hold
the
various
promissory
notes
circumstances. It argued that funding conditions for
which have been used to recapitalise both Anglo and
Anglo and sentiment towards the State (Sovereign) had
INBS. All the promissory notes will be settled in
worsened since the submission of the second Anglo
accordance with their payment schedule ( 18 ). […]. The
restructuring plan, while the discounts on loans trans
merged entity also have a small amount of subordinated
ferred to NAMA and the losses on the non-NAMA
debt, which will correspond to the amount which it does
loan book were higher than expected.
not manage to buy back in the framework of successive
liability management exercises.
2.2.4. The INBS restructuring plan
(50) The
objective
of
the
proposed
joint
restructuring
plan
is
(44) The
restructuring
plan
for
INBS
was
submitted
to
the
to avoid the risk of further losses from new lending,
Commission on 22 June 2010. In line with what was
manage the work-out of the loan books efficiently and
requested in the first INBS recapitalisation decision, the
keep State aid requirements to a minimum. Working out
INBS restructuring plan explored several options for the
the two loan books in one merged entity enables
bank: (i) restructuring and continuation of the business
synergies with regard to capabilities, infrastructure and
with a view to selling it around 2013; (ii) immediate
processes.
wind-down; or (iii) gradual wind-down to be completed
by 2020. The sale required the lowest amount of State
support in addition to EUR 2,7 billion already provided
by the State at the time the plan was submitted.
2.3.1.1. D e p o s i t s
(51) In
conformity
with
the
Programme
for
Support,
Ireland
(45) In the preparation for the sale, INBS was supposed to
committed to transfer, before the merger, the deposits
become a small savings and loan institution. It would
(which are recorded on the liability side of the balance
transfer a significant portion of its existing commercial
sheet) and NAMA bonds (which are recorded on the
loan portfolio to NAMA and cease commercial lending,
asset side of the balance sheet) of Anglo and INBS to
and provide only residential mortgage lending and
viable institutions in an open process. Bids were invited
savings accounts to its customers.
on the package of NAMA bonds and deposits. The sale
of circa EUR 12,2 billion of deposits and of circa EUR
15,9 billion of NAMA bonds of both entities was
completed ( 19 ) on 24 February 2011.
(46) The INBS restructuring plan did not envisage any
particular measures aimed at limiting the distortion of
competition created by the aid.
(52) In contrast to previous versions of the Anglo restruc
turing plans, the merged entity will, in principle, not
hold deposits to fund its assets but will instead exit the
2.3. The joint restructuring plan for Anglo and INBS
deposit market.
2.3.1. Description of the joint restructuring plan
( 18 ) See point 35 of the Commission Decision in Case NN 12/10 and C
11/10 (ex N 667/09) (footnote 6 of this Decision).
(47) On 31 January 2011, Ireland submitted to the
( 19 ) http://www.ntma.ie/Publications/2011/
Commission the joint restructuring and work-out plan
NTMACompletesTransferAngloAndINBSDeposits.pdf

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/23
(53) However,
in compliance with the commitments (see
2.3.1.4. C a p i t a l
Section 2.2.5.1), the merged entity will be allowed to
keep a small amount of corporate deposits which are
(57) In the base case, the joint restructuring plan assumes that
held as guarantee for loans granted to several corporate
no additional capital beyond that effectively injected to
institutions (legacy secured or deposits related to
date, namely EUR 34,7 billion (EUR 29,3 billion for
borrower accounts). The joint restructuring plan
Anglo and EUR 5,4 billion for INBS) will be required ( 21 ).
assumes that there will be a maximum amount of EUR
Those amounts correspond to the amounts already auth
1 billion of deposits at the time of the merger.
orised under the four rescue decisions for Anglo and the
two rescue decisions for INBS ( 22 ). The joint restructuring
plan indicates that in a stress scenario (implying in
particular higher impairments and losses on loans
2.3.1.2. F u n d i n g
disposals), capital requirements would increase up to
EUR 38
billion, meaning that an additional EUR
(54) The joint restructuring plan is based on the following
3,3 billion of capital […] over the period of the plan
assumptions:
(namely 10 years). Besides the risk of higher impairments
and losses on loans disposals, the joint restructuring plan
also identifies several additional risks which could lead to
(i) […]
the merged entity having recourse to […] EUR 3,3 billion
capital in a stress case.
(ii) Existing wholesale funding of EUR […] billion to
mature as per existing schedules (majority within
2.3.1.5. M a i n a d d i t i o n a l r i s k s a s s o c i a t e d
four years), […].
w i t h t h e j o i n t r e s t r u c t u r i n g p l a n
(58) Firstly,
the
joint
restructuring
plan
identifies
a
risk
of
an
increase in the cost of funding and an exchange rate risk.
2.3.1.3. G u a r a n t e e s
[…] ( 23 ). In total, the merged entity will need to access
circa […] of Central Bank funding at the time of the
(55) The
merged
entity
requires
a
comprehensive
set
of
State
merger. That funding need would gradually decrease to
guarantees (see also recital 69), covering the following
[…]. If the reliance on Central Bank funding is not
exposures:
feasible to the extent and for the duration projected ( 24 ),
the merged entity will have to rely on other sources of
funding, if they exist, which could be more expensive.
(i) A State guarantee on deposits and bonds still
outstanding. That guarantee would be needed for
the entire duration of the joint restructuring plan
(59) Furthermore,
some
of
the
merged
entity’s
assets
are
fixed
and is currently provided under the Eligible Liabilities
interest rate, long-term assets (typically, promissory
Guarantee Scheme (hereinafter referred to as ‘the
notes) which are funded through very short-term
ELG scheme’). Once the ELG scheme expires, the
funding […].
guarantee would have to be provided on an ad
hoc basis;
(60) […].
(ii) A State guarantee to the CBI on the unsecured part
of the ELA to Anglo/INBS, which would allow the
(61) In
addition,
the
joint
restructuring
plan
highlights
the
merged entity to access CBI/ELA funding as needed
risks associated with the merged entity’s difficulties in
[…];
running its business on a going concern basis while
being in resolution mode. […]. Finally, the merger
process may lead to elevated operational risks, which in
turn might require further capital.
(iii) A State guarantee on certain liabilities for its off-
balance sheet transactions, services and transactional
capabilities [….] ( 20 ).
(62) The
probability
of
such
risks
materialising
is
difficult
to
assess. Those risks and uncertainties were not incor
porated in the expected capital needs in the stress case
(56) Under
the
joint
restructuring
plan,
no
payments
will
be
scenario.
made by the merged entity for the State guarantees,
except for the guarantees on deposits (50 bps) for the
( 21 ) The Commission approved recapitalisations for Anglo totalling EUR
duration of the ELG scheme and on already guaranteed
29,44 billion. Ireland has actually granted EUR 29,3 billion (namely
bonds outstanding (for which a fee of 95 to 125 bps will
EUR 0,14 billion less).
be paid during the duration of the ELG scheme until they
( 22 ) Commission Decisions in Cases N 356/09, C 11/10, NN 35/10 and
mature).
SA.32057 for Anglo and Commission Decisions in Cases NN
11/10 and SA.31714 for INBS (see footnotes 4 and 6 and
footnotes 8 to 11 of this Decision).
( 20 ) See Commission decision in Case SA.32057 (see footnote 9 of this
( 23 ) […]
Decision).
( 24 ) […]The ECB has received a copy of the joint restructuring plan.

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L 139/24
EN
Official Journal of the European Union
26.5.2012
2.3.2. The Commitments
(v) Ban on coupons and exercising calls on
subordinated debt and hybrid capital instruments:
(63) Ireland
has
provided
a
number
of
commitments
related
The merged entity will not pay coupons or exercise
to the merged entity in order to specifically limit the
calls on subordinated debt instruments and hybrid
distortion of competition resulting from the State
capital instruments, unless it is legally obliged to do
support received by Anglo and INBS. Those
so.
commitments are attached to this Decision in their
entirety in Annex I. For the purposes of this Decision,
the Commission has provided a non-exhaustive summary
in recitals 63 to 66.
(vi) Cap on new lending: The merged entity’s net
commercial loan book will not exceed the
forecasts in the joint restructuring plan by more
than […] in any single year during the plan
period. Concerning the mortgage loan book, the
(i) Duration of the commitments. Unless otherwise
merged entity will limit further advances to
specified, all commitments provided by Ireland
contractually committed amounts and amounts
will remain valid and applicable until the assets of
arising as part of the restructuring of existing
the merged entity are fully worked out, including
mortgage facilities. The aggregate total of further
the promissory notes.
mortgage advances is capped at a maximum of
[…] for the period starting 1 January 2011 and
ending 31 December 2012, and […] per annum
thereafter.
(ii) Ban to develop new activities and to enter new
markets: The merged entity will not develop any
new activities and will not enter new markets,
(vii) In addition, the following lending commitments
that is to say that the merged entity will not
will also apply to the commercial loan book:
carry out any activities other than those that are
consistent with managing the work-out of the
Anglo and INBS legacy loan book (including loan
sales, where appropriate, to maximise recovery
(a) Contractually committed but not yet paid-out
values). In particular, the merged entity will
amounts: The merged entity will be allowed
maintain and use its banking licence only as long
to advance funds under contractually
as necessary for the work-out of the loan portfolios
committed but not yet paid-out loan facilities.
and will not use it to develop new activities. […].
However, such payments will not exceed a
cumulative amount of […] over the entire
period of the joint restructuring plan with
regard to the merged entity’s loan book.
(iii) Management of existing assets: The merged entity
will manage existing commercial assets in a way
that maximises Net Present Value (hereinafter
(b) Additional financing to existing borrowers: The
referred to as ‘NPV’) of the assets in accordance
merged entity may not provide additional
with normal commercial practice. Specifically, if a
financing which is not contractually
client cannot respect the terms of his/her loan, the
committed at the time of the approval of the
merged entity will only restructure the lending
joint restructuring plan (in line with the
terms if such a restructuring would lead to
commitment referred to in point (ii)).
enhancing the NPV of the loan (that is to say, if
the NPV of the cash flows to be expected from the
restructuring is higher than the present value of the
cash flows which can be expected from liquidation).
As an exception to that prohibition, the merged
In summary, the merged entity will manage its
entity may finance small additional amounts to
commercial asset portfolio in the same way as a
existing regulatory groups if it complies with
private asset manager would manage the work-out
the commitment in point (iii)
of a similar book.
— It is strictly necessary to preserve the value
of the loan collateral (for example, to cover
As regards the merged entity’s mortgage assets, the
collateral maintenance, insurance, tax,
same obligations that apply to the commercial
security, insolvency or legal costs); or
assets will apply mutatis mutandis.
— It is otherwise related to enhancing the
expected recovery value of a loan or other
(iv) Ban on acquisitions: The merged entity will not
asset on an NPV basis (for example, meeting
acquire or take participations in any other firm,
essential investment working capital or
except with the prior consent of the Commission.
liquidity needs of the underlying business)

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/25
— The merged entity may only provide such
(ix) Further exceptions in the national interest. On an
additional financing where:
exceptional basis and in the national interest,
Ireland may determine that further exceptions to
the lending restrictions set out in points (vii) and
(viii) may be required to enhance expected recovery
— If the nominal exposure concerned is
values on a NPV basis. Such determinations will be
less than […], the additional financing
subject to prior approval by the Commission.
will not exceed […] of the nominal
exposure;
(x) Deposits — transfer of Anglo and INBS deposits.
Following the transfer of legacy Anglo and INBS
— If the nominal exposure concerned is
deposits, the merged entity will be left with
between […] and […], the additional
certain categories of deposits and accounts, not
financing will not exceed […];
considered for the transfer. The overall amount of
deposits from existing customers at the date of the
merger will at no point in time exceed EUR […]
billion. The merged entity will reduce its deposits at
— If the nominal exposure concerned
broadly the same rate as the overall net loan book
exceeds […], the additional financing
is worked out. In addition, the deposit book of the
will not exceed […] of the nominal
merged entity will not exceed the forecasts of the
exposure.
joint restructuring plan by more than EUR
200 million at any time. The categories of
deposits retained by the merged entity are listed
(c) New borrowers: The merged entity may lend to
in the following points (a) to (h):
a new borrower (or a group of borrowers, also
called ‘a regulatory group’) only where the
following conditions are met:
(a) Deposits which at the time of transferring the
legacy deposits of Anglo and INBS to viable
institutions, are held by or on behalf of any
— The proceeds are used to reduce the
subsidiary of Anglo or INBS, except the Isle
exposure of an existing borrower or regu
of Man subsidiary of Anglo;
latory group;
(b) Secured accounts (in favour of Anglo or INBS
— The transaction overall does not increase
or any other person) and deposits related or
the total net exposure to the merged entity;
connected to a regulatory group from Anglo
or INBS or tracker bond accounts at the time
of transfer of Anglo’s and INBS’s deposits to
two other Irish banks ( 25 );
— The new lending enhances expected
recovery values (as measured by NPV)
compared to other restructuring or fore
closure strategies; and
(c) Deposits denominated in currencies other than
euro, US dollar (USD) or pound sterling (GBP)
at the time of transferring the deposits. They
will not be replaced as they mature;
— There is no capitalisation of interest (‘in
terest roll-up’)
(d) Deposits held or booked at branches at Jersey,
at Dusseldorf, Germany or at Vienna, Austria.
(viii) Specific lending commitments on the mortgage
They will not be replaced as they mature;
book. The merged entity will not be allowed to
provide financing which it is not contractually
committed to providing at the time of the
approval of the joint restructuring plan. As an
(e) Any account which has a negative balance;
exception to that rule, the merged entity may,
when the balance of the loan exceeds the value of
the mortgaged property, facilitate its redemption
through selling off the property by providing
(f) Internal control accounts;
additional finance to a vendor enabling the
repayment of the outstanding balance if the
( 25 ) On 24 February 2011, Allied Irish Banks acquired EUR 8,6 billion
provision of financing is in line with the
of deposits from Anglo and Irish Life & Permanent plc acquired
commitment in point (iii).
EUR 3,6 billion in deposits from INBS.

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L 139/26
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Official Journal of the European Union
26.5.2012
(g) Accounts where the account or the customer to
(c) State guarantees under the ELG scheme covering
whom the account relates has been the subject
deposits, senior unsecured certificates of deposit,
of notification of an investigation by any police,
senior unsecured commercial paper, senior
fraud or investigative authority; and
unsecured bonds and notes ( 29 );
(d) An asset relief measure in the form of the transfer of
(h) All INBS accounts identified in the accounting
EUR 35 billion ( 30 ) of impaired commercial property
records of the Transferor by branch ‘[…]’.
loans to NAMA at an average discount of [50-
70] % ( 31 );
(xi) Monitoring Trustee: The merged entity will appoint
(e) A second recapitalisation for an amount of EUR
a Monitoring Trustee, subject to the Commission’s
10,44 billion, of which EUR 10,3 billion was effec
approval, who will verify adherence by the merged
tively granted by Ireland ( 32 );
entity with the commitments set out in Annex I.
The Monitoring Trustee will be nominated for a
period of three years.
(f) A third recapitalisation for an amount of EUR
10 054 million (of which EUR 8 580 million was
granted upon approval while the remainder (EUR
1 474 million) was injected together with the fourth
(64) Ireland
will
ensure
that
the
merged
entity
complies
with
the commitments set out in Annex I. Ireland will submit
capital injection), see measure (h) ( 33 );
regular reports on the measures taken to comply with
those commitments. The first report will be submitted to
the Commission not later than six months from the date
(g) A guarantee on Anglo’s short-term liabilities
of notification of this Decision and thereafter at six
following the reapplication of the ELG scheme to
monthly intervals.
cover such securities, notably commercial paper,
certificates of deposit, interbank deposits and
corporate deposits with a maturity of less than
three months (covered amount is around EUR […]
2.4. The State measures assessed in this Decision
billion as at 31 December 2010) ( 34 );
(65) Both
Anglo
and
INBS
have
received
a
substantial
amount
of State aid. After the merger, the merged entity will also
(h) An additional recapitalisation of EUR 4 946 million
benefit from several State measures. This Section presents
was granted to cover further losses resulting from the
those measures (see also Table 1).
accelerated transfer of impaired property devel
opment loans to NAMA and losses on the non-
NAMA loan book until […]. The remaining balance
of the third recapitalisation (measure (f)) amounting
(66) Over
the
course
of
the
rescue
period,
Anglo
received
to EUR 1 474 million has already been injected
several State aid measures which have been approved
together with EUR 4 946 billion ( 35 );
by the Commission in the various decisions pertaining
to this case ( 26 ), and which are referred to in points (a) to
( 29 ) See Commission Decision in Case N 349/09, Ireland — Credit
(v) of this recital and recitals 67, 68 and 69):
Institutions Eligible Liability Guarantee Scheme (OJ C 72,
20.3.2010, p. 6), subsequently prolonged until 30 June 2010 by
Commission’s Decision in Case N 198/10, Ireland — Prolongation
of the Eligible Liabilities Guarantee Scheme (OJ C 191, 15.7.2010,
p. 1), extended until 31 December 2010 by Commission Decision
(a) A State guarantee under the CIFS scheme covering
in Case N 254/10, Ireland — Extension of the ELG scheme until
Anglo’s deposits (retail, commercial, institutional and
31 December 2010 (OJ C 238, 3.9.2010, p. 2) and again extended
interbank), covered bonds, senior debt and dated
until 30 June 2011 by Commission Decision in Case N 487/10,
subordinated debt for the period from 1 October
Extension of the ELG scheme until June 2011, not yet published,
2008 to 30 September 2010 (
and by Commission Decision in Case SA.33006, Prolongation of the

27 );
ELG scheme until December 2011, not yet published.
( 30 ) Of the EUR 35 billion loans that are to be transferred to NAMA, to
date EUR 34 billion has been transferred, while EUR 1 billion is
awaiting transfer.
(b) A first recapitalisation of Anglo for an amount of
( 31 ) Commission Decision in Case N 725/09, Ireland — Establishment
EUR 4 billion (
of a National Asset Management relief scheme for banks in Ireland

28 );
— NAMA (OJ C 94, 14.4.2010, p. 10).
( 32 ) Commission Decision in Case C 11/10 (see footnote 6 of this
( 26 ) The Commission will, for the sake of clarity, when describing and
Decision).
assessing the measures, use the lettering employed in the
( 33 ) Commission Decision in Case NN 35/10 (see footnote 8 of this
description of the measures in recitals 66 to 69 in the remainder
Decision).
of this Decision.
( 34 ) Commission Decision in Case N 347/10, Prolongation of the
( 27 ) See Commission Decision in Case NN 48/08 (see footnote 5 of this
guarantee for certain short-term liabilities and interbank deposits
Decision).
(OJ C 37, 5.2.2011, p. 4).
( 28 ) Commission Decision in Case N 356/09 (see in footnote 4 of this
( 35 ) Commission Decision in Case SA.32057 (see footnote 9 of this
Decision).
Decision).

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/27
(i) A guarantee on certain off-balance sheet transactions
until the merger with INBS. That guarantee covers up
covering an amount estimated at around EUR […]
to EUR […] billion of ELA ( 44 );
billion ( 36 ).
(q) INBS also received a State guarantee on a part of the
(67) INBS, during the rescue period, has received the
ELA granted to INBS by the CBI from 24 February
following measures (j) to (o) that were approved by the
2011 until the merger with Anglo. That guarantee
Commission:
covers up to EUR […] billion.
(j) A
guarantee
under
the
CIFS
scheme
covering
INBS’s
(69) After the merger, the merged entity will be provided with
deposits (retail, commercial, institutional and inter
the following measures (r) to (v):
bank), covered bonds, senior debt and dated
subordinated debt from 1 October 2008 to
30 September 2010 ( 37 );
(r) A State guarantee for the remaining customer
deposits, for a maximum amount of EUR […] billion;
(k) A first recapitalisation for an amount of EUR 2,7 bil
lion ( 38 );
(s) A continuation of the State guarantee on off-balance
sheet transactions covering an amount estimated at
approximately EUR […] billion;
(l) State Guarantees under the ELG scheme covering
deposits, senior unsecured certificates of deposit,
senior unsecured commercial paper, senior
unsecured bonds and notes (
(t) A State guarantee on a part of the ELA provided by

39 );
the CBI to the merged entity, essentially combining
both guarantees on the ELA granted to Anglo and
INBS separately. That guarantee is estimated at up to
(m) An asset relief measure in the form of the transfer of
EUR […] billion at the commencement of merger,
EUR 8,9 billion ( 40 ) of impaired commercial property
declining thereafter […];
loans NAMA at an average discount of 64 % ( 41 );
(n) A State guarantee on INBS’s short-term liabilities
(u) An additional recapitalisation, […] to cover additional
following the reapplication of the ELG scheme to
losses in case of additional stress of EUR 3,3 billion;
cover such securities, notably commercial paper,
certificates of deposit, interbank deposits and
corporate deposits with a maturity of less than
(v) A State guarantee on the outstanding ELG-covered
three months (covered amount as at 31 December
wholesale funding transferred from Anglo to the
2010 is approximately EUR […] million) ( 42 );
merged entity covering an amount of EUR […]
billion ( 45 ).
(o) A second recapitalisation for an amount of EUR
2,7 billion ( 43 ).
2.4.1. Rescue measures approved by the Commission
(70) As regards the measures (a) to (o) referred to in recitals
66 and 67, they have already been assessed by the
(68) In addition to the State aid measures (a) to (o) referred to
in recitals 66 and 67, Anglo and INBS have received
Commission in the context of the earlier decisions
prior to the merger further rescue measures (p) and (q):
regarding Anglo and INBS and have been qualified as
rescue aid. Further to the rescue measures, Ireland
notified the Commission of additional measures that
are intended to enable the resolution of Anglo and
(p) Anglo has received a State guarantee on a part of the
INBS, measures (p) to (v) referred to in recitals 68 and 69.
ELA provided to Anglo by the CBI from March 2009
( 44 ) It is important to note that the amount provided to Anglo under
( 36 ) See footnote 33.
ELA covered by a State guarantee has fluctuated over time. The
( 37 ) See footnote 26.
State guarantee which was implemented in September 2010 and
( 38 ) Commission Decision in Case NN 11/10 (see footnote 10 of this
initially covered an amount of EUR […] billion was increased to
Decision).
[…] billion by December 2010. The State guarantee was
( 39 ) See footnote 28.
furthermore increased up to EUR […] billion to deal with the
( 40 ) Of the EUR 8,9 billion to be transferred to NAMA, to date EUR
funding needs of Anglo following the transfer of deposits to
8,5 billion have been transferred, while EUR 400 million is awaiting
Allied Irish Banks in February 2011 and it is expected to
transfer.
decrease after that to around EUR […] billion before the merger
( 41 ) See footnote 29.
with INBS.
( 42 ) See footnote 32.
( 45 ) As deposits have now been transferred from Anglo and INBS
( 43 ) Commission Decision in Case NN 50/10 (see footnote 11 of this
(excluding the amount of up to EUR 1 billion), it refers to ELG
Decision).
debt funding, all of which related to Anglo.

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L 139/28
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Official Journal of the European Union
26.5.2012
(71) With
regard
to
the
measures
already
approved
by
the
2.4.3. Measures for the merged entity
Commission (namely measures (a) to (o) referred to in
recitals 66 and 67), it should be pointed out that the
(76) The
merged
entity
[…]
from
several
State
guarantees
and
CIFS guarantee scheme is no longer in force since
a capital injection of EUR 3,3 billion in a stress case
30 September 2010 (measures (a) and (j) referred to in
(measures (r) to (v) referred to in recital 69).
recitals 66 and 67) and has been replaced by the ELG
scheme and the reapplication of the ELG scheme to
short-term liabilities (measures (c), (g), (l) and (n)
referred to in recitals 66 and 67). After the merger,
(77) The
merged
entity
will
benefit
from
a
State
guarantee
on
those schemes will be replaced by individual State guar
the deposits that will be transferred to it from both
antees (measures (r) and (v) referred to in recital 69),
Anglo and INBS (measure (r) referred to in recital 69).
once the ELG scheme is no longer in place, see recitals
The maximum amount of those deposits will be EUR
77 and 81.
1,05 billion. They are made up in particular of deposits
that are either secured or connected to a borrower
account that is transferred to the merged entity, and
they have therefore not been transferred out of Anglo
and INBS. The merged entity will pay a flat fee of 50 bps
for the duration of the ELG scheme and nothing there
(72) As
for
measures
(d)
and
(m)
referred
to
in
recitals
66
and
after.
67, the transfer of […] loans to NAMA was completed in
November 2010 at an average haircut of 62 % for Anglo
and 64 % for INBS.
(78) The
merged
entity
will
also
benefit
from
a
measure
granted to Anglo before the merger, namely the
continuation of the State guarantee on off-balance
sheet transactions for an amount estimated at around
EUR […] billion ( 46 ) (measure (s) referred to in recital
69). The merged entity will not pay a fee for that guar
(73) Together
with
the
fourth
recapitalisation,
Anglo
also
antee.
received a State guarantee on its off-balance sheet trans
actions (measure (i) referred to in recital 66). That guar
antee, for which Anglo does not pay a fee, essentially
provides comfort to Anglo’s counterparties in derivatives
(79) In
order
to
fund
the
resolution
of
Anglo
and
INBS,
it
is
transactions (mostly hedging contracts) and clearing
foreseen in the joint restructuring plan that the merged
arrangements.
entity will benefit from a State guarantee on part of the
ELA that it will receive (measure (t) referred to in recital
69). In total, the merged entity will have access to an
ELA of up to EUR […] billion, at the commencement of
the merger, declining thereafter […]. The merged entity
will pay the CBI an interest rate of […] bps for euro
2.4.2. Further rescue measures
currency funding and […] bps for foreign currency
funding, but will pay no fee for the State guarantee.
(74) Anglo and INBS both have received further rescue
measures prior to the merger and thus the effective
restructuring (measures (p) and (q) referred to in recital
68). From March 2009 until the merger, Anglo has
(80) According
to
the
joint
restructuring
plan,
[…]
in
case
of
already received an ELA from the CBI which was partly
a further deterioration of its financial position (stress case
State-guaranteed (measure (p)). The State guaranteed part
— measure (u) referred to in recital 69). In that case, […]
of the ELA has fluctuated, from EUR […] billion in
up to EUR 3,3 billion of capital […]. That approach will
September 2010 to EUR […] billion in March 2011.
ensure that the merged entity satisfies the relevant
Anglo pays the CBI an interest rate consisting of the
minimum regulatory capital requirements set by the
ECB base rate (currently 125 basis points) plus […]
Irish Financial Regulator (currently an 8 % total capital
basis points (hereafter ‘bps’) for the ELA but does not
ratio).
pay a fee for the guarantee.
(81) Finally,
the merged entity will benefit from a State
guarantee on the existing wholesale funding of around
EUR 3 billion that will be transferred from Anglo to the
(75) INBS
also
has
received
a
State
guarantee
on
part
of
the
merged entity (measure (v) referred to in recital 69). The
ELA provided by the CBI (measure (q) referred to in
merged entity will pay a fee of between 95 to 125 bps
recital 68). In total, INBS received a State guarantee on
during the duration of the ELG and will pay no fee
its ELA of EUR […] billion from 24 February 2011
thereafter.
onwards until the merger with Anglo. INBS also pays
the CBI an interest rate consisting of the ECB base rate
( 46 ) This is an estimated gross maximum that would be required to be
(currently 125 bps) plus […] bps for the ELA, but does
covered under the State guarantee; the net exposure at December
not pay a fee for the State guarantee.
2010 was EUR […] million.

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EN
26.5.2012 Official
Journal
of
the
European
Union L
139/29
Table 1
Overview of the measures granted to Anglo, INBS and the merged entity (referred to in recitals 66 to 69)
Measures granted to Anglo, Recovery Bank and Funding Bank
No Type
of
measure Amount Remuneration
Rescue measures approved
Anglo Irish Bank
a Guarantee
under
the
CIFS
scheme Peak
EUR
[…]
billion
at
September
flat fee 18,5 bps rising to 32 bps
2008 ( 1 )
b First
recapitalisation EUR
4
billion no
remuneration
c Guarantee
under
the
ELG
scheme EUR
[…]
billion
( 2 ) ECB
recommendation
+
40
bps
( 3 )
d Asset
relief
measure
—
transfer
of
eligible
loans
to
EUR 35 billion transferred n/a
NAMA
e Second
recapitalisation EUR
10,44
billion
( 4 ) (EUR 10,3 billion) no
remuneration
f Third
recapitalisation EUR
10
054
million no
remuneration
g Guarantee
on
short-term
liabilities c.
EUR
[...]
billion
at
December
2010 160
bps
as
at
December
2010
( 3 )
h Fourth
recapitalisation EUR
4
946
million no
remuneration
i Guarantee
on
certain
off
balance
sheet
liabilities estimated
gross
max.
EUR
[…]
billion
( 5 ) no
fee
Irish Nationwide Building Society
j Guarantee
under
the
CIFS
scheme Peak
EUR
[…]
billion
at
October
2008
( 1 ) flat fee 18,5 bps rising to 25,6 bps
k First
recapitalisation EUR
2,7
billion Secured
the
rights
to
the
net
surplus
assets
of the Society
l Guarantee
under
the
ELG
scheme EUR
[…]
billion
( 2 ) ECB
recommendation
+
40
bps
( 3 )
m Asset
relief
measure
—
transfer
of
eligible
loans
to
EUR 8,9 billion transferred n/a
NAMA
n Guarantee
on
short-term
liabilities c.
EUR
[...]
million
at
December
2010 160
bps
as
at
December
2010
( 3 )
o Second
recapitalisation EUR
2,7
billion no
remuneration
Further rescue measures
Anglo Irish Bank
p Guarantee
on
Emergency
Liquidity
Assistance Peak
guaranteed
EUR
[…]
billion
up
to
,[…] no fee for guarantee
16 March 2011 ( 6 )
Irish Nationwide Building Society
q Guarantee
on
Emergency
Liquidity
Assistance Guaranteed
EUR
[…]
billion […],
no
fee
for
guarantee
Restructuring measures
Merged entity
r Continuation
of
guarantee
on
remaining
deposits max.
EUR
[…]
billion Guaranteed
for
the
life
of
the
workout,
first
under ELG and following its expiry on an
ad hoc basis at 50 bps
s Continuation
of
guarantee
on
off-balance
sheet
trans estimated at around EUR […] billion ( 5 ) no
fee
actions
t Continuation
of
guarantee
on
Emergency
Liquidity
estimated at up to EUR […] billion
3
Assistance or other similar facility
u Recapitalisation
in
stress
case EUR
3,2
billion no
remuneration
v Guarantee
on
outstanding
ELG
wholesale
funding around
EUR
[…]
billion fee
in
line
with
ELG
for
its
duration,
no
fee
thereafter
( 1 ) The CIFS Scheme expired on 30 September 2010.
( 2 ) The figures quoted are as at 31 December 2010. (However, the peak ELG guarantee level was EUR […] billion as at April 2010 for Anglo and was EUR […] billion for
INBS as at September 2010.)
( 3 ) As per latest Commission decision on the scheme, remuneration may be adjusted in case of prolongation of the scheme beyond 30 June 2011.
( 4 ) Amount effectively granted by the Irish authorities in brackets.
( 5 ) This estimated figure of EUR […] billion is an estimated gross maximum that would be required to be covered under the State guarantee, the net exposure at December
2010 was EUR […] million.
( 6 ) Figure of EUR […] billion was required due to transfer of Anglo/INBS deposits, this has reduced to EUR […] billion on 16 March 2011.

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L 139/30
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Official Journal of the European Union
26.5.2012
3. GROUNDS FOR INITIATING THE PROCEDURE
to Anglo, the Commission indicated that it doubted
that the measures presented in the plan were sufficient
(82) The Commission opened the formal investigation
to offset the distortive effects of the aid to Anglo.
procedure on the initial Anglo restructuring plan on
31 March 2010 with the adoption of the opinion
decision. Since then, Ireland has fundamentally altered
the restructuring plan for Anglo several times before
submitting the joint restructuring plan for Anglo and
4. COMMENTS FROM INTERESTED PARTIES
INBS on 31 January 2011. Most of the doubts raised
(87) The Commission did not receive any third party
in the opening decision (see Section 4.3.1 of that Deci
comments following the publication of the opening
sion ( 47 )) were specific to the initial Anglo restructuring
decision in the Official Journal of the European Union.
plan, which was based on the assumption that Anglo
would be split into a good bank and a bad bank.
Those doubts are therefore no longer relevant as Anglo
will cease to undertake new activities and instead will be
merged with INBS and focus on working out its loan
5. COMMENTS FROM IRELAND
book over time.
(88) Ireland
did
not
provide
any
comments
on
the
opening
decision, but instead submitted the second Anglo restruc
turing plan and then the third Anglo restructuring plan
on 26 October 2010.
(83) For
the
sake
of
completeness
however,
a
summary
is
provided in Section 3.1 of the doubts raised by the
Commission in its opening decision.
(89) The
third
restructuring
plan
is
now
replaced
by
the
joint
restructuring plan submitted on 31 January 2011 by
3.1. The opening decision
Ireland.
(84) As regards the return to viability of the good bank (in
the opening decision also referred to as ‘NewCo’) and the
orderly wind-down of the bad bank (in the opening
6. ASSESSMENT
decision also referred to as ‘Old Anglo’), the Commission
expressed doubts, since at the time of that decision there
6.1. Existence of aid
was not enough information on the business plans of
both entities. The Commission also doubted whether
(90) It
must
be
assessed
whether
the
measures
contained
in
the estimation of the impairments on both the loans
the joint restructuring plan constitute State aid.
transferred to NAMA and the non-NAMA loans was
Article 107(1) of the Treaty provides that any aid
sufficient. In addition, the macroeconomic assumptions
granted by a Member State or through State resources
provided in the initial Anglo restructuring plan seemed
in any form whatsoever which distorts or threatens to
to be incomplete, thus leading to doubts as to their
distort competition by favouring certain undertakings or
reasonableness. The Commission also expressed doubts
the production of certain goods is, insofar as it affects
with regard to certain new activities the good bank
trade between Member States, incompatible with the
would be undertaking in areas where it did not have
internal market.
any previous experience. The Commission also doubted
whether the funding and liquidity needs of the good
bank could be met based on the plan.
6.1.1. Measures already temporarily approved
(91) With regard to the measures already temporarily
(85) As
regards
burden-sharing
and
Anglo’s
own
contribution,
approved by the Commission as rescue aid in its earlier
the Commission questioned whether the own
decisions pertaining to Anglo and INBS (namely
contribution to the restructuring by Anglo itself was
measures (a) to (o) as set out in recitals 66 and 67),
sufficient in view of the fact that the good bank was
the Commission has already concluded that those
to expand into new activities, something which would
measures constitute State aid in favour of Anglo and
require significant investment. In addition, the
INBS. As a consequence, it is not necessary to reassess
Commission pointed out that the Irish authorities had
whether they constitute State aid in this Decision.
not explored in the initial Anglo restructuring plan
whether Anglo could contribute to its restructuring by
selling assets or through other means.
(92) The
measures
that
have
to
be
assessed
in
this
Decision
in
order to determine whether they constitute State aid have
already been described in recitals 68 and 69. The relevant
(86) Concerning the measures limiting distortion of
measures are: for Anglo measure (p), for INBS measure
competition caused by the massive State aid provided
(q) and for the merged entity measures (r) to (v). In that
context, it should be noted that Ireland accepts that the
( 47 ) See footnote 4.
measures represent State aid.

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6.1.2. State resources
off-balance sheet liabilities, an orderly resolution is not
possible. Furthermore, the fact that the merged entity
(93) Measures (p) to (v) referred to in recitals 68 and 69 are
does not have to pay a fee for several of those guarantees
financed through State resources as the measures are
provides a further advantage to it as it avoids higher
made up of State guarantees and direct grants financed
funding costs and thus more losses.
by the State and should therefore be considered to
constitute State aid.
(99) Finally,
[…]
EUR
3,3
billion
in
the
stress
case
to
cover
6.1.3. Selectivity
further losses as a result of the work out of its loan
book. […] The recapitalisation […] an advantage to the
(94) It is also necessary to assess whether the measures
merged entity as it ensures that it fulfils its relevant
referred to in recitals 66 to 69 confer a selective
regulatory capital requirements during the resolution
advantage on the beneficiary or beneficiaries of the
period. […].
State aid. The measures concerned are selective as they
solely benefit Anglo, INBS and the merged entity.
6.1.5. Distortion of competition and effect on trade between
Member State
6.1.4. Advantage
(100) It should be concluded that measures (p) to (v) referred
(95) The
measures
referred
to
in
recitals
66
to
69
confer
an
to in recitals 66 and 67 are able to distort competition
advantage on the economic activity of both Anglo and
and affect trade between Member States.
INBS as carried on by them until the merger and their
successor, the merged entity, thereafter.
(101) As indicated in Section 6.1.4, without the State support
(96) Anglo
benefits
from
a
State
guarantee
covering
EUR
[…]
measures, both Anglo and INBS would have defaulted
billion of ELA it receives from the CBI (measure (p)
and completely exited the markets in which they were
referred to in recital 68), and which enables Anglo to
active. As a result of the very substantial amount of State
fund its assets. That guarantee represents an advantage
support, they remained active on the deposit market
for Anglo as such a guarantee would not be available on
(until the transfer of their deposits to Allied Irish Bank
the market and. […]. Furthermore, the State guarantee on
and Irish Life & Permanent in February 2011) and to a
the ELA is provided without Anglo having to pay a
very limited degree on the commercial property lending
remuneration for it. That absence of remuneration
market and residential mortgage market (servicing
presents a further advantage to Anglo as it avoids the
existing loans). Therefore, that State support distorted
costs associated with the guarantee.
competition. In those markets, Anglo and INBS
competed not only with Irish banks but also the
foreign players active in Ireland. Anglo was also active
(both for deposits and commercial lending) in the United
Kingdom and thus has competed with domestic UK
(97) For the same reasons, the State guarantee on the ELA
that INBS has received from 24 February 2011 onwards
players and players from other Member States active
for an amount of EUR […] billion provides an advantage
on that market. It should be noted, however, that the
to INBS (measure (q) referred to in recital 68).
activity of those two entities has been more and more

limited over the last couple years, thus reducing the
negative affect on competition and trade.
(98) As
regards
the
measures
in
favour
of
the
merged
entity,
that entity will benefit from a continuation of several
State guarantees, namely on the remaining deposits
(102) As regards the merged entity, it will carry out some
(measure (r) referred to in recital 68), on off-balance
limited economic activities in a market where both
sheet transactions (measure (s) referred to in recital 69),
Irish and foreign banks remain active. In particular, it
on the ELA (measure (t) referred to in recital 69) and on
will be allowed to retain a small amount of deposits
the existing wholesale funding (measure (v) referred to in
and to provide some loans to its existing customers in
recital 69). The merged entity only pays a fee for the
order to increase the NPV of the loans in question in line
guarantee […], the deposits and the wholesale funding
with the commitments provided by Ireland (see Section
for the duration of the ELG scheme (no fee will be paid
2.3.2). Without the State support measures, it would not
thereafter), but does not pay a fee for the other guar
be able to carry out those activities. It should be noted
antees. Those guarantees provide an advantage to the
that as the balance sheet of the merged entity will be
merged entity by helping to ensure that the merged
reduced as a result of its resolution, the distortion of
entity does not default on its obligations. Indeed,
competition and the affect on trade will be significantly
without the necessary funding through the guaranteed
reduced due to the very limited operations which the
ELA, the remaining deposits and the remaining
merged entity will continue to carry out on competitive
wholesale funding and without the guarantee on its
markets.

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L 139/32
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Official Journal of the European Union
26.5.2012
6.1.6. Application of the market investor principle
6.1.8. Conclusion
(103) Finally, the market economy investor principle does not
(107) On the basis of the foregoing, it should be concluded
apply to the measures referred to in recitals 66 to 69
that measures (a) to (v) referred to in recitals 68 and 69
since they are part of a substantial package of rescue
constitute State aid.
measures in favour of Anglo and INBS. In addition,
even if it were applicable, those measures are not in
line with normal market conduct. No market economy
investor would implement all those measures in order to
rescue Anglo and INBS and then merge them in order to
work out the loan book as the chances that it would
6.2. Amount of aid
recoup its investments (total recapitalisations provided to
Anglo and INBS together amount to EUR 34,7 billion in
6.2.1. Recapitalisations of Anglo and INBS
a base case) are negligible. No market economy operator
placed in a similar situation as the State would have been
(108) Both Anglo and INBS have received individual State aid
able to provide the amount of capital and funding
in the form of several recapitalisations. Anglo received a
needed in order to facilitate the resolution of both
total of EUR 29,3 billion through four capital injec
Anglo and INBS. Taking into consideration the
tions ( 48 ). INBS received a total of EUR 5,4 billion
situation on the markets and the appetite for Irish
through two capital injections.
assets and liabilities, it would not be possible for a
market operator to obtain such financing.
6.2.2. Impaired asset measure for Anglo and INBS
(109) Both Anglo and INBS have participated in NAMA
6.1.7. Identification of the beneficiary of the aid
(measures (d) and (m) referred to in recitals in 66 and
67). As regards the aid amount included in the impaired
(104) Ireland intends to introduce new aid measures (measures
(r) to (v) referred to in recital 69) in order to facilitate the
asset measure, namely the transfer of assets to NAMA, it
resolution of Anglo and INBS. Those measures will
should be noted that footnote 2 to paragraph 20(a) of
enable the merger of Anglo and INBS into one legal
the Impaired Assets Communication (hereinafter referred
entity. The main objective of the merged entity is to
to as ‘IAC’) ( 49 ) defines the aid amount in an asset relief
work out the loan books of Anglo and INBS with a
measure as the difference between the transfer value of
view to maximise the return and reduce the cost for
the assets and the market price. However, it is very
the Irish taxpayer.
difficult to estimate the market value of the covered

assets as most of them are loans which are not traded.
Furthermore, the actual aid amount can only be
determined after the valuation by Ireland of the assets
transferred to it has been finalised in line with the
Commission’s Decision in Case N 725/09 ( 50 ) which
will lead to final conclusions regarding the amount of
(105) Under the joint restructuring plan, the merged entity will
carry out only limited lending required by existing
aid involved. In that context, information on the amount
contractual obligations and then only to ensure that
of aid associated with the first and second tranches of
the NPV of the loan book is preserved, thus limiting
loans transferred to NAMA has been made available to
the situations where it is in competition with other
the Commission, while the information on the final
banks to the minimum. The merged entity will,
tranches is still pending.
according to Ireland, only realise its assets as they
mature or by selling them on the market. The merged
entity will use the proceeds of those sales to repay its
debts as they become due and fund its ongoing oper
ational costs as well as any retained historic liabilities. It
(110) Based on the information available for the first and
should, therefore, be concluded that the merged entity
second tranches transferred to NAMA, a number of
will continue to carry out some limited economic
conclusions may be made. Firstly, the first tranche of
activities following the merger and thus should be
commercial property loans that Anglo transferred to
considered as a beneficiary of the State aid measures.
( 48 ) The Commission observes that it actually approved recapitalisations
for Anglo for an amount of EUR 29 440 million. EUR 140 million
of the second recapitalisation approved on 31 March 2010 by the
opining decision, however, was never granted and because of the
structure of that particular recapitalisation may now no longer be
(106) With regard to Anglo and INBS, prior to the intended
granted. For that reason, it is more appropriate to use the EUR
merger they have both been able to continue to operate
29,3 billion figure of total recapitalisation, which reflects the
aided by State guarantees on their liabilities, recapitali
amount Anglo has actually received before the merger with INBS.
sations and an asset relief measure (measures (a) to (o)
( 49 ) Communication from the Commission on the treatment of
impaired assets in the Community Banking Sector (OJ C 72,
referred to in recitals 67 and 68). Anglo and INBS are
26.3.2009, p. 1).
therefore the beneficiaries of those measures.
( 50 ) See footnote 29.

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European
Union L
139/33
NAMA had a nominal value of EUR 9 251 million. That
that the merged entity would carry out more competitive
transfer contained an aid amount of EUR 870 million,
activities.
which represents 9,4 % of the nominal loan balances
transferred. Secondly, in the second tranche, Anglo trans
ferred loans with a nominal value of EUR 6 747 million
to NAMA. That transfer contained an aid amount of EUR
427 million and represents 6,3 % of the nominal loan
balances transferred. Accordingly, the average percentage
6.2.3. Guarantees for Anglo and INBS
of aid to nominal loan balances for the two tranches is
(113) Anglo and INBS have also participated in the CIFS and
7,9 %. When applying that average percentage to the still
ELG guarantee schemes (measures (a), (c), (g), (j), (l) and
outstanding tranches (EUR 19 billion), the aid amount
(n) referred to in recitals 66 and 67). The amount of the
for those tranches would be approximately EUR
liabilities covered for each institution under both schemes
1,5 billion. In total, the State aid amount associated
has fluctuated over time. For instance, in the case of
with the transfer of Anglo’s commercial property and
Anglo, the liabilities covered under the CIFS scheme
development loans and associated loans to NAMA may
peaked at EUR […] billion in September 2008,
therefore be estimated at around EUR 2 797 million ( 51 ).
decreasing to EUR […] billion as at 30 June 2010,
partly as a result of the introduction of the ELG.
Furthermore, Anglo’s liabilities covered by the ELG,
decreased to EUR […] billion as at 31 March 2011
from a peak of EUR […] billion as at 30 June 2010 as
a result of the transfer of its deposits to Allied Irish
Banks. For INBS, the same trend can be observed.
(111) INBS transferred loan balances with a nominal value of
EUR 669 million in the first tranche. That transfer
contained an aid amount of EUR 70 million, which
represents 10,5 % of the nominal loan balances trans
ferred. As part of the second tranche, INBS transferred
(114) In addition, both Anglo and INBS have received State
loan balances with a nominal value of EUR 591 million.
guarantees on short-term liabilities and ELA, while
That transfer resulted in an aid amount of EUR
Anglo has also received a State guarantee […] on its
43,7 million which represents 7,4 % of the nominal
off-balance sheet liabilities.
loan balances transferred. Accordingly, the average
percentage of aid to nominal loan balances for the two
tranches is 9 %. When applying that average percentage
to the still outstanding tranches (EUR 7,7 billion), the aid
amount associated may therefore be estimated at
approximately EUR 693 million. In total, the State aid
(115) It should be noted that, as regards companies in financial
amount associated with the transfer of INBS’s
difficulty, if a bank is not able to raise sufficient non-
commercial property and development loans and
guaranteed debt to cover all its funding needs, the aid
associated loans to NAMA may therefore be estimated
element of such guarantees might go up to the level of
at around EUR 806 million (
their nominal value. That was manifestly the case when

52 ).
Anglo and INBS started to use the CIFS in 2008 and the
ELG, the guarantee on short-term liabilities in 2010 and
the guarantee on their ELA, while Anglo also received a
State guarantee on its off-balance sheet liabilities. In that
context, there was a significant overlap between the
different guarantees, more specifically, the CIFS and
ELG scheme, which could lead to double-counting. At
(112) Although the exact amount of State aid for the still
the same time, the amounts covered by the various guar
outstanding tranches will be verified at a later stage, it
antees fluctuated over time (CIFS, ELG scheme and ELA).
is not necessary to know the exact aid amount contained
It should also be recalled that the participation of those
in those last tranches in order to assess the joint restruc
two banks in State guarantee schemes is not taken into
turing plan’s compatibility with the Treaty as: (i) the way
account for the calculation of the amount of aid relative
the transfer price will be determined has already been
to their risk weighted assets (hereafter ‘RWA’) in order to
agreed by the Commission in its Decision on
establish whether an in-depth restructuring is necessary.
NAMA ( 53 ); (ii) any potential change in the aid amount
On the other hand, the aid element in the guarantees will
will not affect the Commission’s assessment of the aid in
be taken into account in the context of the restructuring.
this Decision given the large amounts already involved
For those reasons, the Commission has not calculated the
and the fact that Anglo and INBS will completely exit the
aid amount associated with those State guarantees.
market; and (iii) in particular, an increased aid would not
increase the distortion of competition created by the
resolution of the merged entity as it would not mean
( 51 ) EUR 870 million + EUR 427 million + EUR 1 500 million = EUR
6.2.4. Aid measures for the merged entity
2 797 million.
( 52 ) EUR 70 million + EUR 43,7 million + EUR 693 million = EUR
806,7 million.
(116) The merged entity […] a further EUR 3,3 billion of
( 53 ) Commission Decision in Case N 725/09, see footnote 30.
capital in case the stress scenario materialises.

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L 139/34
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Official Journal of the European Union
26.5.2012
(117) The merged entity also benefits from State guarantees on
opment loans have lead to significant impairments for
its remaining deposits which stands at a maximum of
Irish banks. Irish banks have also been faced with
EUR 1 billion, its off-balance sheet transactions which
persisting difficulties in obtaining funding and capital
is estimated at a gross maximum amount of […], and
from the markets due to the uncertainty associated
a continuation of the State guarantee on the ELA or
with the property market in Ireland. As a result, the
other similar facility it receives which is estimated at
Irish State (Sovereign) has also come under pressure, in
up to […] at commencement of the merger. For the
the end leading to the Programme for Support.
calculation of the State aid amount, the Commission
finds that as regards the guarantees provided to the
merged entity, the reasoning in recital 115 applies.
(122) The Commission has acknowledged that the global
financial crisis can create a serious disturbance in the
economy of a Member State and that measures
supporting banks are apt to remedy that disturbance;
6.2.5. Conclusion as regards the amount of aid
that view has been confirmed in the Banking Communi
cation ( 56 ), the Recapitalisation Communication, the IAC
(118) On the basis of the foregoing, it should be concluded
and the Restructuring Communication. In respect of the
that Anglo has received State aid in the form of recap
Irish economy, it has been confirmed in the Commis
italisations and an asset relief measures amounting to at
sion’s various decisions approving the measures
least EUR 32 billion (43,9 % of RWA). INBS has received
undertaken by Ireland to combat the financial crisis ( 57 ).
State aid in the form of recapitalisations and an asset
relief measure amounting to at least EUR 6,2 billion
(59 % of RWA). Those levels are substantially above
the 2 % threshold as indicated in the Recapitalisation
(123) Given the specific circumstances in Ireland, combined
Communication ( 54 ) and the IAC.
with the improved but not yet stabilised situation on
the financial markets, the Commission considers that
the measures may be examined under Article 107(3)(b)
of the Treaty.
(119) Finally, it should be concluded that the total State aid
amount involved, when adding up the figures for the
recapitalisations and asset relief measure in favour of
6.3.2. Compatibility assessment
Anglo and INBS, as well as the recapitalisation of the
merged entity in a stress case, may be estimated to be
(124) Anglo, INBS and the merged entity have benefited and
at least EUR 41,5 billion ( 55 ).
will benefit from several State aid measures whose
compatibility has not previously been assessed by the
Commission. They include the State guarantee on the
ELA for both Anglo and INBS (measures (p) and (q)
referred to in recital 68) and the State guarantees and
6.3. Compatibility of the aid
recapitalisation in the stress case […] (measures (r) to (v)
(120) When assessing the compatibility of the joint restruc
referred to in recital 69). Furthermore, Anglo and INBS
turing plan for Anglo and INBS, it should be first
have received measures that have been found compatible
assessed whether Article 107(3)(b) of the Treaty is
by the Commission as rescue aid (measures (a) to (o)
applicable before assessing whether the joint restruc
referred to in recitals 66 and 67), but which now will
turing plan fulfils the requirements of the Recapitalisation
have to be assessed to determine whether they are
Communication and the Restructuring Communication.
compatible as restructuring aid. It is necessary to assess
the compatibility of those measures and the joint restruc
turing plan in the context of the Banking Communi
cation, the Recapitalisation Communication and the
Restructuring Communication.
6.3.1. Legal basis for the compatibility assessment
(121) Article 107(3)(b) of the Treaty permits the Commission
to declare aid compatible with the internal market if it is
(125) Although Anglo and INBS have benefited from asset
intended ‘to remedy a serious disturbance in the
relief measures while transferring assets to NAMA,
economy of a Member State’. In that regard, market
Anglo’s and INBS’s resolution in itself does not give
conditions have been difficult worldwide since the last
rise to a State aid in the form of an asset relief
quarter of 2008. Ireland, in particular, has been severely
measure. All Anglo and INBS assets and liabilities will
hit by the financial crisis. The economic downturn
be merged into one entity exclusively for their work-out
combined with the fall in property prices and the
in its entirety. Accordingly, it is not necessary to assess
exposure of the Irish banks to land and property devel
the merger and resolution of the assets under the IAC.
( 54 ) Communication from the Commission — The recapitalisation of
( 56 ) Communication from the Commission — The application of State
financial institutions in the current financial crisis: limitation of aid
aid rules to measures taken in relation to financial institutions in
to the minimum necessary and safeguards against undue distortions
the context of the current global financial crisis (OJ C 270,
of competition (OJ C 10, 15.1.2009, p. 2).
25.10.2008, p. 8).
( 55 ) 32 billion (Anglo) + 6,2 (INBS) + 3,3 (stress recap for the merged
( 57 ) See amongst others Commission Decisions as referred to in
entity) = 41,5 billion
footnotes 26 to 33.

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Union L
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6.3.3. The application of the Banking and the Recapitalisation
recital 68) and to the merged entity on its remaining
Communication to measures (p) to (v) referred to in
deposits (measure (r) referred to in recital 69), its
recitals 68 and 69
wholesale funding (measure (v) referred to in recital
69), the State guarantee on the ELA it receives
(126) In line with point 15 of the Banking Communication, in
(measure (t) referred to in recital 69) and the off-
order for an aid or aid scheme to be compatible under
balance sheet liabilities (measure (s) referred to in
Article 107(3)(b) of the Treaty it must comply with
recital 69) aim to ensure that the funding the merged
general criteria for compatibility under Article 107(3)
entity receives is secure and that the merged entity will
of the Treaty, which imply compliance with the
not default. That funding is needed in order to ensure
following conditions:
that Anglo and INBS have sufficient funding to cover
their assets, while the funding the merged entity
receives will enable it to work out the Anglo and INBS
(i) Appropriateness: The aid has to be well-targeted in
loan books over time. […].
order to be able to effectively achieve the objective
of remedying a serious disturbance in the economy.
This would not be the case if the measure were not
appropriate to remedy the disturbance;
Conclusion
(131) The recapitalisation of the merged entity in a stress case
is appropriate because it effectively meets its objective to
(ii) Necessity: The aid measure must, in its amount and
ensure that the merged entity is in compliance with its
form, be necessary to achieve the objective. That
regulatory capital requirements. The measure therefore
requirement implies that it must be of the
effectively achieves the objective of preventing the
minimum amount necessary to reach the objective,
default of the merged entity.
and take the form most appropriate to remedy the
disturbance;
(132) The guarantee measures are appropriate since they ensure
that Anglo and INBS pre-merger and the merged entity
(iii) Proportionality: The positive effects of the measure
post-merger have sufficient funding to carry out their
must be properly balanced against the distortions of
tasks, while it prevents a potential default of the
competition, in order for the distortions to be
merged entity.
limited to the minimum necessary to reach the
measure’s objectives.
(133) Furthermore, the different State aid measures ensure that
(127) Those general criteria apply both to recapitalisations and
financial stability in Ireland is maintained.
guarantees. The Recapitalisation Communication further
elaborates on the three principles of the Banking
Communication and states that recapitalisations can
contribute to the restoration of financial stability. In
(ii) Necessity — limitation of the aid to the minimum
particular the Recapitalisation Communication states in
point 6 that recapitalisations may be an appropriate
(134) According to the Banking Communication, the aid
response to the problems of financial institutions facing
measure must, in its amount and form, be necessary to
insolvency.
achieve the aid’s objective. That requirement implies that
the capital injection and the guarantees must be of the
minimum amount necessary to reach the objective. In
that context, it may be observed that the capital
(i) Appropriateness of the Measures
injection will only occur in the stress case and is
limited to an amount of EUR 3,3 billion. The recapitali
(128) The recapitalisation of the merged entity in the stress
sation will ensure that the merged entity will fulfil the
case (measure (u) referred to in recital 69) aims at
relevant regulatory capital requirements. As for the State
ensuring that it has sufficient capital to comply with its
guarantees, they will ensure that there will be funding
regulatory capital requirements while it works out the
available for the merged entity so as to meet its
Anglo and INBS loan books. A capital injection is the
obligations as a going concern.
most efficient and straightforward measure to deal with
the potential capital shortfall that could arise in the stress
case as it directly improves the total capital ratio of the
merged entity.
(135) As regards the remuneration that the merged entity has
to pay for the recapitalisation, the State will receive no
fixed remuneration on the recapitalisation. Anglo, INBS
and the merged entity also do not pay a fee for the
(129) […]
guarantee on the ELA, while the merged entity does
not pay a fee on the guarantee on the off-balance
sheet liabilities. The merged entity will also cease to
(130) The State guarantees provided to Anglo and INBS on the
pay a fee for the guarantee on wholesale funding and
ELA they receive (measures (p) and (q) referred to in
deposits once the ELG scheme has expired.

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(136) As regards the recapitalisation, points 15 and 44 of the
Anglo and INBS (restructuring of loans, preservation of
Recapitalisation Communication explain that in duly
collateral value) and will be subject to strict restrictions.
justified cases lower remuneration can be accepted in
The merged entity will not collect any deposits nor
the short-term for distressed banks on the condition
engage in new activities. Consequently, the distortion of
that the lack of remuneration will be reflected in the
competition caused by the massive aid to Anglo, INBS
restructuring plan. The merged entity essentially is a
and the merged entity will be limited.
resolution vehicle which will facilitate the orderly
resolution of Anglo and INBS. It will not carry out any
economic activities besides those necessary to work out
the loan book. Ireland has provided the necessary
Conclusion
commitments in that regard (see Section 2.3.2). Anglo
and INBS will both disappear from the Irish lending and
(140) It should be concluded that that: (i) the recapitalisation of
deposit markets. It may be concluded that restructuring
the merged entity in a stress case and the guarantees are
in that form compensates for the lack of remuneration.
appropriate to ensure the resolution of Anglo and INBS;
Finally, Anglo and INBS have been fully nationalised and
(ii) Anglo and INBS will exit the Irish deposit and lending
their respective shareholders have lost their rights and
markets; (iii) the fact that the investment in Anglo, INBS
interests in both institutions. As a consequence, any
and the merged entity will not provide any remuneration
potential proceeds realised on termination of the
or positive return is justified under the circumstances of
resolution of the merged entity will accrue to the State
the case; and (iv) there are sufficient measures limiting
in full.
the negative spill-over effects for other competitors.

6.3.4. The application of the Restructuring Communication
(137) The Banking Communication assumes in point 26 that,
for guarantee schemes, an adequate fee should be paid.
(141) The Restructuring Communication sets out the State aid
The fee should be set as close as possible to what could
rules applicable to the restructuring of financial insti
be considered the market price, however taking into
tutions in the current financial crisis. According to the
account the potential difficulties for beneficiaries to
Restructuring Communication, in order to be compatible
bear the amounts that might properly be charged. As
with Article 107(3)(b) of the Treaty, the restructuring of
elaborated in recital 135, it should be noted that the
a financial institution in the context of the current
merged entity will be charged with the resolution of
financial crisis has to:
Anglo and INBS. In view of those circumstances, it
should be concluded that the fact that the merged
entity does not pay a fee for the guarantee is justified.
(i) lead to a restoration of the viability of the bank, or
to the orderly winding-up of the bank;
Conclusion
(ii) include sufficient own contribution by the bene
(138) It should be concluded that the recapitalisation of the
ficiary (burden-sharing);
merged entity in a stress case and the State guarantees
to Anglo, INBS and the merged entity are necessary in
order to ensure the latter’s capital adequacy and to ensure
that sufficient funding is available, while also reducing
(iii) contain sufficient measures limiting the distortion of
the potential risk of default of the merged entity. As
competition.
regards the remuneration of the aid measures in order
to keep the aid to the minimum, it is justified that no
remuneration is paid given the resolution of Anglo and
INBS by the merged entity.
6.3.4.1. O r d e r l y r e s o l u t i o n o f t h e m e r g e d
e n t i t y
(142) The joint restructuring plan aims at the resolution of
Anglo and INBS by the merged entity in an orderly
(iii) Proportionality — measures limiting negative spill-over
fashion. Accordingly, it is not necessary to assess the
effects
viability of the merged entity.
(139) The merged entity will ensure the resolution of Anglo
and INBS and that as a result both institutions will exit
the Irish deposit and lending markets. As established in
(143) The joint restructuring plan presents an orderly
recital 105, the merged entity will carry on some limited
resolution of Anglo and INBS based on State support.
economic activities in order to work out the loan books
The legacy loan books of both banks will be worked out
of Anglo and INBS. The Commission notes positively
over a 10-year period. Ireland has estimated the capital
that Ireland has provided the necessary commitments
injections necessary in […] in order to guarantee the
to ensure that the economic activities carried out by
merged entity against any risk of default. In addition,
the merged entity will be limited to the minimum. The
the merged entity will benefit from State guarantees to
lending granted by the merged entity will be in the sole
pursue operations necessary to work out Anglo and INBS
context of the management of the legacy loan books of
assets.

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26.5.2012 Official
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139/37
(144) Consequently, the conditions to work out the assets of
(150) More generally, merging the two banks will simplify the
the merged entity in an orderly fashion are in place.
resolution structure, and has the potential to reduce the
structural costs, albeit to a limited extent.
6.3.4.2. O w n c o n t r i b u t i o n / b u r d e n - s h a r i n g
A liquidation would be more costly and would present more
(145) The Restructuring Communication indicates that an
systemic risks
appropriate contribution by the beneficiary is necessary
in order to limit the aid to a minimum and to address
(151) Alternatively, Ireland could consider an immediate liqui
distortions of competition and moral hazard. To that
dation of Anglo and INBS. The Commission is, however,
end: (a) both the restructuring costs and the amount of
of the view that a liquidation would be more costly than
aid should be limited; and (b) a significant own
an orderly resolution and would require more State aid.
contribution is necessary.
[…].
(a) Limitation of restructuring costs and of the amount of aid
(152) Concerning the commercial loans transferred to the
merged entity from Anglo, the joint restructuring plan
(146) The principles of the Restructuring Communication
foresees impairments on the nominal value of […] ( 58 ).
require that the aid amount is limited to the minimum
Considering the discount levels estimated by Anglo’s
and banks should first use their own resources to finance
market advisors in May 2010, the fire sale of non-
restructuring.
NAMA loans from Anglo would imply substantially
higher losses than an orderly work-out of the loan
book ([…]) ( 59 ). Overall, the losses that would be
incurred in case of an immediate liquidation of Anglo
Anglo and INBS will exit the market
would imply greater losses to those that the loans would
bear if they are worked out over a long period. It should
(147) Ireland has decided that Anglo and INBS should not
be underlined that, as regards the Irish loans in particular,
pursue their activities in view of the massive losses
there has been no transaction of the size discussed here.
suffered by both institutions and in view of the uncer
Consequently, all the figures are estimations based on
tainty that the continuation of their activities would
experts’ judgment and in case of rapid sale it is far
convey to the market. In particular, the State would be
from certain that a buyer could be found for that
at risk of having to continuously inject capital into Anglo
enormous volume of assets, even at very low prices.
and INBS as long as both banks are active in order to
cover for losses and to ensure that both institutions fulfil
the new capital requirements set by the Financial Regu
lator. By opting for the resolution of both banks, Ireland
has put an end to market speculation on Anglo and INBS
(153) In a liquidation process, the proceeds from the sale of
and has clarified the cost of the State support for them.
assets would be distributed to repay senior bondholders,
depositors and State-guaranteed ECB/CBI funding. […].
(148) That decision by Ireland, combined with the
commitments outlined in Section 2.3.2, will ensure that
(154) In Anglo, approximately EUR […] billion of unsecured
the aid is not used to develop new activities, which
debt is not covered by the State guarantee ( 60 ). […]. The
would require capital and funding, and thus contributes
rest of the unsecured debt in Anglo (approximately EUR
to limit the amount of aid to the minimum. The merged
3 billion) is guaranteed by the State and the relevant debt
entity will, in particular, not engage in new lending and
holders would be paid at par by the State. In total, in
will limit its activities to managing the legacy loan book
case of liquidation, the senior unsecured bond holders
of Anglo and INBS under strict restrictions.
would thus contribute to the losses by a net amount
of maximum […] billion. That amount is exceeded by
the additional losses that would result from fire sales of
Anglo assets.
The merged entity is the most appropriate resolution
mechanism
( 58 ) That level of impairment is more conservative than that anticipated
by […] in May 2010 () in the case of an orderly winding down of
the loan book.
(149) As part of the resolution of both Anglo and INBS,
(
Ireland has decided to merge the two entities in order

59 ) The Anglo legacy loan book has a book value of EUR […] billion; if
the levels of discount estimated by […] for a liquidation were
to manage only one resolution vehicle. That solution is
applied to the legacy loan book, it would result in a loss in
likely to create synergies in terms of the loan books’
excess of. […]. Considering the deterioration of the situation in
work-out, human resources and funding management.
Ireland since those estimations were made, the excess loss would
Although limited, such synergies will facilitate the
likely be greater.
work-out of the assets. […] Merging the two entities in
( 60 ) At 18 February 2011, Anglo had: (i) unsecured unguaranteed senior
bonds worth EUR […] million; (ii) unsecured guaranteed senior
this specific case limits the capital that Ireland has to
bonds worth EUR […] million; and (iii) […] secured unguaranteed
inject into those banks.
senior bonds.

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L 139/38
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Official Journal of the European Union
26.5.2012
(155) In addition, in case of liquidation, the subordinated debt
(b) Significant own contribution
holders would have to assume losses. However, since the
subordinated debts have been bought back in the last
(161) The principles on the own contribution of the beneficiary
years and the remaining outstanding subordinated debts
bank in the restructuring phase require: (i) that the bene
are small, those losses would not compensate the
ficiary bank should use to the extent possible its own
additional State aid required to repay the other, more
resources to finance restructuring, for example, through
senior, debt holders ( 61 ).
the sale of assets; and (ii) that the costs associated with
the restructuring are also adequately borne by those who
invested in the bank by absorbing losses with available
capital and by paying an adequate remuneration for State
interventions. The objective of burden-sharing is twofold:
(156) In conclusion, a rapid liquidation of the loan portfolio,
to limit distortions of competition and to address moral
assuming that it would be feasible — which is far from
hazard ( 63 ).
certain — would crystallise a cost for Ireland superior to
the costs incurred by an envisaged 10-year work-out of
the assets of Anglo and INBS, where the assets easier to
sell will be sold first while the assets for which there is
no market will be held for several years.
(i) Own contribution of the institutions concerned


(162) In the present resolution of Anglo and INBS, the own
contribution of both institutions to their restructuring is
maximised because all assets are identified for sale and
the proceeds accrue in full to the financing of the resol
(157) Concerning INBS, similar considerations as those for
ution. However, the value of assets is so depreciated that
Anglo apply with regard to the legacy commercial loan
the proceeds of their sale is dwarfed by the capital
book of the bank (almost transferred to NAMA in full).
injected into both banks.
The large majority of liabilities of INBS are also guar
anteed by Ireland ( 62 ).
(163) In addition both banks have sold their deposits books.
(158) Concerning the legacy mortgage book of INBS, in the
INBS restructuring plan, Ireland indicated