BANK OF Ireland will announce plans later this month to raise up to €3.3 billion in new capital to meet solvency requirements laid down by the Financial Regulator and to buy back warrants from the Government.

It is understood the bank intends to use €400-€500 million from its capital-raising exercise to buy back five-year warrants that were issued to the Government as part of the State rescue of the financial sector.

This is to eliminate a potential overhang of stock when the capital raising is completed.

This money will be paid to the exchequer, while the balance of the funds will be used to satisfy the Financial Regulator’s equity capital requirements.

On March 30th, the regulator said Bank of Ireland required an additional €2.66 billion to meet its target of 7 per cent equity capital.

The bank is expected to unveil its capital-raising plans during the week beginning April 26th.

These are likely to include a rights issue, a debt-for-equity swap and a placement of shares.

It will also involve the Government swapping preference shares in the bank for equity. This is likely to take the State’s stake in the bank from 15.7 per cent currently to between 35 and 40 per cent.

But there will be no additional State investment in Bank of Ireland, which has already received €3.5 billion from taxpayers.

The bank yesterday released details of its discussions with the European Commission on a restructuring plan in the context of its State aid. The bank is to dispose of six assets, including its ownership of New Ireland Assurance, Bank of Ireland Asset Management and ICS Building Society.

It will also offload its interests in FCE, a US-based foreign exchange company, hedge fund operator Paul Capital and a 17 per cent stake in Irish Credit Bureau.

This will impact 1,000 of Bank of Ireland’s total of 14,500 staff.

New Ireland, which has about a 30 per cent share of the life and pensions market here, is seen as the jewel in the crown.

John O’Donovan, Bank of Ireland’s group chief financial officer, told analysts the book value of New Ireland was about €850 million, while the “total embedded value” of the business was about €1.05 billion. He expressed confidence that the bank would get book value for the business.

Irish Life Permanent has already expressed an interest in acquiring New Ireland and BIAM, which has €25 billion in assets under management.

This would throw up significant competition issues given that Irish Life and Irish Life Investment Managers (ILIM) are market leaders domestically in these sectors.

An IL&P spokesman said: “We don’t comment on market transactions but we would always consider acquisition opportunities.”

It is understood IL&P would argue a merger of ILIM and BIAM should be considered an international deal rather than a domestic one, given that both handle mandates for global clients. Analysts were sceptical about ILP’s ability to fund such deals.