AIB and its unit EBS Building Society have been granted temporary approval by the European Union to receive Government recapitalisation of €13.1 billion.

The European Commission said it would take a final decision on the aid when the Irish lenders submitted a new restructuring plan expected by the end of July.

"The commission acknowledges that the measures are necessary to increase the bank's solvency ratios and maintain confidence in the Irish financial markets," the regulator said in an e-mailed statement today.

The Government took control of EBS last year and ordered it to merge with AIB.

AIB and Bank of Ireland will require "close surveillance" from EU antitrust authorities because they will control the Irish market after the banking crisis forced the Government to bail out several lenders, EU competition commissioner Joaquin Almunia said last month.

The EU said final approval of the government help for Allied Irish and EBS required a restructuring plan that ensured an "adequate participation in the restructuring costs by shareholders and subordinated debt holders".

Bloomberg