European Commission approves AIB restructure plan

The European Commission has approved AIB's restructuring plan subject to a number of conditions, including allowing certain rivals access to its customer base and limiting its exposure to Irish sovereign bonds.

Approval for this plan was necessary under State aid rules. AIB, including the EBS building society, has received €20.775 billion in aid from the Irish Government since 2009 with the State having a 99.8 per cent holding in the bank.

The commission said yesterday that the plan, which covers the period out to the end of 2017, provides for a “credible strategy to make AIB profitable” notably by enhancing the net interest margin and further curbing its operating costs relative to income. AIB is planning to bring its cost-income ratio down to about 50 per cent.

It said AIB would maintain a "strong capital buffer during the restructuring period".

'Appropriate remuneration'
The plan ensures that AIB pays an "appropriate remuneration" to the State for the support it has received and sets out a "repayment commitment".

Both AIB and the commission declined to comment on this.

AIB has also made a number of specific commitments, including targets on cost reduction and a ban on acquisitions.

The bank has agreed to operate “market opening measures” to facilitate the entry of competitors.

This will comprise a “services package” and a “customer mobility package”.

Under the services package, AIB will provide competitors with access to cash supply and distribution services, and access to market intelligence.

Under the “customer mobility package”, AIB will distribute advertising material on behalf of a rival to promote customer switching.

KBC Bank Ireland recently availed of a similar commitment given by Bank of Ireland to the commission for approval of its restructuring plan.

AIB chief executive David Duffy welcomed the commission's approval of its plan. "The commitments as outlined are in line with our existing operational plans," he said

Commission vice president in charge of competition policy Joaquín Almunia said its approval “closed an important chapter in the ongoing restructuring of the Irish banking sector”.