This is an edited version of the Government’s statement. Full version available on irishtimes.com.

THE MINISTER for Finance today briefed his Government colleagues on the strategic options for the future of Anglo Irish Bank. The Government decided that Anglo Irish Bank will be split into a funding bank and an asset recovery bank.

It is intended that in due course the recovery bank will be sold in whole or in part or that its assets will be run off over a period of time.

The guaranteed position of depositors will be unchanged by the new arrangements and no action is required of them as a result of today’s announcement.

The Government’s primary objective in dealing with Anglo Irish Bank has been to minimise the cost of this distressed bank to the Irish taxpayer.

The board of Anglo Irish Bank submitted its preferred option to the Minister and to the European Commission at the end of May for consideration under State aid rules. However, the Government has concluded that this plan in its current form does not now provide the most viable and sustainable solution to ensure the continued stability of the Irish banking system.

RESOLUTION PROPOSAL

In these circumstances the Government has decided to opt for a variation of the board’s restructuring proposal. The Government’s decision does not affect existing guarantee arrangements.

Under the restructuring plan, the funding bank will be a Government-backed/guaranteed specialist deposit bank which will contain the bank’s deposit book. It will be a stand-alone, regulated bank, completely separated from Anglo’s loan assets, and it will be owned directly by the Minister for Finance. This bank will not engage in any lending, but will provide a secure home for Anglo’s depositors and any new customers who wish to deposit their funds with it. Depositors with the funding bank will be completely insulated from the future performance of the rest of the current Anglo Irish Bank loan book. The asset recovery bank will also be a licensed regulated bank. Its dedicated focus will be on the work-out over a period of time of the assets not being transferred to Nama in a manner which maximises the return to the taxpayer.

COSTS

The Government believes that it is essential to identify, with as much certainty as possible, the final cost for the restructuring and resolution of the bank. This will underpin international financial confidence in Ireland. Accordingly, the Central Bank will determine the appropriate levels of capital needed in both institutions. Its decision will be announced by October.

ANGLO STATEMENT

The Board and management of Anglo Irish Bank notes the announcement from the Government today (September 8th, 2010) and will work with the authorities over the immediate future to submit this alternative proposal to the European Commission, who have been briefed. A final decision from the European Commission is expected in the coming weeks. The Bank welcomes the certainty this brings to a very difficult situation.

The Government, in conjunction with the financial authorities, has determined that the best option for the Bank, given the imperatives of system stability and the containment of the overall risk of the balance sheet, is to create through a split; a Recovery Bank and a separate Funding Bank from the existing Anglo Irish Bank. The Recovery Bank will focus on the progressive recovery of the entire non-NAMA loan portfolio and all historical legacy issues. The Funding Bank will focus on maintaining a viable funding base in support of the Recovery Bank’s needs. The Bank will work closely with officials of the various State agencies to deliver a detailed plan to give effect to this new option for the Bank and will implement this plan.