EU gives 'positive' welcome to Anglo Irish split plan

(BRUSSELS) - Europe's competition watchdog gave a "positive" welcome on Wednesday to Ireland's decision to split state-rescued Anglo Irish into two banks, with one half eventually being sold or wound down.

"I welcome the clarification by the Irish Finance Minister on what would now be the Irish preferred option regarding Anglo-Irish," said European Union competition commissioner Joaquin Almunia in a statement.

"I view this new option positively as it would deal better with the distortions of competition.

"However, a number of important aspects still need to be clarified, and a new notification received, before the commission is in a position to finalise its assessment and to take a decision."

In the hope of satisfying the EU, Dublin announced that Anglo Irish will be split into a so-called Funding Bank and Asset Recovery Bank.

The former will guarantee deposits while the state will seek to offload the latter bank.

The decision followed a briefing of cabinet ministers by Finance Minister Brian Lenihan and talks he held earlier this week with the European Commission and EU finance ministers.

"Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case," Dublin said.

"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."

Almunia also confirmed he would back an extension to the country's bank guarantee scheme until the end of the year.

The Spanish official said he "understands that it is necessary to continue, for the time being, with government guarantees also for short-term bank liabilities."

The commission has authorised around 25 billion euros (32 billion dollars) in emergency state recapitalisations for Anglo Irish, which "obviously creates distortions of competition," he stressed.

Anglo Irish last week reported a dizzying pre-tax loss of 8.2 billion euros in the six months to the end of June, on top of 12.7 billion euros for the whole of 2009, the biggest-ever losses in Irish corporate history.