The European Commission has authorised under EU state aid rules an emergency recapitalisation worth 875 million in favour of the Irish Educational Building Society (EBS) for a period of six months as urgent rescue aid.
EBS now needs to submit a restructuring plan, to address its difficulties in the long-term and to become viable without continued state support. “EBS needs a significant recapitalisation to comply and to continue to comply in the coming years with capital requirement rules. The measure is therefore appropriate to preserve financial stability in Ireland and can be approved for six months to that end. During this period, EBS needs to establish a restructuring plan to identify the reasons for its problems and to restore its viability”, said Competition Commissioner Joaquín Almunia.
On 30 April 2010 Ireland notified a 875 million capital injection into EBS, to meet regulatory requirements, in particular regarding core tier 1 capital.
The Commission authorised this measure for six months as emergency aid to remedy EBS’ financial difficulties and maintain confidence in the Irish financial markets. The Irish authorities now have six months, from the date of approval of the measure by the Commission, to submit a restructuring plan.
EBS, a mutual company is owned by its members, i.e. by the depositors, is a building society with a balance sheet of 21.5 billion at the end of 2009. It provides financial services mainly to retail customers and small and medium-sized companies. Since 2005, EBS significantly developed its lending to the commercial real estate sector and was, as a consequence, severely affected by the financial crisis, and, in particular, by the commercial real estate crisis in Ireland.
The non-confidential version of the decision will be made available under the case number N160/2010 in the State Aid Register.
