DUBLIN (MNI) – Ireland plans to merge two of its largest banks as
part of its efforts to restructure the banking sector, Irish Finance
Minister Michael Noonan said Thursday following the release of the
country’s latest round of banking stress tests.

“We intend to combine the operations of AIB and EBS to build a
second Pillar bank from the strengths of both institutions,” Noonan
said.

The new institution “will be a largely domestically focused bank,
retaining its Northern Ireland operations and certain deposit funded
operations in the UK,” the minister said. “The non-core division of the
combined entity will see deleveraging of E23 billion of assets by 2013.”

Irish central bank governor Patrick Honohan said that he was “a
little bit” concerned about a lack of competition in the Irish banking
sector after the merger.

The Department of Finance has also confirmed that depositors will
be protected both during and after the transfer under the Credit
Institutions Eligible Liabilities Guarantee Scheme 2010 and the Deposit
Protection Scheme.

The Irish central bank said it expected the government to provide
additional capital to Irish Life and Permanent, which is required to
raise a fresh E4 billion, and that as a result the state would hold a
majority stake in the firm. The company’s life insurance business and
other assets are expected to be sold.

But the central bank offered assurances of continuity for customers
throughout the both that process and the AIB-EBS merger.

“EBS and Irish Life and Permanent continue to operate as credit
institutions authorized and regulated by the Central Bank of Ireland,”
the Irish central bank said in a reaction to the announcement.

Earlier on Thursday, the Central bank of Ireland revealed that
Irish banks needed to raise an addition E24 billion in fresh capital.

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