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The European Commission found the second restructuring plan of Bank of Ireland (BoI) to be in line with EU state aid rules. In particular, the restructuring plan contains a major restructuring effort ensuring that BoI will refocus its business model and will considerably reduce its dependence on wholesale funding. The plan ensures a sustainable future for the bank without continued state support, and includes appropriate measures to minimise distortion of competition.
The decision grants definitive approval to the various support measures in favour of BoI (recapitalisation, guarantees and asset relief). As regards the restructuring plan, the Commission concluded that it fulfilled the criteria of its communication on the restructuring of banks during the crisis (see IP/09/1180). The plan will restore the bank's viability by exiting risky portfolios and by implementing more prudent risk management practices. In particular, Bank of Ireland will substantially deleverage its balance sheet to reduce its dependency on wholesale funding, and will refocus its business model on balanced-risk lending in Ireland and the United Kingdom. The plan also ensures a fair burden-sharing of past losses and that the bank and its capital providers significantly contribute to the financing of the restructuring costs by selling several businesses and portfolios. Finally, the restructuring plan contains sufficient measures limiting the distortion of competition brought about by the significant state support. In order to enhance competition, the bank will also offer certain services to new entrants or to small banks already active in Ireland, to reduce the cost for competitors to develop banking business in Ireland.
In addition, the Irish authorities committed to a number of market-opening measures in order to enhance competition in the Irish banking market by facilitating the entry and expansion of competitors and by increasing consumer protection in the financial sector. These measures apply to the banking sector in general and not only to the Bank of Ireland. This will include, for example, measures enhancing customer mobility between banks, cost comparison support to facilitate consumer decision-making, enhancement of electronic banking, promotion of financial inclusion, as well as other measures strengthening corporate governance in the financial sector.