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No Banking Licence

Annual Performance Statement (Financial Regulation) 2010-2011 ((((Page 13))))

Restructuring of the Banking Sector – Anglo/Irish Nationwide,

Postbank and Bank of Scotland (Ireland)

A key focus over the year was the future structure of Anglo and its recapitalisation. This involved considerable interaction between the Bank, the other national authorities, as well as the senior management team in Anglo. Similarly, the focus for Irish Nationwide Building Society was in relation to its restructuring and recapitalisation.

A number of alternative scenarios and business plans were examined over the year regarding the future structure of Anglo ranging from the creation of a “good” bank and a recovery vehicle to immediate closure and wind down of the entity, prior to submission to the European Commission. In conjunction with this process, the Bank carried out a PCAR process in September 2010, to evaluate the potential capital requirements for Anglo under a base and stress case scenario out to 2020.

A restructuring plan developed by the senior management team of Irish Nationwide Building Society (INBS) envisaged the society being repositioned as a traditional building society, i.e. focusing on retail deposit taking and providing residential mortgages. However, the plan was not deemed viable. The capital requirements of INBS were assessed on an ongoing basis during the year and this assessment, carried out in conjunction with the Department of Finance and National Treasury Management Agency, resulted in the Minister for Finance injecting €5.4bn of capital into INBS by way of a Special Investment Share (€100m in March) and a Promissory Note (€2.6bn in March which was increased to €5.4bn in December).

The ultimate proposal submitted by the national authorities for approval to the European Commission was that Anglo be restructured and merged with Irish Nationwide Building Society and run down over a ten year period. A restructuring plan was submitted to the EU commission on 3 January 2010, as an addendum to the National Authorities original restructuring plan for Anglo submitted in 2010. The first phase of the restructuring involved both deposit books being transferred to other banks. At time of writing (April 20), approval from the European Commission is awaited for a new consolidated wind down vehicle with a banking licence incorporating both Anglo and INBS.

On 8 December 2010, the Bank received a request under the Central Bank Act 97 to revoke the banking licence of Postbank Ireland Limited as of 20 December 2010. The shareholders of Postbank had announced on 26 February 200 that the joint venture between An Post and BGL BNP Paribas would not continue beyond the year-end.

Following this announcement, Postbank engaged in an orderly wind down of its business. Postbank Ireland Limited was originally issued a banking licence in April 2007; its licence was voluntarily revoked on 20 December 2010.

In February 2010, Bank of Scotland (Ireland) Limited (BoSI) announced that it would close the retail and intermediary business of BoSI in the Republic of Ireland. The retail and intermediary business subsequently closed in June 2010. On 9 August 2010, following a strategic review of its Irish operations, Lloyds Banking Group (LBG) announced its intention to close the operations of BoSI on 3 December 2010. LBG advised that the main reasons for the closure of the Irish bank were (i) the number of impaired loans incurred by the bank and (ii) the perceived lack of opportunity for scalable growth in the future. On 3 December 2010, (i) the business of BoSI transferred to Bank of Scotland plc in the UK, under the EU Cross border Merger Regulations, (ii) BoSI’s banking licence was revoked at the request of the bank and (iii) BoSI ceased to exist. Bank of Scotland plc entered into an agreement with an independent service company in Ireland, Certus, to perform various administrative functions relating to the loan business relating to BoSI.

BoSI had been operating in Ireland since 1971.


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