merrion street

The Minister for Finance notes the statements today by Bank of Ireland, EBS Building Society and Irish Life and Permanent of their intention to launch Liability Management Exercises (LMEs) in relation to the remainder of their bank subordinated liabilities.

The Minister said:

“I would like to reiterate that it is Government policy to achieve appropriate burden-sharing from holders of bank subordinated debt in Bank of Ireland, EBS Building Society and Irish Life & Permanent.  The burden-sharing process is already underway in respect of AIB.

Similarly to AIB, this is the final market based step to ensuring appropriate burden sharing by subordinated bondholders. These financial institutions are remaining solvent due to the ongoing overwhelming financial support of the State, without this support subordinated bondholders’ entire investment would have been irrecoverable.

The levels of burden-sharing in these LMEs are the minimum acceptable to the Government.  If these LMEs fail to deliver the expected core tier 1 capital gains to each of the banks, the Government will take whatever steps are necessary under the Credit Institutions (Stabilisation) Act 2010 or otherwise to ensure that burden sharing is achieved.  Any further action, after investors have had an opportunity to take part in these LMEs, will result in severe measures being taken in respect of the subordinated liabilities.”

The challenges by two investors with holdings in only three of the eighteen affected securities to the Subordinated Liabilities Order that was made by the High Court in respect of AIB on 14 April 2011 will be heard before the High Court.  The Minister remains of the view that these challenges are entirely unfounded.