Bank of Ireland to raise €3.42 billion
The Bank of Ireland has today confirmed plans to raise €3.42 billion with a rights issue and a private placing in the offing. The company, which has suffered from the financial and property downturn in Ireland, needs to boost its capital ratio to abide by new government requirements. The sector as a whole is still struggling and the property market has yet to recover but there are signs that slowly but surely Ireland's major banks are now getting themselves back on an even keel.
There will be a €1.9 billion rights issue and a €1.54 billion private placing amongst institutional shareholders and the state. This will allow the company to increase its Tier 1 capital ratio to 8% from the current 5.3%, which would be well inside the government's stress test guidelines. There are hopes, assuming that the fund raising is successful, that this could herald the first phase in a major recovery programme required by the Irish banking system. Whether or not it will be enough to see off potential assistance for the government from the IMF and European Union in the short to medium term remains to be seen.
There is concern that the longer the Greek debacle continues the more chance that economies such as Ireland and Spain will struggle and ultimately require bailout funding from third parties such as the IMF and the European Union.
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