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Irish government to increase stake in Bank of Ireland

As we reported yesterday, the Bank of Ireland is currently in the process of raising an additional £3 billion which will see new shares issued to institutions and the Irish government as well as existing shareholders. After the fundraising the Irish government's stake in the Bank of Ireland will increase from 15.7% to around 36% and the government will also have around £1.6 billion worth of preference shares in the company.

While there is no doubt that progress is being made with regards to the Irish banking community, which suffered a dramatic downturn during the worldwide recession, there is still a long way to go. The government is very keen at the moment to stabilise the economy which means stabilising the banking sector and ensuring there is financial assistance available in the short, medium and longer term.

There is some relief that there appears to be natural demand from existing shareholders and institutions towards the issue of new shares which bodes well for the future. However, it may be many months and possibly years before we see a major turnaround in the Irish financial sector and the government is likely to have a significant stake in the sector for some time to come.

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