Bank of Ireland today secured EU regulatory approval for drastically shrinking its operations and wholesale funding activities, which was mandated by the European Commission after the Government took part in its recapitalisation.
The bank's exit from risky portfolios and the adoption of more prudent risk management practices will help restore its viability, the EU executive said in a statement.
"Bank of Ireland has embarked on an ambitious plan to downsize and refocus its activities to better serve the Irish economy," EU Competition Commissioner Joaquin Almunia said.
Under the restructuring plan, the bank will substantially deleverage its balance sheet to reduce its dependency on wholesale funding and will focus on balanced-risk lending in Ireland and Britain.
It will also offer certain services to new players or to small banks already active in Ireland in order to reduce the cost for competitors. The Government holds a 15%stake in Bank of Ireland.
The Commission said Irish authorities also pledged to open up the financial market to boost competition and implement measures allowing customers to switch banks more easily and better compare prices.
Bank of Ireland was ordered in March to raise an additional €4.2 billion in core Tier 1 capital to shield its balance sheet against future property-related losses following tough, new stress tests.
Bank of Ireland said today that it welcomed the Commission's decision. It said it continues to ''make good progress in implementing the commitments agreed under the 2011 Revised Restructuring Plan''.
Finance Minister Michael Noonan also welcomed today's decision from Europe. "The Commission's approval of the revised restructuring plan is another step in the achievement of the Government's strategy of returning the banking system to long-term viability and profitability," he said.
The Commission also found a resolution scheme for distressed credit unions in Ireland to be in line with EU rules. The scheme, under the Central Bank and Credit Institutions (Resolution) Act 2011, gives the Central Bank wide powers to intervene in struggling credit unions.
Its options include the appointment of a special manager, modified liquidation and the transfer of a credit union's assets and liabilities to another party.
