Bank of Ireland has said it has been told by the EU not to make €280m interest payments on the Government's preference shares in the bank which it owns arising from last year's recapitalisation of the bank.
A statement from the bank raises the prospect that rather than the cash dividend, the Government may receive ordinary shares in the bank as an alternative. However, it adds that this is not certain.
The EU's moratorium on dividend/interest payments is designed to avoid further weakening of financial institutions still reliant on state aid. It is part of the EU's wider policy towards bailed-out banks pending consideration of their restructuring plans.
The move follows a similar instruction to AIB made in early December and instructions to other European banks in receipt of state aid.
In its statement this morning, Bank of Ireland said the EU Commission had told it not to make coupon payments on its Tier 1 and Upper Tier 2 capital instruments unless under binding legal obligation to do so.
The move affects hundreds of millions of euro of dividend payments to bond holders including €250m due to the Government on February 20 and a further €30m due before the end of March.
The Government preference shares, which it holds in exchange of its €3.5 billion recapitalisation of Bank of Ireland, form part of its core Tier One capital.
Bank of Ireland says it recognises the EU instruction is unfavourable from the point of view of the holders of the impacted securities.
One proposal is to pay the €280m coupon it owes to the Government by way of ordinary shares either on the due date, or at some future date.
It said it was in discussions with the Department of Finance and the European Commission about this and other related matters as part of its discussions on the bank's restructuring.
The bank added that it is examining the merits of further liability management in the group such as a debt for equity swap which it undertook last year transferring a billion of bondholder debt into ordinary shares.
Bank of Ireland shares closed down 2.3% at €1.48 in Dublin.
