The European Commission has expressed serious doubts about Anglo Irish Bank's plans to stay in business by splitting into a so-called 'good bank' and 'bad bank'.
Anglo's plan is to split itself into a good bank and a bad bank, because it claims it will be the least costly option facing the Irish taxpayer.
But in the official journal version of the European Commission's decision to grant a temporary approval of the State's recapitalisation of Anglo, the Commission raises serious doubts over the assumptions used by Anglo in its case for the new business.
In particular it questions the claim that, by 2014, the new bank will generate profits equivalent to those earned by Anglo Irish at the height of the boom.
It said that, considering the size of the impairments at Anglo, the reduced size of the new bank and its plan to diversify into areas in which it has no experience, the Commission doubts these assumptions are achievable with reasonable levels of risk.
The bank also undertook not to make any new loans for at least a year after establishment, and would advance money only to complete existing projects.
The Commission asked for a full business plan and a stress test of the new bank's business model by May 31. This new plan is under consideration by the commission, and Anglo management went to Brussels two weeks ago to meet Commission officials.
Chief executive Mike Aynsley told Reuters news agency he expected a preliminary ruling from the commission by the end of July or early august, with a full decision in September.
