AIB is to sell its 70% stake in Poland's Bank Zachodni WBK for €3.1 billion to Spanish bank Santander.

AIB is selling off its stake as part of a restructuring plan aimed at raising €7.4 billion to meet targets set down by the Financial Regulator. The bank said €2.5 billion of the proceeds from the sale would go towards meeting that target.

Bank Zachodni was seen as the jewel in the crown of AIB's non-Irish businesses.

Santander, which is the biggest bank in the euro zone by market value, is understood to have beaten off bids from BNP Paribas, Fortis and Polish bank PKO, in which the Polish government holds a 50% share.

AIB is also in the process of selling its 22% stake in US regional bank M&T, and its bank branches in the UK.

If its sale of assets fails to raise the €7.4 billion in fresh capital it needs, the State will have to increase its shareholding in the bank.

AIB managing director Colm Doherty said the deal represented the first step in its recapitalisation plan, adding that other elements were making 'good progress'. The Polish sale must be backed by AIB shareholders, and the bank will have to pay Santander €7.5m if shareholders do not back the deal.