Finance Minister Brian Lenihan has said AIB's managing director and chairman are to step down. Chairman Dan O'Connor will step down within the coming weeks, while managing director Colm Doherty will also leave the bank before the end of the year.
Brian Lenihan said that in conjunction with the recapitalisation of the bank, he expected progressive management and board changes at AIB.
Read the Minister's statement here
The Minister said that AIB would need a further €3 billion on top of existing state funds being converted into shares.
The Financial Regulator says it has updated its assessment of the bank's capital requirements, raising it from €7.4 billion to €10.4 billion.
That is likely to push the Government's shareholding to a majority stake - potentially over 90%. But the bank will retain a stock market listing.
Shares in the bank fell sharply in Dublin in response to the announcement, though they regained some ground later in the day. See how the shares performed here
AIB said that a €5.4 billion equity capital raising would be launched in November and completed before December. The raising will be fully underwritten by the National Pensions Reserve Fund Commission at a fixed price of 50 cent per new ordinary share. This represents a discount of over 9% to the bank's closing price yesterday.
The Minister said that if necessary, the National Pension Reserve Fund Commission's commitment will be met through a new cash contribution to up to €3.7 billion for new ordinary shares from existing cash resources of the commission and by the conversion of up to €1.7 billion of the existing 2009 preference shares held by the commission.
The terms of the capital raising are subject to the approval of the European Commission, the bank's shareholders and other regulatory authorities.
Mr Lenihan said that the high level of support being provided to AIB, as an institution, is 'absolutely necessary' given the central role that the bank plays in the economy and in the Irish financial system.
He said that over the coming weeks he will be working closely with the board of the bank to ensure that AIB successfully overcomes its current challenges and develops a renewed strategic focus on the Irish market following the sale of its overseas operations.
AIB recently sold its Polish subsidiary BZWBK for €2.5 billion.
The general secretary of the IBOA union, Larry Broderick, said this morning's news 'should now extinguish the vain hope of avoiding majority State ownership which seems to have been key to the AIB board's policy of disposing of many of its prized assets'.
He said he hoped the Minister's plan for a new management team would lead to a re-evaluation of its policies, and urged AIB to reconsider especially the plan to sell off First Trust Bank in Northern Ireland and AIB's British arm.
'The board's proposal to go to the market in November to seek private investment would be further flawed if the prospectus on offer to would-be investors is for a Bank already shorn of many of its most attractive features,' Mr Broderick said.
