Minister for Finance Brian Lenihan has been given High Court approval to inject €3.7 billion into AIB.
This means the State's shareholding increases to 49.9% immediately, but this will rise to 92.8% following the completion of the sale of AIB's Polish subsidiary to Santander.
The passing of the Credit Institutions Stabilisation Bill has allowed today's action by the Finance Minister. Minister Lenihan told RTE radio the money was being invested so that AIB could become an indestructible part of the Irish banking landscape. He said AIB would not function as a bank from January 1 unless the Government invested in it.
AIB is to cancel its listing of shares on the Irish Stock Exchange's main market and the London Stock Exchange, but it will apply for a listing on the ISE's junior market, the Enterprise Securities Market. This is to ensure that shareholders will still have access to a public trading facility for their shares. AIB shares will continue trading on the main market up to January 25.
See how AIB shares reacted here
When all of the paperwork is done, AIB will be the fourth financial institution taken into state control after Anglo Irish Bank, and building societies Irish Nationwide and EBS.
This €3.7 billion comes from the National Pensions Reserve Fund and its transfer was approved by the European Commission earlier this week.
The new banking Bill allows the government to 'overcapitalise' the banks to meet end-of-year capital ratio targets set by the Financial Regulator, and a 12% capital ratio target by the end of February.
To meet that 12% target the Commission has approved another injection of €6.1 billion into AIB, which will happen early next year. AIB said it was also looking at its options for raising some of this money through liability management exercises in relation to its subordinated capital.
The bank has raised some money on its own by selling its US and Polish operations, but mounting losses have seen its capital requirement more than double.
This is the second time AIB has received a State bailout, having been given €3.5 billion from the taxpayer last year.
Labour finance spokesperson Joan Burton called today's move 'the last act of a disastrous year for the Government's banking policy'.
She also described the use of the new banking act to secure High Court approval through a secret hearing as 'a most disturbing feature of the new law'.
