MINISTER FOR FINANCE Michael Noonan has confirmed that Allied Irish Banks and EBS Building Society have reached an agreement to merge the two institutions – with AIB buying the failed building society for the princely sum of €1.
Plans to roll the two institutions together were announced by Noonan at the end of March, following the publication of the most recent batch of national stress tests.
Today the two institutions said they had reached a deal on merging their own operations, with the procedures of completing the merger to be completed by July 1 when EBS is demutualised and AIB pays a token sum to acquire it.
The Department of Finance said in a statement that the low sum would be paid because it would make little sense for a larger sum of money to paid from one state-owned institution to another.
The combined institutions will form one of the two ‘pillar banks’ around which Ireland’s downsized banking landscape will be built, with an augmented Bank of Ireland being the other main institution.
EBS will remain a standalone brand, however, with EBS customers still being able to deal with the remaining EBS branches. The company will be renamed EBS Limited when its demutualisation has been completed.
It is thought that this tactic is being pursued so that EBS can ultimately be sold off, as had been planned before the results of the stress tests – and the need of the State to inject €1.5bn more into the building society.
That move forced the State to cancel an auction process in which Irish Life & Permanent and the Cardinal Capital consortium were the two main bidders.
Anglo Irish Bank and Irish Nationwide are being merged and wound down, while Irish Life & Permanent will sell off its life assurance arm.