The Future of AIB

Issued : 30 September 2010

This morning's announcements by the Republic's Minister for Finance and the Governor of the Central Bank that AIB will require an additional €3bn to meet the level required under the Prudential Capital Adequacy Review "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," said IBOA General Secretary, Larry Broderick.

"In particular IBOA hopes that the Minister's announcement of his intention to replace both the Chairman of the Board and the Managing Director in order to introduce a 'progressive management team' to restore AIB to its former health will lead to a re-evaluation of the policies pursued by AIB in the recent past which appear to have been condemning the Bank to a very limited existence as a much reduced institution operating entirely within the Republic of Ireland at a significant disadvantage to its main competitors, Bank of Ireland and Ulster Bank, which will both maintain a significant presence in Northern Ireland and Britain.

"The Bank should now reconsider its disposal strategy before any more assets are sold - and especially the plan to sell of First Trust Bank in Northern Ireland and Allied Irish Bank (GB) - which makes even less commercial sense now than it did when first announced at the beginning of the summer.

"The Board's proposal to go to the market in November to seek private investment would be further flawed," added Mr. Broderick, "if the prospectus on offer to would-be investors is for a Bank already shorn of many of its most attractive features.

"Since the tax-payer, through the Minister for Finance, has promised to make up the shortfall in funding to the Bank to the point where it is widely accepted that it will become the majority share-holder, we believe that the Minister should insist that the current strategy be reviewed. While in the short term the disposal of assets may appear attractive, in the medium to long term a much smaller AIB would have far less capacity to make a sound return for the State, as envisaged by the Minister.

IBOA will be seeking an early meeting with both the Minister for Finance and the senior management team in AIB to discuss the implications of these announcements. In particular, we will be seeking clarification from AIB as to the status of the negotiations on the future of AIB which have recently commenced between the Union and senior management to determine whether the imminent departure of the two leading figures in the governance and management of the Bank signifies a change in direction in the talks process.