LONDON, Feb 3 (IFR) - Bank of Ireland and Allied Irish
Banks, Ireland's two largest lenders, are on course to set up
holding companies to help them meet regulatory requirements
designed to facilitate future bank resolutions.
Bank of Ireland said in a statement on Friday that the
Single Resolution Board, together with the Bank of England, had
indicated its preference for a single point of entry bail-in
strategy through a group holding company.
It expects to establish a holding company, which would
become the parent company of the group.
The SRB has also notified Allied Irish Banks that its
preferred resolution strategy for the lender is a single point
of entry via a holding company.
This approach had been widely expected and puts the Irish
banks - including Permanent TSB, which already has a holdco in
place - on a level footing.
Like their European peers, Irish lenders must issue billions
in loss absorbing debt to meet the incoming European MREL
However, the setting up of a holding company promises to
drive a deeper wedge between European bank resolution strategies
as a two-track system emerges.
While Irish and UK banks ramp up holdco issuance, lenders in
France and Spain are issuing new forms of senior debt out of
their operating companies, an approach endorsed by the European
Commission late last year.
Neither bank has indicated how long it will take to set up a
holdco, but Bank of Ireland said it would require shareholder
approval. Analysts at Davy expect them to be set up during the
second half of 2017.
"We would be hopeful that given the time required to set up
the holdcos that Irish banks may receive additional time - as
with the UK banks - in order to issue the required amount of new
debt to satisfy their MREL requirement, the amount of which is
also yet to be confirmed," Davy's Stephen Lyons wrote in a note.
The Bank of England said in November that it would extend
the deadline for UK banks to meet their MREL by two years, to 1
The SRB's decision also has ramifications for existing
bondholders of Bank of Ireland and AIB.
Bank of Ireland said that while the decision was not
expected to impact its Common Equity Tier 1 ratios, a holdco
structure may knock its Total Capital and Tier 1 capital ratios
due to minority interest deductions applied to externally-held
subordinated debt issued out of subsidiaries beneath the holdco.
BNP Paribas analysts said the impact on capital ratios
should materially reduce the extension of risk of these
"We expect the bonds to be redeemed and replaced at the
holdco level over time," they added.
(Reporting by Alice Gledhill, editing by Helene Durand, Julian