Heads roll as State runs €3bn-bill AIB
CULL: Lenihan orders executive jobs must go and warns more face axe after latest bailout
Finance Minister Brian Lenihan has ordered a clear-out of AIB's top executives.
That was the price of the shock State takeover of our second biggest bank today.
The additonal €3bn rescue of the bank came as a huge surprise and the bank's share price plunged in early trading.
New managing director Colm Doherty will be axed by the end of the year along with AIB's chairman, Dan O'Connor.
The management executives, considered to be safe pairs of hands, took up their positions less than two years ago.
And Mr Lenihan said that he expects there will be additional management and board changes at AIB.
"Those who brought the bank to this path have to take responsibility for it," he said.
"A line has to be drawn here in relation to responsibility."
Mr Lenihan said that the high level of State support being provided to AIB was "absolutely necessary" given the central role that AIB plays in the Irish economy.
The total amount of capital the bank needed had risen from €7.4bn to €10.4bn
Allied Irish Bank's shares plummeted by as much as 18pc in early morning trade to stand at 0.45c.
The Financial Regulator revealed this morning that the bank will need an additional €3bn in recapitalisation.
This is on top of the €3.5bn invested in it last year, which means that the Government will now become the majority shareholder in the bank.
AIB will in effect be the country's newest semi-State organisation as the Government will hold as much as a 90pc stake in the institution.
The additional €3bn will be funded by the taxpayer through the National Pension Reserves Fund.
In recent weeks, the bank has made a lot of effort to sell off assets to raise money required.
The group is in the process of selling its Polish interests to Santander, which will raise about €2.5bn.
It is also in the midst of trying to sell its 22.5pc share in US bank M&T as well as its UK assets, including First Trust Bank in Northern Ireland.
But in the event that the bank's capital requirement is not met through asset sales by March 31 next year, Mr Lenihan said that any shortfall will be met.
It is estimated that the bank now needs €10.4bn, following an assessment of AIB's potential losses on loans transferred to the National Asset Management Agency (NAMA).
About €5bn of this will come from the disposal of assets, while the remaining €5.4bn will come from an equity capital raising that will begin in November.
To date AIB has transferred just over €6bn of loan assets to NAMA at a discount of 45pc.
But following a review by NAMA on the quality of loans still to transfer from AIB, the discount to be applied to the remaining €13.5bn of loans could be at 60pc.