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In a cabinet meeting today, the Irish Government decided to split the Anglo Irish Bank into two parts: a Funding Bank and an Asset Recover Bank.

This strategic decision was made by the Cabinet following a briefing by the Ministerof Finance Brian Lenihan where he highlighted opinions of the key stakeholders including the Board of Anglo Irish Bank, the Central Bank, the National Treasury Management Agency, the Department of Finance as well as European Partners.

 Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case. It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time.

The guaranteed position of depositors will be unchanged by the new arrangements and no action is required of them as a result of today’s announcement.  The depositors will become customers of the Funding Bank which will be fully capitalized and continue as a regulated bank.

In order to restore the reputation of the Irish Financial System it is essential to bring finality to the problem of Anglo Irish Bank - and the Government made its decision to split the bank to reduce the burden on the public purse.

Under the restructuring plan, the Funding Bank will be a Government-backed/guaranteed specialist deposit bank which will contain the bank’s deposit book. It will be a stand-alone, regulated bank, completely separated from Anglo’s loan assets and it will be owned directly by the Minister for Finance. This bank will not engage in any lending, but will provide a secure home for Anglo’s depositors and any new customers who wish to deposit their funds with it. Depositors with the Funding Bank will be completely insulated from the future performance of the rest of the current Anglo Irish Bank loan book.

The Asset Recovery Bank will also be a licensed regulated bank.  Its dedicated focus will be on the work-out over a period of time of the assets not being transferred to NAMA in a manner which maximises the return to the taxpayer.

Today’s decision by the Government will provide certainty about the future of Anglo Irish Bank," said Mr. Lenihan before adding "resolution of this, our most distressed institution, is essential to the promotion of confidence and stability in our financial system.”