Bank of Ireland must sell units, cut operations in return for approval of €3.5 billion subsidy

Bank of Ireland wins EU clearance for state rescue

BRUSSELS — Bank of Ireland will have to sell units and reduce lending to British companies in return for European Union approval of a euro3.5 billion recapitalization from the Irish government.

The bank is one of the country’s two biggest lenders and ran into trouble by lending heavily during the Irish property bubble. The Irish government rescue saw the state take a 36-percent stake in the bank and buy up euro12.2 billion of its property-based toxic debts at a discount.

The European Commission must approve large state subsidies to companies and said it could only allow the payment if the bank made major cutbacks in return for the advantage it gains over rivals from the government help.

Bank of Ireland will “significantly reduce” its British corporate lending operations, running down two loan portfolios. It will sell life insurer New Ireland Assurance Company, mortgage broker ICS Building Society and a 17-percent stake in a credit reference agency, the Irish Credit Bureau.

To increase competition, it has also promised to help smaller banking rivals by offering them access to its cash machine network and back-up services and giving Bank of Ireland customers information on alternative current account and credit card suppliers.

EU Competition Commissioner Joaquin Almunia said the changes would open up the Irish banking market and “facilitate entry and growth of market challengers.”