EU probes state aid for Ireland's EBS

AP News
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Posted: Oct 11, 2010 9:01 AM
EU probes state aid for Ireland's EBS

The European Union said Monday it was examining whether Ireland's nationalization of the country's largest building society EBS violated state-aid rules.

The probe comes after the European Commission in June temporarily approved an euro875 million capital injection for the Educational Building Society, which brought the firm under government ownership.

After a preliminary assessment, the commission said, it "has concerns whether the distortions of competition caused by the aid to EBS are sufficiently addressed by the measures proposed" in the Irish government's restructuring plan for the firm.

Competitors of EBS, which provides retail mortgages and savings accounts in Ireland only, now have one month to comment on the plan.

The commission also asked the Irish government for more information on its claim that the restructuring plan is sufficient to ensure EBS's survival without further state aid.

In addition to the euro875 million bailout, EBS has also sold assets to Ireland's National Asset Management Agency, or "bad bank" designed to absorb troubled investments from distressed financial institutions, and is covered by the government's loan guarantee program.

The Irish government has been looking for a buyer for EBS and the commission also asked for additional information of the sales process.

Since the start of the financial crisis, Ireland has had to rescue many of the nation's largest financial firms. It said last months that bailout costs would reach euro50 billion, pushing its budget deficit to almost a third of gross domestic product.