EU competition commissioner Joaquin Almunia has opened an in-depth inquiry into the State’s support for the nationalised Educational Building Society (EBS), which received a pledge of €875 million from the Government in June.
Mr Almunia doubts whether the distortions of competition caused by the State’s financial aid for the institution are adequately addressed in a restructuring plan that was submitted five months ago.
“Ireland has taken decisive action to strengthen EBS,” the commissioner said. “The amount of aid received by EBS, however, justifies that we give interested third parties the opportunity to comment on whether distortions of competition are adequately addressed.”
A further factor is the fact that the situation of the EBS has changed since the restructuring was submitted as a result of the Government’s decision to sell the former building society.
Four bidders are in contention: Irish Life & Permanent; a US buyout firm JC Flowers; British private equity firm Doughty Hanson; and a group led by Dublin investment firm Cardinal.
“After a preliminary assessment of the plan, the Commission has concerns whether the distortions of competition caused by the aid to EBS are sufficiently addressed by the measures proposed in this plan,” said a statement from the Commission.
“In addition, the Commission requires more information to underpin the claim that the EBS will not need further state aid and will restore its viability on the basis of the current plan.”
Saying the investigation will proceed quickly, Mr Almunia’s spokeswoman declined to elaborate on the specific nature of his concerns.
The Government’s rescue of the EBS follows a disastrous foray into commercial real estate lending in 2005, when Ireland’s property bubble was approaching its height.
The investigation comes amid scrutiny of restructuring plans from other institutions, Anglo Irish Bank and Allied Irish Banks among them. A final version of the plan to wind down Anglo by dividing its business into a “funding” and “asset recovery” banks is still awaited in Brussels but is expected from Dublin within days.
