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Document Type

Case Study

Abstract

At the November 2008 height of the Global Financial Crisis, Ireland’s Department of Finance announced a willingness to inject capital into the six largest banks. This announcement followed the issuance of a blanket guarantee of those banks’ liabilities in September 2008. After broadly designing the potential investments in 2008, the Irish government came to agreements with Bank of Ireland and Allied Irish Banks in February 2009 to inject €3.5 billion ($4.5 billion) in each bank in exchange for preferred equity stakes. The government funded the investments from the funds of the National Pensions Reserve Fund, something it would secure the authority to do only in March, after the initial announcements of the recapitalization plan. This set of injections would prove to be only the first step in a multiyear recapitalization and restructuring process, eventually pushing the sovereign to a financial rescue from the International Monetary Fund and European Union.

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