Bank of Ireland plans first ‘bail-inable’ bonds under new structure

Bank of Ireland has hired banks to market the first issuance of junior debt by its new holding company, created to meet new European rules on minimising future government bailouts.

The bank has mandated BNP Paribas, Citigroup, Davy, Morgan Stanley and UBS to arrange a series of meetings with potential investors in the bonds, commencing on Friday. Sources said that a sale of bonds, known as Tier 2 debt, is likely to commence next week. The size of the deal is not clear.

Bank of Ireland set up the holding company in July following consultation with the euro zone's Single Resolution Board, which is responsible for overhauling or even winding down ailing banks in the event of a future crisis. AIB is planning a similar structure.

Debt - but junior and senior - issued in future by the holding companies could be “bailed in” if needed, before state support would be drawn upon. Deposits, however, will remain in the existing operating banks, where they would enjoy greater protection.

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Irish banks inflicted €15 billion of losses on junior bondholders as taxpayers picked up a gross €64 billion rescue tab for the sector between 2009 and 2011. However, senior bondholders were protected because of opposition from the European Central Bank and the fact that Ireland had no legal framework to "burn" them without also hitting depositors.