BANK OF IRELAND MEETING:BANK OF Ireland shareholders voted overwhelmingly in favour of a plan to raise €3.56 billion in fresh capital at an extraordinary general meeting of the bank.

Shareholders approved a fully underwritten rights issue to tap existing investors for €1.72 billion.

The bank is offering retail shareholders €1.1 billion of new stock, while €627 million of new shares will be issued to the Government for converting €3.5 billion in preference shares to ordinary shares.

Shareholders are being offered three shares for every two they own at a discount of 55 cent a share or 42 per cent on the expected value of shares afterwards. The results of the rights issue will be announced on June 9th, a day after subscriptions end.

Bank of Ireland shares fell 1.7 per cent, or 2.5 cent, to €1.40.

Pat Molloy, the bank’s governor (chairman), said the meeting to approve the capital raising marked “an important milestone”.

The bank had “greater certainty” and clarity on recapitalisation, the losses incurred from selling loans to the National Asset Management Agency (Nama) and the EU restructuring demands to launch the capital raising, he said.

The bank was told by the European Commission that a restructuring plan to approve the State’s bailout of the bank would leave the lender’s core business “intact” after selling off some businesses.

“The EU restructuring plan will not, we believe, be materially detrimental to the long-term interests of the group,” said Mr Molloy.

The viability plan has yet to be approved but he said the bank could proceed with recapitalisation with “sufficient confidence”.

Bank of Ireland will use €2.94 billion of the capital raised to bolster reserves to cover losses on bad loans moving to Nama and on other loans remaining at the bank.

The Financial Regulator has demanded the bank raise €2.66 billion to meet new capital rules.

Shareholders called for the board and management to stand down due to imprudent lending, and criticised the salary and pension payments made to executives.

Mr Molloy, who took over last year, said the bank’s management was “performing very well”.

The board was changing by rotation – four directors have stepped down and two others, Terry Neill and Declan McCourt, retired after yesterday’s annual meeting.

“There has been a fairly considerable level of change,” he said.

Mr Molloy said he understood the anger of shareholders who were being offered the opportunity to buy more shares when they had lost so much in the past. The bank would try to rebuild value, he said.

The bank’s “unrelenting focus” was on increasing the value of shares but that the bank could not pay dividends under EU rules until 2012 or until the State’s preference share investment was repaid.

It would try to restore dividends “as quickly as possible”, he said.

The bank would be more prudent, he said, and there would be a greater focus on supporting the community. “It is going back, in a sense, to where we came from.”

He said no predetermined decision had been made by the State on the sale of its stake, which will be 36 per cent after the rights issue. He expected taxpayers to be repaid “handsomely” for the stake.

Asked why the bank failed to spot the impending crisis, he said there was “a remarkable absence” of economists who were forecasting what had unfolded.

Chief executive Richie Boucher said the bank would become “more boring” and would seek “to be in charge of our own destiny” by relying more on deposits and less on wholesale funding markets.

“The future is uncertain but if we are strongly capitalised, people will have a credit appetite for us,” said Mr Boucher. There were “very significant plans” to raise funding but there were also “contingency plans” to use mortgages as collateral to fund the bank.