THE INITIATION in Brussels of an in-depth competition inquiry into State aid for the nationalised EBS is unlikely to derail the Government’s sale of the former building society, say well-placed sources.

Indeed, certain observers expect Minister for Finance Brian Lenihan to make public a shortlist of prospective buyers before the end of the week.

If Ireland’s eighth-largest financial institution is ultimately acquired by a private buyer, it would be the first to emerge from outright State control since the financial crisis prompted a wave of nationalisations.

With Anglo Irish Bank set for a long-term wind-down and Allied Irish Banks in intensive care pending majority State ownership, further sales could be a long time coming.

Irish Life Permanent (ILP) is expected to make the EBS shortlist, as is one or other of two private equity groups: Dublin firm Cardinal and its US partners Carlyle and WL Ross; or US firm JC Flowers. For the moment at least, the prospect of British firm Doughty Hanson taking part in the final shake-out seems to have dimmed.

At this point, there is a certain amount of confidence in Dublin that the EU investigation can be disposed of within a couple of months. Still, competition commissioner Joaquín Almunia has sent a clear signal that he doubts whether the current EBS restructuring plan adequately addresses distortions in competition caused by the State aid it has received.

The plan was submitted on foot of Mr Almunia’s temporary approval of a €875 million injection into the EBS in June.

So far the Government has taken the benefit of this approval to inject about €350 million into the institution, with the remainder awaiting drawdown as large-scale losses from loan transfers to Nama are crystallised.

However, the Government’s decision to sell the institution supersedes the original restructuring plan. As a result, Mr Almunia wants an update to fill in the gaps outstanding since the first notification.

It is a given that he will want answers as to how the EBS will be returned to viability following any sale. In correspondence with the Government last June, for example, he made it clear that the institution was not in a fundamentally sound condition and was in a particularly distressed financial situation.

While the EBS bailout was a comparatively small affair when compared with Anglo, Mr Almunia made it clear in his original scrutiny of the state aid application that he wanted “own contribution” measures from the institution itself and burden-sharing from its stakeholders.

That would hardly change in any sale scenario, meaning prospective buyers will be obliged to recognise significant Government support for the EBS.

At the present reading, the State may well retain a significant minority shareholding after any change of control. With fresh cash injections from new owners still required to keep capital ratios in order in the EBS, this may well be the most likely outcome.

Absent other drama, all this would amount to seismic change in the world of Irish finance.

If only it were so.