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Government seizes control of Irish bank

ANGLO Irish Bank Corp shares were suspended yesterday after the government seized control in the wake of a scandal that forced the resignations of its chief executive officer and chairman.

Irish Finance Minister Brian Lenihan said on Thursday that a proposed 1.5-billion-euro (US$1.97 billion) cash injection was no longer "appropriate" and that he was taking the "decisive step of public ownership."

The nationalization adds Anglo Irish to the list of banks now owned by European governments, Bloomberg News said. The United Kingdom owns Royal Bank of Scotland Group and took over Northern Rock, while Iceland's government seized control of its three biggest lenders.

"Moving this particular bank into full public ownership is the right, the correct, decision in these circumstances," Ireland's Prime Minister Brian Cowen said. It was made "in the best interests of the economy."

Takeover legislation will provide "fair compensation" for shareholders depending on how an assessor values the company, according to Lenihan. "If the assessor decides the bank is worthless, then compensation will be nil."

Lenihan said that there were "no difficulties" at Allied Irish Banks and the Bank of Ireland, which are to receive 2 billion euros each under the banking industry bailout.

"The bad loans in Anglo are not substantially any greater from the bad loans in the other two financial institutions, although of course Anglo Irish Bank has a smaller balance sheet," Lenihan said. "That's why the existence of bad loans puts Anglo Irish in a far more fragile position."

The nationalization comes less than four weeks after the government agreed to an initial bailout which would have given it a 75-percent stake in Anglo Irish. Already facing mounting losses on property loans, Anglo's woes increased last month when Chairman Sean Fitzpatrick quit after failing to fully disclose 87 million euros in loans over an eight-year period.

CEO David Drumm left a day later and Finance Director Willie McAteer also resigned. The scandal also hit Ireland's financial regulator, whose CEO Patrick Neary retired the day an inquiry showed the agency failed to take "appropriate and timely" action.


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