ANNEX ISupplementary provisions
ANNEX I COMMITMENTS UNDERTAKEN BY IRELAND State aid case C 11/10 — restructuring of Anglo Irish Bank and INBS (together ‘the merged entity’) (1) Duration of the commitments . Unless otherwise specified, all commitments taken by the Irish authorities will remain valid and applicable until the assets of the merged entity are fully worked out, including the promissory notes. Ban to develop new activities and to enter into new markets . The merged entity will not carry out activities other than those that are consistent with managing the work-out of the merged entity’s legacy loan book (including loan sales where appropriate to maximise recovery values and minimise capital losses). The merged entity will not develop any new activities and will not enter new markets. The merged entity will conserve and use its banking licence only as long as necessary for the work-out of the loan portfolio and will not use it to develop new activities. The merged entity will be liquidated once the merged entity’s assets are fully worked out. (2) Management of existing assets . The merged entity will manage existing commercial assets in a way that maximises Net Present Value (NPV) of the assets in accordance with normal commercial practice and fiduciary duties. Specifically, if a client cannot respect the terms of his loan, the merged entity will only restructure the lending terms (deferral or partial waiver of repayments, conversion of (part of) the claim in capital, etc.) if such a restructuring would lead to enhancing the present value of the loan (i.e. if the present value of the cash flows to be expected from the restructuring is higher than the present value of the cash flows which can be expected from liquidation). In summary, the merged entity will manage its commercial asset portfolio in the same way as a private asset manager would manage the work-out of a similar book. As regards the merged entity’s mortgage assets, the obligations that apply to the commercial assets will apply mutatis mutandis. The merged entity, in particular, will be allowed to restructure its mortgage assets via the following variations to the terms of existing mortgages: (i) a change of deal (e.g. by offering a new fixed rate); (ii) transferring existing mortgages to new properties; and (iii) transferring equity (e.g. adding a borrower to the mortgage or removing one). (3) Ban on acquisitions . Other than with the prior consent of the European Commission, the merged entity will not acquire or take participations in any other firm. That ban on acquisitions does not apply to capital participations acquired by the merged entity in the framework of the restructuring of an existing exposure to a regulatory group ( 1 ) in difficulty (for instance through a debt-for-equity swap), as long as any such restructuring complies with the principles laid down in commitment (3) above. (4) Ban on coupons and exercising calls on subordinated debt and hybrid capital instruments . The merged entity will not pay coupons or exercise calls on subordinated debt instruments and hybrid capital instruments, unless it is legally obliged to do so. (5) Cap on new lending . Consistent with the objective to work out the merged entity’s post-NAMA loan book over a 10-year period and commitment (3) above, the merged entity’s net commercial loan book will not exceed plan forecasts by more than […] in any single year during the plan period, excluding currency movements. That cap applies to the full commercial lending activity of the merged entity, including lending described under point (7). In addition, the following lending commitment will apply to the mortgage loan book: The merged entity shall limit further advances to contractually committed amounts and amounts arising as part of the restructuring of existing mortgage facilities. The aggregate total of further residential mortgage advances is capped at a maximum of […] for the period starting 1 January 2011 and ending 31 December 2012, and […] per annum thereafter. Specific lending commitments on the commercial book . The following specific lending commitments will also apply to the commercial loan book. (a) Contractually committed but not yet paid-out amounts : The merged entity may advance funds under contractually committed but not yet paid-out loan facilities. However, such payments will not exceed a cumulative amount of EUR 1,4 billion over the entire plan period with regard to the merged entity’s legacy loan book, consisting of EUR 1,1 billion of contractually committed, but undrawn facilities and EUR 0,3 billion of contractually committed off-balance-sheet guarantees (as of 30 June 2010 interim accounts). Revolving facilities will be counted on the basis of the overall limit amount rather than on individual draw downs. (b) Additional financing to existing regulatory groups : The merged entity may not provide additional financing which is not contractually committed at the time of the approval of the restructuring plan (in line with commitment (2) above). As an exception to that prohibition, the merged entity may provided additional amounts to existing regulatory groups if it complies with the commitment in point (3) and — It is strictly necessary to preserve the value of the loan collateral (e.g. to cover collateral maintenance, insurance, tax, security, insolvency or legal costs); or — It is otherwise related to minimising capital losses and/or enhancing the expected recovery value of a loan or other asset on an NPV basis (e.g. meet essential investment working capital or liquidity needs of the underlying business/regulatory group). — The additional financing is subject to the following limitation: — If the nominal exposure to the regulatory group concerned is below […], the additional financing will not exceed […] of the nominal exposure; — If the nominal exposure to the regulatory group concerned is between […] and […], the additional financing will not exceed […]; — If the nominal exposure to the regulatory group concerned exceeds EUR […] million, the additional financing will not exceed […] % of the nominal exposure. (c) New regulatory groups New lending to new regulatory groups: The merged entity may lend to a new regulatory group only where the following conditions are cumulatively met: Proceeds are used to reduce the exposure of an existing regulatory group; and The transaction overall does not increase the total net exposure to the merged entity; and The new lending minimises the expected capital losses and/or enhances expected recovery values (as measured by NPV) compared to other restructuring or foreclosure strategies; and There is no capitalisation of interest (interest roll-up). (6) Specific lending commitments on the mortgage book . The following specific lending commitment will also apply to the restructuring of existing mortgage loans. When the balance of the loan exceeds the value of the property, the merged entity may facilitate the loan’s redemption through selling off the property by the way of providing additional finance to a vendor enabling the repayment of the outstanding balance; and it complies with the commitment in point (3). (7) On an exceptional basis and in the national interest, the Irish National Authorities may determine that exceptions to the above lending restrictions in points (7) and (8) are required to enhance expected recovery values on a Net Present Value basis. Such determinations will be subject to prior approval by the European Commission. (8) Transfer of legacy Anglo and INBS deposits . Following the transfer of all legacy Anglo and INBS deposits (where deposits do not include intra-group deposits, interbank deposits, wholesale funding, debt-securities in issue or funding provided central banks and/or equivalent institutions), the merged entity will be left with the categories of deposits and accounts specified below (‘excluded liabilities’) which are permitted to remain in the merged entity, subject to any associated commitments: Deposits which at the time of transfer of the deposits are held by or on behalf of any subsidiary of the Transferor (but not including Isle of Man Co.): (a) Secured accounts (in favour of the Transferor or any other person) and deposits related or connected to a regulatory group from the Transferor or tracker bond accounts at the Transfer Time; (b) Deposits denominated in currencies other than euro, United States Dollars or Sterling at the time of transfer of deposits. They will not be replaced as they mature; (c) Deposits held or booked at branches at Jersey, at Dusseldorf, Germany or at Vienna, Austria. They will not be replaced as they mature; (d) Any account which has a negative balance; (e) Internal control accounts; (f) Accounts where the account or the customer to whom the account relates has been the subject of notification of an investigation by any police, fraud or investigative authority; (g) All INBS accounts identified in the accounting records of the Transferor by branch […]. (9) Caps on deposits and excluded liabilities . The merged entity will not collect deposits from new customers. The overall amount of deposits from existing customers at the date of the merger will at no point in time exceed EUR 1 billion, and will not consist of deposits other than those defined in point (10) above. The merged entity will wind-down deposits at broadly the same rate as their related or connected assets are wound down (or, if there are no related or connected assets, at broadly the same rate as the overall net loan book is wound down) excluding currency movements and contractual commitments to retain deposits. In addition, the deposit book of the merged entity will not exceed the forecasts of the restructuring plan by more than EUR 200 million at any moment. (10) Monitoring Trustee . The merged entity will appoint a Monitoring Trustee, subject to European Commission’s approval, who will verify the adherence to the above listed commitments. The Monitoring Trustee will be nominated for a period of three years. The appointment rules of the Monitoring Trustee and its duties are listed in Annex II. The Monitoring Trustee will in particular need to prove that he has an experience in the area of loan restructuring and loan management to monitor commitments (3) and (6). (11) Enforcement and Reporting . The Irish authorities will ensure that the merged entity complies with the above listed commitments. The Irish authorities will submit regular reports on the measures taken to comply with the commitments. The first report will be submitted to the Commission not later than six months after approval from the date of notification of the Decision and thereafter at six-monthly intervals. ( 1 ) For the sake of clarity, a regulatory group can comprise a single borrower, or several customers to which the merged entity has provided a loan. If a regulatory group consists of several customers, multiple loans may be held which are cross-collateralised. When seeking to minimise capital losses or maximise recoveries, lending can be considered at the level of the regulatory group rather than of the individual borrower.