With so many negative surprises dominating the eurozone in the past year, it is easy to forget the positive surprise notched up by Ireland’s largest bank. When Bank of Ireland (BoI) was ordered by the Irish regulators to raise €4.2bn in core Tier 1 capital and a further €1bn in contingent capital following a local stress test carried out in March 2011, there was a widespread assumption that the bank would follow Anglo Irish and Allied Irish into full nationalisation.
Instead, the opposite occurred. Existing shareholders took up almost 60% of a rights offering in July 2011. And a group of large institutional investors – including Fidelity Investments, Canadian insurance giant Fairfax Financial Holdings and dedicated turnaround fund WL Ross & Co – brought an additional €1.12bn in new money to the table. At the same time, €1.9bn in eligible bonds was tendered in a debt-for-equity swap on Tier 1 and Tier 2 subordinated instruments.