Anglo Irish Gets Split

The Irish lender will be split in two and its lending operations shuddered.
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DUBLIN (

TheStreet

) -- Irish regulators will take a lesson from the U.S. financial meltdown playbook and split struggling lender

Anglo Irish Bank Corp.

into a good bank/bad bank.

"The Government decided that Anglo Irish Bank will be split into a Funding Bank and an Asset Recovery Bank," according to a statement from Ireland's Department of Finance. "It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time"

According to the statement, the so-called "Funding Bank" will be government-backed and will house the deposit book within a stand-alone, regulated entity owned directly by the Irish Minister for Finance. "Depositors with the Funding Bank will be completely insulated from the future performance of the rest of the current Anglo Irish Bank loan book," the statement said.

The "Asset Recovery Bank" - which houses the bad loans -- will also be a licensed bank with a "dedicated focus will be on the work-out over a period of time of the assets not being transferred

which maximises the return to the taxpayer."

"Today's decision by the Government will provide certainty about the future of Anglo Irish Bank. Resolution of this, our most distressed institution, is essential to the promotion of confidence and stability in our financial system.," said Minister of Finance Brian Lenihan.

Previous estimates of housing loans losses at the bank were placed at EUR 25 billion, much of which would be shouldered by taxpayers through the Irish Central Bank.