Over the weekend, Bank of Ireland went through some major changes to their structure.

This is needed to avoid a future bail out. Fitch, one of the world’s top three credit ratings firm, said the Irish banking system had around 15 percent of non-performing loans. This is about three times the average amount of the European Union countries.

Despite this, Fitch still gave Ireland a rating of A because of the potential economic growth. They gave Ireland this rating on Friday because the economy is supposed to grow 3.5 percent this year which makes Ireland one of the top growers from the EU area for the third consecutive year.

Even with this high rating, Fitch warns Irish banks that this massive amount of problem loans is weighing the country’s rating down.

Bank of Ireland responds by restructuring their equity to protect Ireland if a crisis occurs. This new system protects the Irish bank accounts and minimizes taxpayer bailout.

How it works?

Bank of Ireland will issue two types of equity: senior and junior. This puts the liability of crisis to fall on the investors. The bank accounts will then be better protected against losses.

Bank of Ireland also has reduced their shares down to 1 new share per 30 old shares. That reduces it down from 32.4 billion outstanding shares to 1.08 billion.

The new share started trading on Monday at €7.38 per share, a huge increase from the 24.6 cents it was trading at on Friday.

An independent debt research company, CreditSights, predicted Bank of Ireland may sell up to 7.5 billion euros of the new type of equity.

This new system now complies if the minimum requirement for own funds and eligible liabilities changes.

AIB bank is also planning of setting up a holding company like Bank of Ireland. However, since the bank’s initial public offering on June 23rd they have pushed it back to the end of the year.

Bank of Ireland is starting to take precautions due to the vast amount of non-performing loans in Ireland. This is a good sign because this new system will protect depositors and potentially save taxpayer dollars.

In reference to Fitch highlights problem loans as new BoI shares get set for trading by Joe Brennan in the Irish Times on July 9, 2017.