On Thursday, the European Commission approved the creation of a €8 billion loan scheme to help Ireland’s biggest banks to repay their loans to the Irish government.
The scheme, dubbed the Blue Trust Loan Scheme, is designed to help Irish banks recover from the damage caused by the global financial crisis, the Commission said in a statement.
Under the scheme, which was approved in the autumn, the banks will receive €2.2 billion of the €8.5 billion loan from the European Stability Mechanism.
The total amount of the loan will be used for recapitalisation of Irish banks.
It will be administered by the European Central Bank (ECB), the European Investment Bank (EIB) and the Bank of Ireland.
The EIB will also be providing additional support for Irish banks in the form of lending.
The loan will have an interest rate of 0.1% for two years.
The first two years will be spent on recapitalising Irish banks, the ECB said.
The money will also provide €100 million in additional funding to the banks for recapitisation activities, the EIB said.
This means that the amount of funds provided will be €2 billion, €1 billion of which will be available to the bank shareholders.
The second year will be dedicated to recapitalise the banks.
The banks will have the opportunity to renegotiate the terms of the loans.
This will take place once the bank has reached a deal with the government on terms of repayment.
The commission said it is “extremely important that the scheme is able to continue”.