Allied Irish Banks has bowed to government pressure and announced plans to raise an additional €1.5bn as part of a €5bn (£4.4bn) statebacked recapitalisation.

The government of the Republic of Ireland has already agreed to invest €3.5bn of preference shares in the country’s largest bank.

But after reviewing AIB’s loan book as part of the due diligence ahead of that investment, the government told AIB it would need to raise an extra €1.5bn in core tier one capital.

AIB has the biggest exposure to property and construction of any Irish financial institution, with €22.6bn of development property loans. With land prices collapsing and few houses being sold, the bank is looking at large provisions.

Financial Times, The Independent