The Bank of Ireland has won a 1.12-billion-euro ($1.6-billion) injection from private investors in a deal to keep the nation's largest lender out of majority state ownership, the government said on Monday.
"The Minister for Finance, Michael Noonan, today welcomed the successful conclusion of negotiations by the government with a group of investors," said a statement from the Department of Finance.
"Subject to appropriate regulatory clearances being obtained, they have committed to buy up to 1.123 billion euros of the state's shares in Bank of Ireland (BoI), reducing accordingly the state's obligation to capitalise for this amount as part of the March stress tests."
The investors will initially buy 241 million euros of the state’s shareholding and were also committing to purchase the remainder of up to 882 million euros after regulatory approvals have been given.
Dublin currently owns 36 percent of the bank but has been talking to investors in recent months to reduce its stake to a range between 15-32 percent.
"This investment is tangible proof of growing international confidence in the future prospects of both Bank of Ireland and the Irish economy," said Noonan in the statement.
The BoI welcomed Monday's news of the investment from a group of significant institutional investors and fund managers.
Noonan added that the deal would result in a minimum private-sector ownership of 68 percent in the bank.
In March, Ireland's central bank ordered a drastic overhaul of the nation's stricken banking sector after carrying out stress tests on their capital and liquidity, in a Prudential Capital Assessment Review (PCAR).
Under the shake-up, the central bank decided that BoI needed to raise new capital of about 5.2 billion euros by the end of July.
"Today's announcement represents the accomplishment of another major step in our plan," added Noonan on Monday.
"The commitment by a number of significant private sector investors to invest side by side with the state's retained holding without any form of additional risk sharing by the state reaffirms the credibility of our stress tests and the health of our banks after the PCAR exercise.
"It further underlines how we are successfully breaking the link between bank risk and the sovereign."
Ireland's government was forced to bailout the eurozone country's banking sector after years of reckless lending. In recent times it has been hammered by the international financial crisis and collapse of a domestic property bubble that has seen house prices slump since 2007.