THE BANK OF IRELAND
(Exact name of registrant as specified in its charter)

40 MESPIL ROAD, DUBLIN 4, IRELAND
(Address of principal executive offices)

The Governor and Company of the Bank of Ireland
40 Mespil Road,
Dublin 4, Ireland
Telephone no: +353 1 6378000
Facsimile no: +353 76 6234786
(Name, telephone number, facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock as of 31 December 2011:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated file and large accelerated file" in Rule 12b-2 of the Exchange Act:

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As set out in Note 1 to the Consolidated Financial Statements, on 17 February 2010 the Group changed its fiscal year end from 31 March, to 31 December to align its financial calendar with that of its peer banks. Accordingly, these financial statements cover the twelve month period from 1 January 2011 to 31 December 2011, with comparatives for prior periods covering the twelve month period from 1 January 2010 to 31 December 2010 and the nine month period from 1 April 2009 to 31 December 2009. As a result, the amounts presented in the financial statements are not entirely comparable.

In this Annual Report on Form 20-F (Annual Report or Form 20-F), the term 'Ordinary Stock' refers to units of ordinary stock of The Governor and Company of the Bank of Ireland (the Bank) and the term 'ADSs' refers to American Depositary Shares each representing the right to receive forty units of ordinary stock and evidenced by American Depositary Receipts (ADRs). On 11 July 2011, the ordinary stock of the Bank was renominalised from €0.10 to €0.05 per unit. For further detail see note 48 to the Consolidated Financial Statements.

The ADSs are listed on the New York Stock Exchange and are evidenced by ADRs issued by The Bank of New York Mellon as Depositary under a Deposit Agreement.

Unless a specific source is identified, all information regarding market and other operating and statistical data provided in this Annual Report is based on the Group's own estimates. In making estimates, the Group relies on data produced internally and, where appropriate, external sources, including information made public by other market participants or associations.

Information found on any website address included in this Annual Report is not part of or incorporated into this Annual Report and the inclusion of such addresses is for the reader's reference only.

Certain definitions are also set out in the Appendix to Part I of this Form 20-F.

This Annual Report contains certain forward looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934 and Section 27A of the US Securities Act of 1933 with respect to certain of the Bank of Ireland Group's (the Group) plans and its current goals and expectations relating to its future financial condition and performance, the markets in which it operates, and its future capital requirements. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Generally, but not always, words such as "may," "could," "should," "will," "expect," "intend," "estimate," "anticipate," "assume," "believe," "plan," "seek," "continue," "target," "goal," "would", or their negative variations or similar expressions identify forward looking statements. Examples of forward looking statements include among others, statements regarding the Group's near term and longer term future capital requirements and ratios, level of ownership by the Irish Government, loan to deposit ratios, expected impairment charges, the level of the Group's assets, the Group's financial position, future income, business strategy, projected costs, margins, future payment of dividends, the implementation of changes in respect of certain of the Group's defined benefit pension schemes, estimates of capital expenditures, discussions with Irish, UK, European and other regulators and plans and objectives for future operations.

Such forward looking statements are inherently subject to risks and uncertainties, and hence actual results may differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include, but are not limited to, the following:

See Item 3 "Key Information—Risk Factors" and under Item 11 "Quantitative and Qualitative Disclosures about Market Risk" in this document for more information on factors that could cause actual results to differ materially from those contemplated by the forward looking statements in this document.

Nothing in this document should be considered to be a forecast of future profitability or financial position and none of the information in this document is or is intended to be a profit forecast or profit estimate. Any forward looking statements speak only as at the date they are made. The Group does not undertake to release publicly any revision to these forward looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. The reader should however, consult any additional disclosures that the Group may make in documents filed or submitted or may file or submit to the US Securities and Exchange Commission.

For the purposes of this Annual Report, the term "Bank" means The Governor and Company of the Bank of Ireland, the terms "Group" and "Bank of Ireland Group" mean the Bank and its consolidated subsidiaries and, where the context permits, its interests in associated companies and joint ventures.

The term "the State" means the Republic of Ireland, its Government and, where and if relevant, Government departments, agencies and local Government bodies.

Certain financial and statistical information in this Annual Report is presented separately for domestic and foreign activities. Domestic activities include transactions recorded on the books of the Group branches and offices located in Ireland. Foreign activities include transactions recorded on the books of the Group branches and offices in the United Kingdom 'UK', the United States of America 'US' and elsewhere outside of Ireland.

Unless otherwise stated, for the purposes of this Annual Report, references to 'Ireland' exclude Northern Ireland.

The Group publishes consolidated financial statements in euro "€" or "EUR". Each euro is made up of one hundred cents, each of which is represented by the symbol "c" in this Annual Report.

References to "dollars", "US$", "$" or "¢" are to US currency, and references to "Stg£", "GBP£" and "pounds sterling" are to UK currency. Amounts in dollars, unless otherwise stated, for the current financial (fiscal) year have been translated from euro at the rate prevailing on 31 December 2011 as shown below under "Exchange Rates". This rate should not be construed as a representation that the euro amounts actually denote such dollar amounts or have been, could have been, or could be converted into dollars at the rate indicated.

As a significant portion of the assets, liabilities, income and expenses of the Group is denominated in currencies other than euro, fluctuations in the value of the euro relative to other currencies have an effect on the euro value of assets and liabilities denominated in such currencies as well as on the Group's results of operations. The principal foreign currencies affecting the Group's financial statements are sterling and the dollar. At 23 March 2012, the spot rate was US$1.3263 = €1.00.

The following table sets forth, for the dates or periods indicated, the spot or Noon Buying Rate in New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") and the rates used by the Group in the preparation of its consolidated financial statements, which are sourced from the European Central Bank (ECB):

The highest spot or noon buying rate for each of the last six months was: February 2012: 1.3463, January 2012: 1.3192, December 2011: 1.3487, November 2011: 1.3803, October 2011: 1.4172, September 2011: 1.4283.

The lowest spot or noon buying rate for each of the last six months was: February 2012: 1.3087, January 2012: 1.2682, December 2011: 1.2926, November 2011: 1.3244, October 2011: 1.3281, September 2011: 1.3446.

The following tables present selected consolidated financial data which have been derived from the audited consolidated financial statements of the Group. Tables 1 and 2 detail financial data under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") for the years ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and the years ended 31 March 2009 and 2008.

The consolidated financial statements of the Group have been prepared in accordance with IFRS as issued by the IASB for the years ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and the years ended 31 March 2009 and 2008. The EU adopted version of IAS 39 currently relaxes some of the hedge accounting rules in IAS 39 'Financial Instruments—Recognition and Measurement'. The Group has not availed of this relaxation, hence these financial statements comply with both IFRS as adopted by the EU and IFRS as issued by the IASB.

The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, the consolidated financial statements of the Group and the notes thereto, which are included in this Annual Report. The financial results should not be construed as indicative of financial results for subsequent periods. See Item 5 "Operating & Financial Review and Prospects".

As noted in the Presentation of Information, on 17 February 2010 the Group changed its financial year to 31 December (see note 1 to the Consolidated Financial Statements) to align its financial calendar with that of its peer banks.

	Year ended 31 December 2011⁽¹⁾			Year ended 31 December 2011

	US$m			(in € millions, except per unit amounts and percentages)
Income Statement Data
Interest income		6,125			4,618		5,179		4,188		9,717		10,397
Interest expense		(4,090	)		(3,084	)	(2,960	)	(2,009	)	(6,047	)	(7,134	)

Net interest income		2,035			1,534		2,219		2,179		3,670		3,263
Net insurance premium income		1,232			929		969		665		1,069		1,940
Fees and commission income		812			612		633		474		717		816
Fees and commission expense		(255	)		(192	)	(257	)	(255	)	(232	)	(150	)
Net trading income/(expense)		25			19		225		(28	)	(307	)	(246	)
Life assurance investment income, gains and losses		(50	)		(38	)	474		958		(1,570	)	(826	)
Gain on liability management exercises		2,373			1,789		1,402		1,037		—		—
Other operating income		16			12		199		31		73		238

Total operating income		6,188			4,665		5,864		5,061		3,420		5,035
Insurance contract liabilities and claims paid		(995	)		(750	)	(1,268	)	(1,462	)	537		(798	)

Total operating income, net of insurance claims		5,193			3,915		4,596		3,599		3,957		4,237
Other operating expenses		(2,186	)		(1,648	)	(1,805	)	(1,381	)	(2,121	)	(2,160	)
Impact of amendments to defined benefit pension schemes		3			2		733		—		—		—
Reversal/(impairment) of goodwill and other intangible assets		5			4		2		(6	)	(304	)	—

Operating profit before impairment charges on financial assets and gain/(loss) on NAMA/deleveraging		3,015			2,273		3,526		2,212		1,532		2,077
Impairment charges on financial assets		(2,658	)		(2,004	)	(2,284	)	(4,057	)	(1,513	)	(232	)
Gain/(loss) on sale of assets to NAMA including associated costs		44			33		(2,241	)	—		—		—
Loss on deleveraging of financial assets		(749	)		(565	)	—		—		—		—

Operating (loss)/profit		(348	)		(263	)	(999	)	(1,845	)	19		1,845
Share of results of associates and joint ventures (after tax)		52			39		49		35		(42	)	46
Profit/(loss) on disposal of business activities		45			34		—		(3	)	—		—
Profit on sale of property		—			—		—		—		—		39

(Loss)/profit before taxation		(251	)		(190	)	(950	)	(1,813	)	(23	)	1,930
Taxation		305			230		341		344		41		(229	)

Profit/(loss) for the period		54			40		(609	)	(1,469	)	18		1,701

Attributable to non-controlling interests		(7	)		(5	)	5		(9	)	(35	)	5

Attributable to stockholders		61			45		(614	)	(1,460	)	53		1,696

Profit/(loss) for the period		54			40		(609	)	(1,469	)	18		1,701

Earnings/(loss) per unit of €0.05/€0.10/€0.64⁽³⁾ ordinary stock		(0.93c	)		(0.7c	)	(21.5c	)⁽⁴⁾	(105.5c	)⁽⁴⁾	2.7c	⁽⁴⁾	109.0c	⁽⁴⁾

Diluted earnings/(loss) per unit of €0.05/€0.10/€0.64⁽³⁾ ordinary stock		(0.93c	)		(0.7c	)	(21.5c	)⁽⁴⁾	(105.5c	)⁽⁴⁾	2.7c	⁽⁴⁾	108.6c	⁽⁴⁾

Dividends per unit of €0.05/€0.10/€0.64⁽³⁾ ordinary stock⁽⁵⁾		—			—		—		—		—		39.8c	⁽⁴⁾

Number of shares used in EPS calculation (in millions)		15,704			15,704		3,811	⁽⁴⁾	1,587	⁽⁴⁾	1,579	⁽⁴⁾	1,543	⁽⁴⁾

Number of shares used in diluted EPS calculation (in millions)		15,704			15,704		3,811	⁽⁴⁾	1,587	⁽⁴⁾	1,579	⁽⁴⁾	1,549	⁽⁴⁾

	Year ended 31 December 2011⁽¹⁾			Year ended 31 December 2011

	US$m			(in € millions, except per unit amounts and percentages)
Balance Sheet Data
Total assets		205,417			154,880		167,473		181,106		194,116		197,434
Loans and advances to customers (net of impairment provisions)		131,720			99,314		114,457		119,439		133,740		135,738
Loans held for sale to NAMA (net of impairment provisions)		—			—		793		9,457		—		—
Other assets classified as held for sale		3,244			2,446		119		—		—		—
Loans and advances to banks		10,689			8,059		7,458		5,031		7,886		9,409
Allowance for impairment provisions on loans and advances to customers (including loans held for sale to NAMA and loans classified as held for sale)		(8,442	)		(6,365	)	(5,050	)	(5,775	)	(1,781	)	(596	)
Available for sale financial assets		13,610			10,262		15,576		20,940		26,858		29,307
NAMA senior bonds		6,653			5,016		5,075		—		—		—
Deposits from banks		41,824			31,534		41,075		17,903		28,814		14,130
Customer accounts		93,512			70,506		65,443		84,812		83,119		86,234
Debt securities in issue		25,364			19,124		28,693		43,144		45,133		60,842
Subordinated liabilities		1,891			1,426		2,775		6,053		7,942		7,808
Non-controlling interests		66			50		56		50		61		38
Capital stock		3,252			2,452		1,210		699		699		664
Stock premium account		6,800			5,127		3,926		4,092		4,092		775
Retained earnings		4,651			3,507		3,740		3,263		4,761		5,670
Other reserves		(1,153	)		(869	)	(1,510	)	(1,580	)	(2,610	)	(400	)
Own shares held for the benefit of life assurance policyholders		(20	)		(15	)	(15	)	(87	)	(90	)	(225	)
Stockholders' equity		13,531			10,202		7,351		6,387		6,852		6,484

(1): Translated solely for convenience into dollars at €1.00 = US$1.3263, the Spot Rate on 23 March 2012.
(2): The income statement data for the nine month period ended 31 December 2009 shown in this table is taken from the consolidated income statement on page F-4. This data differs from that shown in the Operating and Financial Review and the Operating Segments note (see note 2 to the consolidated financial statements on page F-52). During 2010, the Group changed the reported presentation of the results of two of its subsidiaries such that the income and other operating expenses are presented on separate line items in the Income Statement and to facilitate a more meaningful comparison, a similar presentation has now been adopted in the Operating and Financial Review and the Operating Segments note (but not in the consolidated income statement or the income statement data in Table 1) for the nine month period ended 31 December 2009. This has led to a decrease in net interest income of €9 million, an increase in other income of €17 million and an increase in operating expenses of €8 million as compared to the amounts previously reported for these line items.
(3): The Group's ordinary stock was renominalised from €0.64 to €0.10 with effect from 19 May 2010 and from €0.10 to €0.05 with effect from 11 July 2011.
(4): The prior years have been adjusted retrospectively to reflect the bonus element of the rights issue, which took place in July 2011. An adjustment factor of 1.007809 has been applied. See note 21 to the consolidated financial statements.
(5): See Item 8 "Financial Information—Dividend Policy" for details of dividends per unit of ordinary stock in dollars.

	Year ended 31 December 2011

	(in Percentages %)
Other Financial Data
Return on average total assets⁽⁷⁾		0.03		(0.35	)	(1.03	)	0.03	0.8
Return on average stockholders' equity⁽⁸⁾		0.5		(8.4	)	(25.3	)	0.9	24.4
Net interest margin⁽⁹⁾		1.1		1.4		1.7		2.1	1.9
Cost/income ratio⁽¹⁰⁾		41	*	39	*	38	*	62	50
Impairment provisions on loans and advances to customers⁽¹¹⁾		6		4.2		2.5		1.3	0.4
Impairment provisions on loans held for sale to NAMA⁽¹²⁾		—		8.6		22.7		—	—
Impairment charges to average total loans⁽¹³⁾		1.7		1.6		3.9		1.0	0.2
Stockholders' equity to assets⁽¹⁴⁾		6.6		4.4		3.5		3.3	3.3
Dividend payout ratio⁽¹⁵⁾		—		—		—		—	36

*: Impacted by the gain of €1,789 million (year ended 31 December 2010: €1,402 million and 9 month period ended 31 December 2009: €1,037 million) on the repurchase of subordinated liabilities and the gain of €2 million (year ended 31 December 2010: €733 million and 9 month period ended 31 December 2009: €nil) from amendments to defined benefit pension schemes.
(6): Other financial data for the nine month period ended 31 December 2009 is presented on an annualised basis.
(7): Return on average total assets represents profit attributable to the ordinary stockholders as a percentage of average total assets. The calculation of the average balances for all years includes daily, weekly or monthly averages for certain reporting units. See Item 5 "Operating & Financial Review and Prospects—Average Balance Sheet and Interest Rates". The Group considers these average balances to be representative of the operations of the Group.
(8): Return on average stockholders' equity represents profit attributable to the ordinary stockholders as a percentage of average stockholders' funds, excluding minority interests.
(9): Net interest margin represents net interest income as a percentage of average interest earning assets.
(10): The cost / income ratio is determined by dividing the total expenses including goodwill impairment of the Group by the total income (including gain on the re-purchase of subordinated liabilities) of the Group including income from associated undertakings and joint ventures.
(11): Impairment provisions on loans and advances to customers is calculated by dividing the impairment provision on loans and advances to customers by total loans and advances to customers at the balance sheet date.
(12): Impairment provisions on loans held for sale to NAMA is calculated by dividing the impairment provision on loans held for sale to NAMA by loans held for sale to NAMA at the balance sheet date.

This section addresses those risks to the Group's business that are considered material by the Directors. These risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties: some risks are not yet known and some that are not currently considered material could later turn out to be material. All of these risks could materially adversely affect the Group, its income, operating profits, earnings, net assets, liquidity, funding and/or capital resources and its ability to meet any targets or objectives.

Given the challenging conditions that remain in financial markets and the continuing weakness of the economies in which the Group operates, the precise nature of all the risks and uncertainties cannot be predicted and many of these risks are outside the Group's control.

Concerns regarding European sovereign debt experienced since 2010 have resulted in instability in financial markets, adversely impacting market sentiment, restricting access to wholesale funding markets for many sovereigns and financial institutions across Europe and limiting their ability to raise funds at sustainable cost levels.

These concerns have surfaced due to the focus in international debt markets on the level of fiscal deficits and evolving sovereign debt levels of some EU member states and the potential impact of these on the individual EU member state economies. The contagion effect arising from severe sovereign debt issues in Greece in 2011 has given rise to increased speculation regarding the overall stability of the eurozone and the suitability of the single currency to deal appropriately with specific circumstances of individual member states.

Plans are currently in development for tighter new budgetary rules to enforce economic discipline and deepen economic integration, commonly referred to as a 'fiscal compact', the main provisions of which include a percentage Gross Domestic Product (GDP) cap on countries' structural deficits and automatic consequences for those countries whose public deficits exceed specified percentages of GDP. These tighter rules are to be embedded into national laws. While this is not proposed as a treaty change, but a separate international agreement between certain member states, this will require ratification by those member states and will require a referendum in Ireland. The Irish Government has announced that the fiscal treaty referendum will be held on 31 May 2012.

Any failure by Ireland or another member state to ratify this agreement may jeopardise that country's continuing participation in the euro or limit or eliminate refinancing options for borrowings at acceptable cost levels with adverse implications for the fragile recovery in economic and financial systems.

There is no certainty that ratification of this agreement will resolve the current market dislocation.

Any threat to the overall stability of the euro system may have profound recessionary impacts, particularly on a small open economy such as Ireland.

The Group has a continuous need for liquidity to fund its business activities. It may suffer periods of market-wide and/or firm-specific liquidity constraints and is exposed to the risk that liquidity is not made available to it even when its underlying business is strong.

The Group relies on customer deposits to fund a considerable portion of its loan portfolio. Loss of customer confidence in the Group's business or in banking businesses generally, among other things, could result in unexpectedly high levels of customer deposit withdrawals, which could have a material adverse effect on the Group's results, financial condition and liquidity prospects.

The termination or non-renewal on or before 31 December 2012 of, or changes to the operation of, or the participation by the Group in, the Eligible Liabilities Guarantee (ELG) scheme or changes in the terms of the Group's participation in this scheme could have an adverse impact on the Group's results, financial condition and prospects.

Continued concerns regarding the stability of the eurozone could materially adversely impact the Group by increasing its costs of funding, reducing its access to the wholesale funding markets and / or increasing its reliance on funding from Monetary Authorities, thereby adversely impacting the Group's ability to fund its operations, which could materially adversely impact the Group's results, financial condition and prospects.

The Group is currently receiving funding from Monetary Authorities and any disruption to access could increase the Group's liquidity and funding risks.

The Central Bank prescribes regulatory liquidity ratios for Irish domestic financial institutions. Compliance with these ratios can be adversely impacted by a range of factors, including the term of borrowings, the split between unsecured and secured funding and the mix of liquidity facilities provided by Monetary Authorities. There were temporary breaches in January, April, June and September 2011 of liquidity requirements, which were subsequently remediated. If the Group fails to achieve the actions agreed with the Central Bank to delever the balance sheet in line with the PLAR requirements this may jeopardise the Group's ability to comply with regulatory liquidity ratios in the future.

The credit ratings of the Irish sovereign and the Group are set out on page 226. Further downgrades to the Irish sovereign credit ratings or outlook or the restructuring of, or inability to meet Irish sovereign liabilities could further increase the cost of or otherwise impair the Group's access to funding, trigger additional collateral requirements and weaken its competitive position.

Further downgrades to the Group's credit ratings or outlook could impair the Group's access to funding, capital or deposits markets, trigger additional collateral requirements, further withdrawals of deposits and/or weaken its competitive position.

A foreign owned bank with stronger credit ratings than the Group could acquire one of the Group's principal competitors in the Irish banking market. This could have an adverse impact on the Group's funding profile if a significant number of depositors transferred their deposits from the Group to the competitor due to the new owner's stronger credit ratings. In addition, the competitor could be in a position to lend to the Group's customers at lower rates due to access to cheaper funding with a consequent adverse impact on the Group's financial condition and prospects.

The Group's businesses are subject to inherent risks arising from macroeconomic conditions in the Group's main markets, particularly in Ireland and the UK. A small open economy such as Ireland is dependent on export led growth for prosperity. Ongoing weakness in world economies may dampen export demand. Downside risks to the global economy are particularly driven by concerns over growth in Europe.

Reduced growth prospects in Ireland's trading partners increases the likelihood of prolonging the existing recession which could further adversely impact the Group's results, financial condition and prospects.

The continued downturn in economic conditions, particularly in Ireland, has resulted in a decline in demand for business products and services, weak business and consumer confidence, lower personal expenditure and consumption, increases in the debt service burden of consumers and businesses and limitations on the general availability of credit. These factors have significantly impacted, and may continue to impact, the Group's customers. As a consequence, the demand for, and supply of, the Group's products and services may weaken and in turn this may impact the Group's results, financial condition and prospects.

The downward pressure on firms' profitability and household disposable incomes from austerity measures, as well as the high level of private sector debt combined with the resulting deterioration in the business environment, are likely to further impact demand for loans. In addition, the Group's customers may further significantly decrease their risk appetite for non-deposit investments such as life and investment products, which could adversely impact the Group's fee and commission income.

Weak business conditions could also lead to increased difficulties in relation to the recoverability of loans and other amounts due from borrowers and other counterparties. This has led to increases and could result in further increases in the Group's impaired loans and impairment charges.

The precise nature of all the risks and uncertainties the Group faces as a result of the economic outlook is difficult to predict, in view of uncertainty regarding the scale and pace of economic recovery. Accordingly, the Group may experience further reductions in business activity, increased funding costs, decreased asset values, additional impairment charges with consequent adverse impacts on its financial condition. Moreover, any worsening of the global economic environment could impact Ireland, the UK or other countries that are significant to the Group's business and could further adversely impact the Group's results, financial condition and prospects.

Deterioration in the credit quality of the Group's borrowers and counterparties, as well as increased difficulties in relation to the recoverability of loans and other amounts due from such borrowers and counterparties, have resulted in significant increases, and could result in further significant increases, in the Group's impaired loans and impairment charges.

Exposures originated and managed in Ireland and the UK represent a substantial majority of the Group's credit risk. The Group has exposures to residential mortgages and to a range of corporate customers in different sectors, in particular to investors in commercial property and residential property. Economic conditions may deteriorate further in the Group's main markets, which may lead to, amongst other things, further declines in values of collateral and investments, persistently high unemployment levels, weakened consumer and corporate spending, declining corporate profitability, declining equity markets and bond markets and a further increase in corporate insolvencies.

Residential property prices continue to be under pressure in Ireland. This could impact the collateral value assumed for provisioning purposes and the price achieved with respect to repossessed properties.

Uncertainty surrounding behavioural changes in Irish borrowers, and potential changes to the bankruptcy regime in Ireland, may further impact on the Group's credit exposures and on the Group's results, financial condition and prospects.

The Group is exposed to declining property values and deterioration in the performance of the residential and commercial property markets in Ireland and the UK. The majority of the Group's commercial property exposure relates to investment property, which is vulnerable to tenant repayment capacity.

Many Irish SMEs/Corporates are dependent on the export market. Their repayment capacity is impacted by factors such as exchange rates and economic growth in the countries to which they export. Irish and UK SMEs/Corporates that sell to their domestic markets are exposed to the possibility of reduced levels of consumer and corporate demand as well as continued weak consumer sentiment amid further austerity measures.

The Group has also been exposed to increased counterparty risk as a result of financial institution and corporate failures and will continue to be exposed to the risk of loss if counterparty financial institutions or other corporate borrowers fail or are otherwise unable to meet their obligations.

Sovereign risk concerns for the Group primarily relate to Ireland and the eurozone region. Further turmoil in the eurozone area could result in downgrades and deterioration in the credit quality of the Group's sovereign exposures.

Management of Irish and European bank debt exposures continues to be a focus for the Group. The successful introduction of a unified European solution to the crisis is key to resolving counterparty credit risk concerns.

The Group is subject to a number of risks associated with the Irish banking system and the regulatory environment primarily in Ireland and the UK. New regulatory obligations or fines and sanctions resulting from regulatory investigations could have a material adverse impact on the Group's results, financial condition and prospects.

The Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act 2011)

The introduction of the Credit Institutions (Stabilisation) Act 2010 (the Stabilisation Act) created a mechanism for State intervention in the banking industry to a degree which could have a very significant adverse impact on the Group's operations. This legislation is scheduled to cease to have effect on 31 December 2012, to be replaced as far as the Group is concerned by the existing permanent resolution regime for all other relevant financial institutions, as provided by the Central Bank and Credit Institutions (Resolution) Act 2011. (See Regulation of Banks and Residential Lending—General Supervision and Regulation of Banks in Ireland). Under the Resolution Act 2011 the Central Bank is given the authority to take over, run and break up troubled financial institutions as it seeks to minimise the cost of a bank failure for taxpayers (this power rests with the Minister for Finance under the Stabilisation Act). A special resolution fund is also to be set up, with a levy to be placed on banks to cover the cost of the Central Bank assuming control of a financial institution. Both the Resolution Act 2011 and the Stabilisation Act allow the Central Bank and the Minister respectively to require banks to be managed in the national interest rather than shareholders' interest. Under the Resolution Act 2011 the Central Bank is also given the power to make an application to the High Court to appoint a special manager to run troubled banks and is also allowed to remove any staff, directors or consultants. It can also create 'bridge banks' to take control of deposits and loans of a failed institution pending their transfer to another bank.

On 1 September 2011, the Central Bank published its Regulations and Standards of Fitness and Probity under Part 3 of the Central Bank Reform Act 2010.

The Act gave the Central Bank wide ranging powers across the financial services industry to:

The Central Bank has stated that it may initiate reviews under the fitness and probity standards in respect of the directors of certain financial institutions who were directors of those institutions since before the beginning of the financial crisis in 2008 (of which the Group's CEO is one). If the Deputy Governor (Financial Regulation) of the Central Bank were to form an opinion that there is reason to suspect the person's fitness and probity to perform the relevant function, an investigation may be conducted which may result in a prohibition notice being issued preventing the person from carrying out their function. No such opinion in relation to the Group's CEO has been formed to date. If any issues were to arise under the Fit and Proper regime, they could impact on the Group's reputation, results, financial condition and prospects.

The introduction of new government policies or the amendment of existing policies in Ireland or the UK in respect of the banking system, including its supervision, regulation, recapitalisation and structure, has had, and may have a significant impact on the Group's results, financial condition and prospects.

Irish Government policy in respect of the banking system, including its supervision, regulation, recapitalisation and structure, has had, and will continue to have a major impact on the Group. The Irish Government can implement its policy by utilising its extensive powers under existing legislation, the introduction of new or amended legislation or, in the Group's case, the exercise of its stockholder and other rights pursuant to the holding by the National Pensions Reserve Fund Commission (NPRFC) of ordinary stock and preference stock in the capital of Bank of Ireland and the powers included in the Stabilisation Act.

Implementation of Government policy and other requirements arising from the EU/IMF Programme, in particular those that may impact banks in Ireland, could give rise to policies and changes that may not be aligned with the interests of the Group or its stockholders or its creditors. The introduction of new Government policies or the amendment of existing policies by any future Government could have a significant impact on the Group's results, financial condition and prospects.

The Group has also given a number of undertakings to the Minister for Finance in respect of its lending, corporate governance, dividends and remuneration.

The increased geopolitical risk in the eurozone may have implications for the future of the Irish banking system and increased capital requirements for banks operating in Europe since heavily capitalised banks are mooted as a possible solution to some of the sovereign risk concerns.

Regulatory obligations are increasing and the embedding of the significant number of new codes into existing systems and business processes within requisite timescales is very challenging, especially given their operational complexity. In addition there appears to be an increasing tendency to impose more stringent sanctions or fines. Were the Group to breach regulatory obligations to such an extent that a regulator considered that a sanction or fine was necessary, such sanction or fine would require public disclosure which may impact on both investor and customer sentiment and could adversaly impact the Group's results, financial condition and prospects.

Under the ELG scheme, certain liabilities of Irish financial institutions (Participating Institutions) are guaranteed by the Minister for Finance. The ELG scheme facilitates Participating Institutions, including the Group, in issuing debt securities and taking deposits.

The Irish Government has extended the ELG scheme for a further period of one year to 31 December 2012. The extension is subject to, as normal, EU state aid approval every six months—which is the maximum period permitted for such approval under the European Commission's policy on guarantee schemes in the financial sector. The EU Commission has approved the first six month extension to 30 June 2012. Debt securities and deposits issued under the ELG scheme prior to 30 June 2012 will be covered up to maturity, subject to a maximum maturity of five years.

The cancellation, cessation or material amendment of the ELG scheme could adversely affect the terms on which the Group would be able to access funding. The Group's financial position may also be impacted by material changes to the cost of participating in the ELG scheme, which may be changed at the discretion of the Minister for Finance and the European Commission.

Notwithstanding the support made available to the State by the EU / IMF Programme, an Irish sovereign default on its liabilities would lead to a loss on outstanding holdings of Irish government and NAMA

bonds, materially impair the Group's access to funding, trigger additional collateral requirements, weaken its competitive position and adversely affect the Irish economy with significant effects for the Group.

On 15 July 2010, the European Commission approved the State aid received by the Group under EU State aid rules on the basis of the Group's EU Restructuring Plan submitted on 30 September 2009 and updated on 26 May 2010.

On 31 March 2011, the Minister for Finance, in his Statement on Banking Matters, stated that the State would submit new restructuring plans for the banks to the European Commission for approval under EU State aid rules in respect of the implications of the changes necessary for the future banking landscape in Ireland. As part of the European Commission State aid review, a revised 2011 EU Restructuring Plan was prepared by the Group and submitted by the Department of Finance to the European Commission on 29 April 2011. This Revised 2011 EU Restructuring Plan includes the additional deleveraging of assets and the expansion and extension of other behavioural measures already agreed in the Approved 2010 EU Restructuring Plan. On 20 December 2011, the European Commission adopted their Final Decision approving the Revised 2011 EU Restructuring Plan.

The Group could be subject to a variety of risks as a result of implementing the EU Restructuring Plan. If the Group fails to comply with commitments contained in the EU Restructuring Plan or if the Group materially deviates from the EU Restructuring Plan or needs additional State aid not foreseen in the Commission's decision approving the EU Restructuring Plan, the Commission may reopen the State aid control procedure and/or open a new procedure and reassess the aid measures in their entirety. This may result in an adverse outcome for the Group such as the requirement to complete a new or revised plan and the imposition of additional divestiture obligations or behavioural restrictions going beyond the ones contained in the current EU Restructuring Plan.

In implementing the EU Restructuring Plan, the Group will lose existing customers and other assets through the sale of businesses and potentially suffer damage to the rest of the Group's business arising from implementing the final EU Restructuring Plan regarding both the divestment and behavioural commitments. The potential for the Group realising associated revenues and margins that it otherwise might have achieved in the absence of such measures may be inhibited. Such implementation may also result in disruption to the retained business impacting on customers, and could result in separation costs which could potentially be substantial. There is no assurance that the price that the Group receives for any assets sold pursuant to the final EU Restructuring Plan will be at a level that the Group considers adequate or which it could obtain in circumstances in which the Group was not required to sell the assets in order to implement the EU Restructuring Plan or if the sale of these assets were not subject to the restrictions contained in the terms of the plan.

A Monitoring Trustee approved by the European Commission will oversee the Group's adherence to the commitments of the EU Restructuring Plan. The actions of the Monitoring Trustee could further adversely impact on the Group and its performance by requiring the Group to act in a manner which is not always aligned with the interests of Stockholders and which could lead to disruption in the Group's operations, financial condition and prospects.

The Government (through the NPRFC) currently holds all of the outstanding 2009 Preference Stock. Under the terms of the 2009 Preference Stock, if the Group does not pay the cash dividend otherwise due on the 2009 Preference Stock, payable annually on 20 February, it may issue units of ordinary stock to the NPRFC in lieu of the relevant cash dividend. This could arise if the Group was precluded from paying dividends or had inadequate distributable reserves at the relevant dividend declaration date.

As the current holder of the outstanding 2009 Preference Stock the NPRFC has the right to directly appoint 25% of the directors of the Group. The tabling of any resolution at a General Court of Bank of Ireland to alter the capital structure of the Group requires the prior approval in writing of the Minister for Finance. These rights apply in full for so long as the NPRFC holds any units of 2009 Preference Stock and they are not reduced in line with any reduction in the number of units of 2009 Preference Stock held.

The Group's participation in the ELG scheme and the NPRFC's holding of 2009 Preference Stock could require the Group to implement operational policies that could materially adversely affect the Group's results, financial condition and prospects.

At 31 December 2011, the Group's subsidiary bank in the United Kingdom, Bank of Ireland (UK) plc, comprised the Group's Post Office joint ventures, its branch business in Northern Ireland, assets from its former intermediary mortgage business, and other parts of its UK business banking operations. The Group's UK subsidiary could be subject to special resolution regime powers under the UK Banking Act 2009. The Financial Services Act 2010 (FS Act 2010) obliges the Financial Services Authority (FSA) to make Recovery and Resolution Plan (RRP) rules for UK incorporated deposit-takers having regard to international standards relating to RRPs.

Bank of Ireland (UK) plc is authorised and regulated by the FSA. If the FSA considered that Bank of Ireland (UK) plc was failing, or likely to fail, to meet the threshold authorisation conditions in the Financial Services and Markets Act 2000 (FSMA 2000), it could exercise the special resolution regime powers granted to HM Treasury, the Bank of England and the FSA under the UK Banking Act 2009. These powers allow the FSA to: (a) transfer all or part of the business of the subsidiary or the shares of the subsidiary to a third party, (b) transfer all or part of the business of the subsidiary to a 'bridge bank' wholly owned by the Bank of England or (c) take the subsidiary into temporary UK Government ownership, with the corresponding risk of the loss to the Group of the Bank of Ireland (UK) plc business. Such actions could adversely impact the existence, nature or value of the Group's investment in Bank of Ireland (UK) plc. If Bank of Ireland (UK) plc was subject to the special resolution regime and a partial transfer of its business to another entity took place, the quality of the assets and the quantum of the liabilities not transferred and remaining with Bank of Ireland (UK) plc may result in a deterioration of the creditworthiness or in the insolvency of Bank of Ireland (UK) plc. In such circumstances, while the Group may have a claim for compensation there can be no assurance that it would recover compensation promptly or equal to any loss actually incurred.

The additional regulatory complexity of Bank of Ireland (UK) plc impacts current management accountabilities and operations and the business plan for Bank of Ireland (UK) plc and Group deleveraging plans. As UK deposits are a critical source of funding, additional conditionality attaching to licensing parameters may undermine efforts to achieve Group objectives to repay monetary authority funding.

In July 2011, the EU published its proposals for CRD IV which will implement Basel III rules in the EU. The rules will be implemented on a phased basis, commencing in 2013 and currently planned to complete by 2019. The Group continues to plan for CRD IV, however as there are differences between Basel III and CRD IV definitions for key ratios including the Liquidity Coverage Ratio (LCR), the Net Stable Funding Ratio (NSFR) and Risk Weighted Assets (RWA) composition, it is difficult to assess the full impact on the Group of the revised rules at this time.

Capital adequacy and its effective management is critical to the Group's ability to operate its businesses and to pursue its strategy.

The Group's business and financial condition would be affected if the Group were insufficiently capitalised. This could be caused by a materially worse than expected financial performance (including, for example, reductions in earnings as a result of impairment charges, increases in risk weighted assets and delays and higher than planned haircuts in the disposal of certain assets).

The minimum regulatory requirements imposed on the Group, the manner in which the existing regulatory capital is calculated, the instruments that qualify as regulatory capital and the capital tier to which those instruments are allocated, could be subject to change in the future.

A number of regulatory initiatives have recently been proposed or enacted, which could significantly alter the Group's capital requirements. These initiatives include Capital Requirements Directives (CRD II, III, IV), Basel III and Solvency II.

The Central Bank of Ireland expects the Group to complete a revised Prudential Capital Assessment Review in 2012 (2012 PCAR), similar to the exercise completed in 2011. The 2012 PCAR is an assessment of forward-looking prudential capital requirements of the Group arising from expected and potential stressed loan losses, and other financial developments. The Group could be subject to the risk that capital requirements may increase post the publication of the results of the 2012 PCAR.

The Group has had significant capital raisings in 2010 and 2011. Any requirement in the future to raise additional capital could significantly dilute existing shareholdings.

The Group can be exposed to market risks such as changes in interest rates, interest rate spreads and foreign exchange rates.

The Group distinguishes between structural and discretionary market risk. The Group uses the term 'structural' to encompass the interest rate risks that arise from the presence of non-interest related assets and liabilities on the balance sheet, the exposure of Group earnings to basis risk (including cross-currency basis risk) and the exposure of the Group's net worth and its principal capital ratios to exchange rate movements. The challenge of managing these structural risks has increased in recent years as a result of higher impairment charges, write-downs on disposals, capital management initiatives and the impact of the crisis on interest rate and foreign exchange markets. The Group remains potentially exposed to adverse movements in interest rates, interest rate basis (the differential between variable interest rates), cross-currency basis (the cost of borrowing in euros to fund assets in sterling) and exchange rates.

The Group may be required to make further contributions to its pension schemes if the value of pension fund assets is not sufficient to cover potential obligations.

While significant progress was made in 2009 to confine the size of liabilities, the Group's pension funds are subject to market fluctuations and changes in the value of underlying assets, as well as to interest rate risk, mortality risk and changes to actuarial assumptions. These fluctuations could impact on the value of the schemes' asset portfolios and result in returns on the pension funds being less than expected and / or result in there being a greater than expected increase in the estimated value of the schemes' liabilities.

Negative public or industry opinion can result from the actual or perceived manner in which the Group conducts its business activities or from actual or perceived practices in the banking industry, such as remuneration practices, money laundering, the occurence of cyber crime, mis-selling of financial products or widespread mortgage foreclosures.

Negative public or industry opinion may adversely impact the Group's ability to have a positive relationship with key stakeholders including the Government and / or keep and attract customers and, in particular, depositors, the loss of which may in each case adversely impact the Group's business, financial condition and prospects.

The Group's businesses are dependent on their ability to process and report, accurately and efficiently, a high volume of complex transactions across numerous and diverse products and services, in different currencies and subject to a number of different legal and regulatory regimes.

Operational risks are inherently present in the Group's businesses, including as a result of potentially inadequate or failed internal processes (including financial reporting and risk monitoring processes), information technology or equipment failures or the failure of external systems and controls including those of the Group's suppliers or counterparties or from people related events or external events, such as cyber crime or the risk of fraud and other criminal acts carried out against the Group. Any weakness in the Group's internal control structures and procedures could result in a material adverse impact on the Group's results, financial condition and prospects, as well as reputational damage which could exacerbate such adverse impact.

The Group is subject to various tax rates in various jurisdictions computed in accordance with local legislation and practice. There is a risk that such tax rates, legislation and practice may change, which could adversely impact the results, financial condition and prospects of the Group.

In accordance with applicable accounting rules, the Group has recognised deferred tax assets on losses available to relieve future profits to the extent that it is probable that such losses will be utilised. The assets are quantified on the basis of current tax legislation and are subject to change in respect of the tax rate or the rules for computing taxable profits and allowable losses. A failure to generate sufficient future taxable profits or changes in tax legislation may reduce the recoverable amount of the deferred tax assets currently recognised in the financial statements.

The resolution of the eurozone sovereign debt crisis has given rise to discussions regarding increased fiscal convergence and the possible introduction of a financial transaction tax, the so called 'Tobin Tax'. Any revised treaty to support announcements by Germany and France on the concept of fiscal union including an 'economic government' could have implications for Irish corporate tax rates or the tax base. This may impact on the Group's results, financial condition and prospects.

The Group may be subject to litigation proceedings which could have a material adverse impact on its results, financial condition and prospects.

Disputes and legal proceedings in which the Group may be involved are subject to many uncertainties, and their outcomes are often difficult to predict, particularly in the earlier stages of a case or investigation.

Adverse judgments in litigation could result in restrictions or limitations on the Group's operations or result in a material adverse impact on the Group's reputation or financial condition.

The Group's success depends in part on the availability of skilled management and the continued services of key members of its management team, both at its head office and at each of its business units.

Failure by the Group to staff its operations appropriately, or the loss of one or more key senior executives and failure to replace them in a satisfactory and timely manner may have a material adverse impact on the Group's results, financial condition and prospects.

In addition, if the Group fails to attract and appropriately train, motivate and retain highly skilled and qualified people, its businesses may also be negatively impacted. Restrictions imposed on remuneration by Government, tax or regulatory authorities or other factors outside the Group's control in relation to the retention and recruitment of key executives and highly skilled and qualified people may also adversely impact on the Group's ability to retain such staff.

The Group is also subject to restrictions on remuneration arising from the implementation of Irish legislation and the European Banking Authority (EBA) remuneration guidelines.

The Governor and Company of the Bank of Ireland was established as a chartered corporation by an Act of the Irish Parliament of 1781/2 and by a Royal Charter of King George III in 1783. The Bank of Ireland Group had total assets of €155 billion at 31 December 2011. The address of the principal executive offices is 40 Mespil Road, Dublin 4, Ireland. (Telephone +35316378000).

The Group provides a broad range of banking and other financial services. All of these services are provided by the Group in Ireland, with selected services being offered in the UK and internationally. The Group has a network of retail branches in Ireland and joint ventures in the UK engaged in the provision of consumer financial services. Corporate Banking and Global Markets conduct the Group's international business with offices in Dublin, London and the US, as well as branches in Paris and Frankfurt.

Subsidiaries of the Group include Bank of Ireland (UK) plc (a UK regulated bank encompassing the Group's successful joint venture with the UK Post Office, the Northern Ireland branch network and its UK business banking and certain other lending activities), Bank of Ireland Life Holdings plc, a life assurance and pensions company in Ireland, ICS Building Society (ICS), a home mortgage business in Ireland, and Bank of Ireland Mortgage Bank (BoIMB).

The Group provided fund management services through its Asset Management businesses. However, on 10 January 2011, the Group completed the sale of Bank of Ireland Asset Management (BIAM) to State Street Global Advisors; on 1 June 2011, the Group completed the sale of Bank of Ireland Securities Services (BoISS) to Northern Trust Corporation, and on 21 April 2011 the Group completed the sale of its 50% holding in Paul Capital Investments LLC to the firm's existing management team.

On 15 July 2010 the European Commission approved the terms of the Group's 2010 EU Restructuring Plan which was required in the context of a review by the European Commission following the Group's receipt of State aid.

Following the March 2011 PCAR/PLAR review, the Group submitted its 2011 EU Restructuring Plan to the European Commission, which was subsequently approved on 20 December 2011.

The key amendments to the approved 2010 EU Restructuring Plan reflected in the 2011 EU Restructuring Plan are as follows:

The Group announced the deleveraging of financial assets with a carrying value of €8.6 billion during 2011 of which €7.6 billion had been completed and derecognised by 31 December 2011. The Group realized a loss on disposal after transaction costs of €565 million. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months. Further information on deleveraging is shown in note 17 to the Consolidated Financial Statements.

The Group provides a broad range of financial services in Ireland to all major sectors of the Irish economy. These include checking and deposit services, overdrafts, term loans, mortgages, business and corporate lending, international asset financing, leasing, instalment credit, invoice discounting, foreign exchange facilities, interest and exchange rate hedging instruments, executor, trustee, life assurance, pension and financial advisory services, including mergers and acquisitions. The Group provides services in euro and other currencies. The Group markets and sells its products on a domestic basis through its extensive nationwide distribution network in Ireland, which consists of 251 full time service branches and approximately 1,246 ATMs, its direct telephone banking service, direct sales forces and its online services.

The Retail UK division incorporates Business Banking in the UK, the branch network in Northern Ireland, the discontinued intermediary sourced mortgage business operating under Bristol & West and Bank of Ireland brands and the joint ventures with the UK Post Office, namely Post Office Financial and Travel Services, which were transferred to the Group's wholly owned banking subsidiary, Bank of Ireland (UK) plc, on 1 November 2010. In addition, the Bank provides corporate lending and treasury products and services to corporate customers in the UK through its Corporate Banking and Global Markets businesses which have offices in Belfast, Bristol and London.

As at 31 December 2011 the Group organised its businesses into Retail Ireland (formerly Retail Republic of Ireland), Bank of Ireland Life (BoI Life), Retail UK (formerly UK Financial Services), Corporate and Treasury (formerly Capital Markets), and Group Centre. Corporate and Treasury includes Corporate Banking, Global Markets and IBI Corporate Finance business. The Group's operations extend geographically throughout Ireland, the UK, Europe and the US. The segmental analysis note, shown in note 2 to the Consolidated Financial Statements includes an analysis of profit contributions by both geographic segments and by business classes. See also Item 5 "Operating & Financial Review and Prospects" and note 60 and note 17 to the Consolidated Financial Statements for further information in relation to the EU restructuring plan and divestments.

Retail Ireland includes all the Group's branch operations in the Republic of Ireland. The branches offer a wide range of financial products and services in addition to the deposit, lending, current account and other money transmission services traditionally offered by banks. It also includes Bank of Ireland Mortgage Bank, ICS Building Society, Business Banking, Private Banking, an instalment credit and leasing business, credit card operations, commercial finance/factoring businesses, together with direct telephone and online banking services.

Bank of Ireland Life comprises the Group's businesses that operate in the life and pensions market in Ireland. New Ireland Assurance Company plc (NIAC) is a manufacturer of pension, life assurance and related products for individuals and SME's as well as a distributor in the independent intermediary and direct sales channels. Bank of Ireland Life is the distributor to Group customers in Ireland through the branch network. As one of its commitments under the Approved 2010 EU Restructuring Plan the Group is required to sell NIAC. A key amendment to the approved 2010 EU Restructuring Plan as reflected in the 2011 EU Restructuring Plan, which was approved on 20 December 2011, is that the divestment period for NIAC will be extended by twelve months from the date originally agreed.

The principal constituents of the Corporate and Treasury division are Corporate Banking, Global Markets and IBI Corporate Finance.

Corporate Banking provides integrated relationship banking services to a significant number of the major Republic of Ireland and Northern Ireland corporations, financial institutions and multi-national corporations operating in or out of the island of Ireland. The range of lending products provided includes, but is not limited to, overdraft and short term loan facilities, term loans, project finance and structured finance. Corporate Banking is also engaged in international lending, with offices located in London, Paris, Frankfurt and the United States. Its international lending business includes, but is not limited to, acquisition finance, project finance, term lending, and asset based financing, principally in the United Kingdom, Europe and the US.

Global Markets is responsible for managing the Group's interest rate and foreign exchange risks, while also responsible for executing the Group's liquidity and funding requirements. Global Markets trades in a range of market instruments on behalf of the Group itself and the Group's customers. The trading activities include, but are not limited to, dealing in foreign exchange spot and forward contracts, options, inter bank deposits and loans, financial futures, bonds, swaps and forward rate agreements and equity tracker products. Global Markets also operates in the United Kingdom and the US.

IBI Corporate Finance provides independent financial advice to public and private companies on takeovers, mergers and acquisitions, disposals and restructurings, in addition to fund raisings, public flotations and stock exchange listings.

Retail UK comprises Business Banking in Great Britain and Northern Ireland, the branch network in Northern Ireland, the UK residential mortgage business and the business activities with the UK Post Office. The business banking unit provides loan facilities to medium and large corporate clients in addition to international banking, working capital financing, leasing and electronic banking services. Offshore deposit taking services are offered in the Isle of Man. The business activities with the UK Post Office provide a range of retail financial services. A substantial part of the Retail UK operations are conducted through the Group's wholly owned UK licensed subsidiary, Bank of Ireland (UK) plc.

Group Centre comprises the central support functions for the Group including Finance, Group Credit and Market Risk, Group Governance Risk and Human Resources. In the Group's financial statements, Group Centre also reflects the costs associated with capital management activities, unallocated support costs and the cost of the Government Guarantee Scheme.

The Group changed the name of three of its segments as detailed above with no change to composition of its segments.

There were no principal acquisitions in the three financial periods to 31 December 2011.

The principal capital divestitures in the three financial periods to 31 December 2011 consist of the following:

On 19 December 2011 the Group announced the sale of Burdale Financial Holdings Limited (Burdale) to Wells Fargo International Banking Corporation. Burdale is a 100% subsidiary of the Group and is a provider of comprehensive asset based lending to the UK and US markets. The sale completed on 1 February 2012, resulting in a loss of €6 million which will be included in the income statement for the year ended 31 December 2012.

In the year ended 31 December 2011 an impairment charge of €45 million on goodwill relating to Burdale was recognised in the income statement.

During the year ended 31 December 2011 the Group disposed of its interest in Foreign Currency Exchange Corporation (FCE Corporation). FCE Corporation was a 100% subsidiary of the Group and provides foreign currency note services and international money payment services to a large number of banking institutions throughout the US and Canada. In line with the commitments given in the EU Restructuring plan, on 9 May 2011 the Group announced the sale of FCE Corporation to Wells Fargo Bank N.A. for consideration of €31 million. On 1 August 2011, all conditions were satisfied and the sale was completed with a resulting profit of €8 million.

During the year ended 31 December 2011 the Group disposed of its interest in Paul Capital Investments LLC. In line with the commitments given in the EU Restructuring plan, on 21 April 2011 the Group completed the sale of its 50% holding in Paul Capital Investments LLC to the firm's existing management team for consideration of €9 million. The profit was less than €1 million. This sale represented the Group's exit from institutional fund management and the completion of another element of the Group's EU Restructuring and Viability Plan.

During the year ended 31 December 2011 the Group disposed of its interest in Bank of Ireland Securities Services (BoISS). BoISS was a 100% subsidiary of the Group and is a provider of asset administration. On 24 February 2011 the Group announced the sale of BoISS to Northern Trust Corporation for cash and deferred consideration. The fair value of the consideration was estimated to be €51 million and the sale was completed on 1 June 2011, with a resulting profit of €32 million.

During the year ended 31 December 2011 the Group disposed of its interest in Bank of Ireland Asset Management (BIAM). BIAM was a 100% subsidiary of the Group and is a provider of investment management solutions to Irish and international clients. In line with the commitments given in the EU Restructuring plan, on 22 October 2010 the Group announced the sale of BIAM to State Street Global Advisors for cash consideration of €57 million, subject to certain conditions. On 10 January 2011, all conditions of the sale were satisfied and the sale was completed, with a resulting profit of €39 million.

At 31 March 2009, the Group held a 71.5% interest in Guggenheim Alternative Asset Management LLC (Guggenheim). During the nine month period ended 31 December 2009, the Group disposed of a 49.5% interest in Guggenheim and disposed of the remaining interest (22%) during the year ended 31 December 2010. Guggenheim acted as a US based fund of hedge funds managed within the Corporate and Treasury division of the Group. Similar to Iridian, the significant drop in assets under management in the latter part of the last financial year following the turmoil in global markets prompted the Group to consider its strategic options for this business. The disposal of the 49.5% stake was concluded on 31 August 2009 with a resulting profit on disposal of €7 million. The remaining 22% interest was of negligible value with minimal control or influence.

During the nine month period ended 31 December 2009 the Group disposed of its interest in Iridian Asset Management LLC (Iridian). Iridian was a 100% subsidiary of BIAM US Inc and acted as an Institutional Asset Manager in the US market within the Corporate and Treasury division of the Group. The disposal was concluded on 30 June 2009 with a resulting loss on disposal of €10 million.

Name	Principal activity	Country of incorporation	Statutory year end

Bank of Ireland International Finance Limited⁽¹⁾	International asset financing	Ireland	31 December
Bank of Ireland Life Holdings Limited⁽¹⁾	Life assurance and pensions	Ireland	31 December
Bank of Ireland Mortgage Bank⁽¹⁾	Mortgage lending and issuance of mortgage covered securities	Ireland	31 December
Bank of Ireland (UK) plc⁽¹⁾	Retail financial services	England and Wales	31 December
First Rate Exchange Services Holdings Limited⁽²⁾	Foreign exchange	England and Wales	31 March
ICS Building Society⁽¹⁾	Mortgage lending and deposit gathering	Ireland	31 December
New Ireland Assurance Company plc⁽¹⁾	Life assurance business	Ireland	31 December
Midasgrange Limited (t/a Post Office Financial Services)⁽³⁾	Retail financial services	England and Wales	31 March
Bank of Ireland (I.O.M.) Limited	Retail Banking	Isle of Man	31 December

All the Group undertakings are included in the consolidated accounts. Except as otherwise indicated, the Group owns 100% of the equity of the principal group undertakings and 100% of the voting shares of all these undertakings and in the case of ICS Building Society, 100% of the investment shares.

At 31 December 2011, the Group operated 295 full time retail bank branches of which 251 were in Ireland and 44 in Northern Ireland. There are no full service retail bank branches in Britain.

The property at 40 Mespil Road, Dublin 4 having approximately 11,133 square metres (120,000 square feet) of net floor space became the Group's Head Office with effect from 12 April 2010 and the registered office of the Governor and Company of the Bank of Ireland on 1 July 2010.

The head office of New Ireland Assurance is located at 9-12 Dawson Street, Dublin 2, Ireland. The head office and administrative buildings occupy approximately 5,388 square metres (58,000 square feet) of net floor space. New Ireland Assurance also has a network of 7 branches operating through New Ireland Assurance Company plc.

The Bank of Ireland Group's former headquarters, located at Lower Baggot Street, Dublin 2, Ireland, comprise a complex of three buildings constructed in the 1970's having approximately 20,439 square metres (220,000 square feet) of net floor space, which the Bank leases on commercial terms. The Bank has exercised the break option and will be handing the property back in August 2012. The Group also occupies approximately 47,909 square metres (516,000 square feet) of net floor space for central functions in Dublin, of which 3,723 square metres (40,000 square feet) is sublet, in addition to the offices and administrative buildings of New Ireland Assurance and the multi occupied property at 40 Mespil Road.

The Bank's UK operations occupies approximately 35,524 square metres (382,000 square feet) of net floor space in the UK for business centres and administrative support functions. As a result of changes in the UK operations there are a number of leased premises that are no longer used in support of business operations. The majority of these premises are held on individual leases with different expiry dates. These

properties are either sublet or vacant and on the market. There are no new major projects in progress which will have a significant bearing on occupied floor space but opportunities to exit leases and consolidate space are being reviewed or taken as and when they arise.

Operations in the rest of the world are undertaken by Corporate Banking through offices located in the UK, France, Germany and the US and by Global Markets through offices located in the UK and the US. These premises are owned directly by the Group or held under commercial leases. The premises are subject to continuous maintenance and upgrading and are considered suitable and adequate for the Group's current and anticipated operations. Details of acquisitions and disposals during the year are given in note 36 to the consolidated financial statements under the heading "Property, Plant and Equipment".

Following the sale and leaseback of 36 branches in October 2006, and a further 30 properties in September 2007, the Group now leases back these properties under operating leases which give rise to a total annual rental commitment of €13 million (31 December 2010: €12 million).

The Bank of Ireland Group faces ongoing competition in all of its major markets. Other financial services groups, including local banks and domestic and foreign financial services companies, compete for business in these markets.

Bank of Ireland provides a comprehensive range of banking services in Ireland and faces competition from various types of institutions in the financial services sector, both domestic and foreign.

The Bank's main competitors across the full range of banking activities are other banks, in particular, Allied Irish Banks plc, Ulster Bank Limited, National Irish Bank Limited, and Irish Life and Permanent plc.

Allied Irish Banks plc and Irish Life and Permanent plc each have their head offices in Dublin. Ulster Bank Limited is a subsidiary of The Royal Bank of Scotland Group plc and National Irish Bank Limited is a subsidiary of Danske Bank A/S.

In addition to these banks, there is also competition in different segments from building societies, the Irish Post Office, credit unions and other banks operating in Ireland.

The general competitive environment in Ireland is subject to the operation of the Competition Act, 2002 (as amended). The Competition (Amendment) Bill 2011 has been introduced to strengthen competition law enforcement in Ireland through increased penalties and sanctions. In the UK (including Northern Ireland) the competitive environment is subject to the Competition Act 1998 and the Enterprise Act 2002. National legislation in Ireland reflects and supplements EU competition legislation.

The Bank of Ireland Group's operations in the UK, conducted primarily through its FSA regulated UK subsidiary, Bank of Ireland UK plc focus on specific market niches, in particular business banking, retail savings, mortgage lending and retail financial services (the latter through a joint venture with the UK Post Office).

The UK has a competitive and sophisticated financial market. The Group's principal competitors include other providers of personal and commercial financial services, such as banks, building societies, supermarkets and insurance companies many of which have extensive branch networks throughout the UK and some with direct or online-only propositions. Significant recent developments to the UK competitive landscape have included the acquisition of Northern Rock by Virgin and the opening of Metro Bank.

While one of the initial impacts of the financial crisis on the UK market was to consolidate the market share of the largest market participants (for example, the Lloyds TSB merger with HBOS and the acquisition of the Bradford and Bingley deposit book by Santander), UK regulators have a clear position to promote increased competition in the market in order to counter the perceived impact of this consolidation—see under Inquiries below.

In those markets where the Group's strategy is to create niche businesses internationally the range and number of competitors is even more extensive. In addition, certain businesses based in Ireland, such as corporate finance, face competition on an international rather than a national basis.

The UK Independent Commission on Banking published its Final Report in September 2011, developing suggestions previously set out in its Interim Report of April 2011 as to how competition between banks could be encouraged and about the divestiture of the Lloyds HBOS to improve competition by enabling the entry of a strong effective challenger. In February 2012, the outgoing Director General of Fair Trading gave a speech calling for greater competition in the retail banking sector, failing which he argued that the market should be referred to the Competition Commission for investigation. Greater competition in the UK market might ultimately benefit the Bank of Ireland Group as a 'challenger' brand in the UK but could also result in increased cost and operational complexity in the short to medium term.

In 2011, the UK Competition Commission varied its previous (2008) Order in relation to Personal Current Accounts in Northern Ireland, largely to align it with EU legislation in the Consumer Credit and Payment Services Directives respectively. The broad intention of the 2008 Order is to enhance competition in the Northern Ireland market, following an enquiry by the Commission.

Also in 2011, Consumer Focus brought a super-complaint under the Enterprise Act 2002 that charges for purchasing foreign currency and using cards overseas can be confusing and often not at all clear for UK consumers. Discussions between the office of Fair Trading and the industry bodies involved led to an agreement on various actions to remedy this. Bank of Ireland Group will abide by this agreement in relation to its UK debit and credit cards and its foreign exchange joint venture with the UK Post Office.

In March 2012 the UK Government published plans for an extensive reform of UK competition law following a consultation exercise. These plans include the establishment of a single Competition and Markets Authority, to simplify and strengthen the competition landscape in the UK.

Measures by the Irish Government to support the Irish financial sector have resulted in closer supervision of financial institutions as well as additional regulatory requirements relating to the specific measures implemented, such as the NPRFC Investment, the ELG scheme and NAMA.

Banking activities in Ireland are regulated and supervised by the Central Bank. The Irish banking law regulations consist primarily of the 1942 to 2011 (including the Central Bank Reform Act 2010 which is described in more detail below), the Central Bank and Credit Institutions (Resolution) Act 2011 (see page 38), the 1992 Supervision Regulations, the 1992 Licensing Regulations, regulations made by the Minister for Finance under the European Communities Act 1972 and regulatory notices issued by the Central Bank. These ministerial regulations and regulatory notices implement EU directives relating to banking regulation, including the First Banking Coordination Directive, the Second Banking Coordination

Directive, the Solvency Ratio Directive, the Own Funds Directive, the Large Exposures Directive, the Deposit Guarantee Scheme Directive, the Capital Adequacy Directive and the Capital Requirements Directive. To the extent that areas of banking activity are the subject of EU directives, the provisions of Irish banking law reflect the requirements of those directives.

The Central Bank Reform Act 2010 (the 2010 Reform Act) was commenced on 1 October 2010. The 2010 Reform Act creates a single fully integrated Central Bank with a unitary board, the Central Bank Commission, chaired by the Governor of the Central Bank. The Financial Regulator was dissolved and most of its existing functions were merged into the new structure. The Central Bank is now responsible and accountable for the prudential supervision of individual financial firms, ensuring the best interests of consumers of financial services are protected through conduct of business rules and contributing to the stability of the financial system overall.

The Central Bank also has responsibility for ensuring the efficient and effective operation of payment and settlement systems, for the provision of analysis and comment to support national economic policy development and for the performance of functions imposed on the Central Bank under the Treaty of Rome and the Statute of the European System of Central Banks.

The 2010 Reform Act removed the promotion of financial services as one of the functions of the Central Bank. The 2010 Reform Act also provided for the transfer of some of the consumer information and education functions from the Central Bank to the National Consumer Agency, with the National Consumer Agency being granted the power to impose levies on financial service providers, including the Bank, for the purposes of funding its performance of these functions.

The Central Bank and Financial Services Authority of Ireland (CBFSAI) Act, 2003 (CBFSAI Act), established the Irish Financial Services Appeals Tribunal, which hears and determines appeals under any of the designated enactments or statutory instruments referred to above that have the effect of imposing a sanction or liability on any person. The provisions of the CBFSAI Act, 2003 relating to the Irish Financial Services Appeals Tribunal became effective on 1 August 2004.

All Irish licensed banks are obliged to draw up and publish their annual accounts in accordance with the European Communities (Credit Institutions: Accounts) Regulations, 1992 (as amended, including by the European Communities (Credit Institutions) (Fair Value Accountancy) Regulations, 2004 and the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations, 2010). As a listed entity, the Group is required to prepare its financial statements in accordance with IFRS and with those parts of the Companies Acts applicable to companies reporting under IFRS and Article 4 of the EU Council Regulation 1606/2002 of 19 July 2002.

Subject to the provisions of the 1992 Licensing Regulations relating to mutual recognition of credit institutions authorised elsewhere in the EU, the Central Bank Act, 1971 (the 1971 Act) restricts the carrying on of banking business in Ireland to holders of licences granted under the 1971 Act. The 1971 Act stipulates that licence holders must maintain a minimum deposit with the Central Bank. The Central Bank has a qualified discretion to grant or refuse a licence and may attach conditions to any licences granted. The Bank holds a licence granted under the 1971 Act. The Central Bank, after consultation with the Minister for Finance, may revoke a licence under certain circumstances specified in the 1971 Act.

The Central Bank has statutory power to carry out inspections of the books and records of licence holders and to obtain information from licence holders about their banking and bank related business. Pursuant to this power, the Central Bank carries out regular review meetings and periodically inspects licensed banks. The Central Bank is also empowered by law to obtain information from licence holders about their banking and bank related business.

The Central Bank may also prescribe ratios to be maintained between, and requirements as to the composition of, the assets and liabilities of licensed banks and to make regulations for the prudent and orderly conduct of banking business of such banks.

The Group is required to comply with the liquidity requirements applied by the Central Bank and with the requirements of local regulators in those jurisdictions in which liquidity requirements apply to the Group. The Central Bank requires that banks have sufficient payment resources (cash inflows and marketable assets) to cover 100% of the expected cash outflows in the 0 to 8 day time horizon and 90% of expected cash outflows in the 8 to 30 day time horizon.

The Group is also subject to EU rules relating to capital adequacy, and in the area of monitoring and control of large exposures, by way of the Banking Consolidation Directive as implemented in Irish legislation. The capital framework as set out in the Capital Requirements Directive has been transposed into Irish law via the European Communities (Capital Adequacy of Investment Firms) Regulations 2006 (S.I. No. 660 of 2006) and the European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (S.I. No. 661 of 2006) (as amended by the European Communities (Capital Adequacy of Credit Institutions) (Amendment) Regulations 2009 (S.I. No. 514 of 2009)) and by way of administrative notice. These regulations set forth minimum start up and ongoing capital requirements for banks licensed by the Central Bank and require applicants for a licence to notify the Central Bank of the identity of certain shareholders and the size of their holdings in the applicant. The Central Bank also sets requirements and standards from time to time for the assessment of applications for licences. The most recent requirements and standards which were published initially in the "Quarterly Review of the Central Bank, Winter 1995" have been updated regularly and are non-statutory requirements which are applied by the Central Bank to credit institutions as a supplement to the statutory requirements referred to generally in this paragraph but do not purport to interpret or refer comprehensively to the statutory provisions applicable to credit institutions.

The Group is subject to extensive regulation and regulatory supervision in relation to the levels of capital in its business. As a result of the current environment and market events, the minimum regulatory requirements imposed on the Group, as well as the manner in which the existing regulatory capital is calculated could change in the future.

Capital Requirements Directive II (CRD II) is a package of measures adopted by the European Parliament and Council on 16 September 2009 and implemented in Ireland by the European Communities (Directive 2009/111/EC Regulations) 2010, the most important of which are as follows:

Capital Requirements Directive III was implemented on 1 January 2011 by the European Communities (Directive 2010/76/EU) Regulations 2010 with some specific items being phased in over the next two years. It introduces a number of changes in response to the recent and current market conditions, which may:

On 16 December 2009, the Basel Committee on Banking Supervision, a forum for regular co-operation on banking supervisory matters, published a consultation paper entitled "Strengthening the resilience of the banking sector". The consultation paper contains proposals to strengthen the global capital framework by, among other things, raising the quality of the Core Tier 1 Capital base in a harmonised manner (including through changes to the items which give rise to adjustments to that capital base), strengthening the risk coverage of the capital framework, promoting the build up of capital buffers and introducing a global minimum liquidity standard for the banking sector. The consultation paper was open for consultation until 16 April 2010. On 26 July 2010, the Basel Committee on Banking Supervision announced revised proposals, which were further clarified on 12 September 2010. The final paper was published on 16 December 2010 entitled "Basel III: A global regulatory framework for more resilient banks and banking systems".

On 26 February 2010, the European Commission issued a public consultation document on further possible changes to Capital Requirements Directive (CRD) IV which is closely aligned with the initial proposals of 16 December 2009 from the Basel Committee. In July 2011, the EU published its proposals for CRD IV which will implement Basel III rules in the EU. The rules will be implemented on a phased basis, commencing in 2013 and currently planned to complete by 2019. The Group continues to plan for CRD IV, however as there are differences between Basel III and CRD IV definitions for key ratios including the Liquidity Coverage Ratio (LCR), the Net Stable Funding Ratio (NSFR) and RWA composition, it is difficult to assess the full impact on the Group of the revised rules at this time.

The Solvency II Directive (Directive 2009/138/EC) is a fundamental review of the capital adequacy regime for the European insurance industry. When implemented (required by 31 October 2012) the capital structure and overall governance of the Group's life assurance business will alter significantly to the extent

that New Ireland Assurance Company plc has not been disposed of in accordance with the terms of the Revised 2011 EU Restructuring Plan and this may have an impact on the capital structure of the Group.

When the changes to minimum capital standards are implemented as currently proposed, in particular the changes proposed by the Basel Committee and the CRD IV consultation document relating to the definition of instruments that are eligible to be included within the Core tier 1 Capital base, they are expected to have an impact on the capital and asset and liability management of the Group.

The Group's operations in overseas locations are subject to the regulations and reporting requirements of the regulatory and supervisory authorities in the overseas locations with the Central Bank having overall responsibility for their regulation and supervision. The Central Bank is required to supervise the Group on a consolidated basis, i.e. taking account of the entire Group activities and relationships.

Licensed banks must notify their existing fees and charges and related terms and conditions, and any changes therein from time to time to the Central Bank, who can direct that no fees, charges or increases or changes therein be made without its approval.

All credit institutions are obliged to take the necessary measures to counteract money laundering effectively in accordance with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 and the guidance notes relating to the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.

The Central Bank of Ireland issued a paper in December 2011 entitled "Impairment Provisioning and Disclosure Guidelines" which sets out guidelines regarding the policies, procedures and disclosures which should be adopted for loans and receivables financial assets that are subject to impairment review.

Following engagement with the Central Bank of Ireland, the Group has provided additional Credit disclosures in the Annual Report for the year ended 31 December 2011 in relation to Residential mortgage disclosures, Impairment, Divisional split of asset quality and disclosures relating to assets held for sale. These are included within section 2.1 Credit Risk of the Risk Management Report (Item 11).

As outlined in Item 3 "The Group is subject to a number of risks associated with the Irish banking system and the regulatory environment primarily in Ireland and the UK. New regulatory obligations or fines and sanctions resulting from regulatory investigations could have a material adverse impact on the Group's results, financial condition and prospects".

Under the European Communities (Deposit Guarantee Schemes) Regulations, 1995 (as amended) the Central Bank also operates a statutory depositor protection scheme (the Deposit Guarantee Scheme) which both licensed banks (including the Bank) and building societies (including ICS Building Society) are required to fund by lodging funds in a deposit protection account maintained by the Central Bank. The Deposit Guarantee Scheme provides compensation in respect of current accounts, demand deposit accounts and term deposit accounts. The maximum level of compensation payable to any one depositor was increased in 2008 to €100,000 per depositor per licensed financial institution regulated by the Central Bank. The Deposit Guarantee Scheme does not have an end date. The ELG scheme applies to relevant deposits in addition to the Deposit Guarantee Scheme. The first €100,000 of a depositor's funds at an institution is covered by the Deposit Guarantee Scheme and any excess is covered by the ELG scheme.

In November 2011, the Minister for Finance introduced flexibility for covered institutions to issue certain customer deposits in unguaranteed form. At 31 December 2011, no such unguaranteed deposits had been issued by the Group. The guarantee also provides flexibility to issue certain debt securities in both unguaranteed and guaranteed form (up to a maximum maturity of five years).

In February 2012, the Minister for Finance gave notice that at the request of Bank of Ireland (UK) plc and pursuant to paragraph 13 of the Schedule to the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009, deposits made with Bank of Ireland (UK) plc after 30 March 2012 will not be guaranteed under the scheme.

Under the Deposit Guarantee Scheme, the compensation payment process is initiated by either the Central Bank determining that a credit institution is unable to repay deposits due to its financial condition, or a court making a ruling, for reasons directly related to a credit institution's financial circumstances, that suspends depositors' ability to make claims against that institution. The Central Bank is expected to pay compensation to depositors within 21 days of a determination that deposits are unavailable, or of a ruling by the court (subject to the terms and conditions set out in the regulations).

In 1997, the EU Investor Compensation Directive laid down basic requirements for investor compensation schemes. This was done to provide a harmonised minimum level of investor protection across the EU. In Ireland, this Directive was transposed into Irish law pursuant to the Investor Compensation Act, 1998 under which the Investor Compensation Company Limited ("ICCL") was established. The main purpose of the scheme is to provide adequate funds out of which eligible investors (private clients) of failed investment firms are compensated for financial losses arising. The funds are generated solely from contributions from investment firms. The current contribution rate varies depending on the nature of the investment services provided and in certain situations, on the number of clients being provided with services by the firm. In the Group, Bank of Ireland Insurance and Investments Limited and Bank of Ireland Private Banking contribute to this fund.

This scheme covers certain investment products i.e. non-deposit based products where the investment intermediary is unable, due to its financial circumstances, to return client money or investment instruments owed or belonging to a private client. The amount recoverable from the ICCL is currently 90% of the customer's net loss from the investment product, or €20,000, whichever is the smaller. The ICCL can only begin the process of making compensation payments to eligible investors once it has been advised by the Central Bank that an authorised investment firm has either: been the subject of a court ruling which prevents the firm returning money or investment instruments to clients; or been the subject of a determination by the Central Bank that the firm is unable to meet its obligations arising from claims by clients.

In addition to the deposits covered by the above Regulations and by the ELG scheme, certain other group deposits are covered by the deposit protection schemes in other jurisdictions, chiefly the UK Financial Services Compensation Scheme (in respect of deposits issued by Bank of Ireland (UK) plc) and the Isle of Man Depositors Compensation Scheme (in respect of deposits issued by Bank of Ireland (I.O.M.) Limited).

The Central Bank has implemented a Consumer Protection Code and Minimum Competency Requirements. The Consumer Protection Code, fully effective from July 2007, applies to banks and building societies, insurance undertakings, investment business firms, mortgage intermediaries and credit unions. The Central Bank issued a revised Code of Practice in relation to Consumer Protection in the last quarter of 2011 and this revised code is being implemented in 2012. The Consumer Protection Code requires regulated entities to know their customers and their suitability for products or services, to prepare terms of business and minimum levels of information for customers, including disclosure requirements and customer record obligations, to identify all charges, fees or other rewards connected with the supply of a service and to establish processes to deal with errors, complaints and conflicts of interest. There are also detailed rules on the fairness of advertising, and specific sectoral rules on banking products, loans, insurance services and investment products.

The Minimum Competency Requirements, effective from January 2007, require employees of regulated entities who provide advice on or sell retail financial products to acquire the competencies set out therein and to engage in continuing professional development on an ongoing basis. The Central Bank issued a revised code of practice in relation to the Minimum Competency Requirements in 2011 which is effective from December 2011 and has been implemented by the Group.

A financial services ombudsman's bureau and a financial services ombudsman council have been established under the Central Bank and Financial Services Authority Act of 2004. This Act also sets out the functions and powers of that council and bureau, respectively.

The Credit Institutions (Stabilisation) Act 2010 (the Stabilisation Act) has given the Minister for Finance, for a period of two years (to 31 December 2012), extensive powers regarding the affairs, assets and liabilities of certain covered financial institutions in Ireland, including the Bank. In particular, Section 48 of the Stabilisation Act imposes a duty on the Directors of the Bank to align the activities of the Bank and the duties and responsibilities of the Directors, officers and employees of the Bank, with the public interest and the other purposes of the Stabilisation Act (as set out in Section 4 of the Stabilisation Act). This duty is owed by the Directors to the Minister, on behalf of the State, and takes priority over any other duty of the Directors.

The Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act 2011)

On 1 September 2011, the Central Bank published its Regulations and Standards of Fitness and Probity under Part 3 of the Central Bank Reform Act 2010 and on 30 November 2011 the Central Bank published amended Regulations and revised Standards. This Act gave the Central Bank wide ranging powers across the financial services industry to: approve or veto the appointment of people to certain positions; investigate and where appropriate remove or prohibit certain position holders; and set statutory standards of fitness and probity across the financial services industry.

The Central Bank has stated that it may initiate reviews under the Regulations and Standards of Fitness and Probity in respect of the directors of certain financial institutions who were directors of those institutions since before the beginning of the financial crisis in 2008 (of which the Group's CEO is one). If the Deputy Governor (Financial Regulation) of the Central Bank were to form an opinion that there is reason to suspect the person's fitness and probity to perform the relevant function, an investigation may be conducted which may result in a prohibition notice being issued preventing the person from carrying out their function.

The EBA published new Guidelines on Internal Governance in September 2011 which are to be implemented by 31 March 2012. The Central Bank has directed the full implementation of these Guidelines which cover: Corporate Structure and Organisation; Management Body; Risk Management; Internal Control; Systems and Continuity; and Transparency. These Guidelines have been implemented by the Group.

At 31 December 2011, the Group's subsidiary bank in the United Kingdom, Bank of Ireland (UK) plc, comprised the Group's Post Office joint venture, its branch business in Northern Ireland, assets from its former intermediary mortgage business, and other parts of its UK business banking operations. The Group's UK subsidiary could be subject to special resolution regime powers under the UK Banking Act 2009. The Financial Services Act 2010 (FS Act 2010) obliges the FSA to make Recovery and Resolution Plan (RRP) rules for UK incorporated deposit-takers having regard to international standards relating to RRPs.

The Group's UK subsidiary could be subject to future structural and non-structural reforms to promote financial stability and competition and to protect UK retail depositors currently under consideration by the UK Government. Bank of Ireland (UK) plc is authorised and regulated by the FSA. If the FSA considered that Bank of Ireland (UK) plc was failing, or likely to fail, to meet the threshold authorisation conditions in the Financial Services and Markets Act 2000 (FSMA 2000), it could exercise the special resolution regime powers granted to HM Treasury, the Bank of England and the FSA under the UK Banking Act 2009.

These powers allow the FSA to: (a) transfer all or part of the business of the subsidiary or the shares of the subsidiary to a third party, (b) transfer all or part of the business of the subsidiary to a 'bridge bank' wholly owned by the Bank of England or (c) take the subsidiary into temporary UK Government ownership, with the corresponding risk of the loss to the Group of the Bank of Ireland (UK) plc business. Such actions could adversely impact the existence, nature or value of the Group's investment in Bank of Ireland (UK) plc. If Bank of Ireland (UK) plc was subject to the special resolution regime and a partial transfer of its business to another entity took place, the quality of the assets and the quantum of the liabilities not transferred and remaining with Bank of Ireland (UK) plc may result in a deterioration of the creditworthiness or in the insolvency of Bank of Ireland (UK) plc.

In such circumstances, while the Group may have a claim for compensation there can be no assurance that it would recover compensation promptly or equal to any loss actually incurred. The additional regulatory complexity of Bank of Ireland (UK) plc impacts current management accountabilities and operations and the business plan for Bank of Ireland (UK) plc and Group deleveraging plans. As UK deposits are a critical source of funding, additional conditionality attaching to licensing parameters may undermine efforts to achieve Group objectives to repay monetary authority funding.

On 31 March 2011 the Central Bank announced the results of the 2011 PCAR. The incremental capital requirement arising from the 2011 PCAR together with the capital raised and generated by the Group over the past two years will ensure a sustainable, robust future for Bank of Ireland as a systemically important bank, continuing to support our customers, and contributing to economic growth, thereby benefiting all our stakeholders.

The key highlights of the 2011 PCAR results for the Group were as follows: a requirement to generate incremental equity capital of €4.2 billion including a regulatory buffer of €0.5 billion, leading to a very strongly capitalised Group with a Core tier 1 ratio at 31 December 2011 of 15.1% (14.3% of PCAR/EBA stress test basis)⁽¹⁾.

In addition €1.0 billion of Contingent Capital was also required through the issue of a debt instrument which under certain circumstances would convert to equity capital.

The EBA was established on 1 January 2011 with a broad remit that includes safeguarding the stability of the EU financial system. The EBA is required, in cooperation with the European Systemic Risk Board (ESRB), to initiate and coordinate EU-wide stress tests to assess the resilience of financial institutions to adverse market developments. Building on experience of two previous EU-wide stress tests undertaken by the EBA's predecessor, the Committee of European Banking Supervisors (CEBS), the EBA conducted a stress test on a wide sample of banks (including the Group) in the first half of 2011. This exercise was undertaken in coordination with national supervisory authorities, the ESRB, the European Central Bank (ECB) and the European Commission.

The EBA stress test was carried out across 91 banks, covering over 65% of the EU banking system total assets. It sought to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions.

The methodology applied in the EBA stress test incorporated a number of differences to that applied in the 2011 PCAR which assessed the capital requirements of Irish banks under a base and adverse stress scenario as well as including specific deleveraging objectives for Irish banks in order to reduce their reliance on short term wholesale funding and achieve a loan to deposit ratio of 122.5% by December 2013. The EBA stress test set a 5% Core tier 1 capital requirement in the adverse stress scenario over a two year time frame (2011-2012) whereas PCAR applied a 6% Core tier 1 requirement under the adverse stress scenario over a three year timeframe (2011-2013). In addition, the EBA methodology also applied a significantly different approach in relation to future changes in the balance sheet, the calculation of loan losses, the application of funding constraints, and treatment of sovereign and bank credit losses.

On 15 July 2011 the EBA announced the results of the 2011 stress test. Bank of Ireland passed the stress test, where under the adverse stress scenario, the Group's Core tier 1 ratio would be 7.1% at 31 December 2012, which is 2.1% or €1.3 billion in excess of the 5% Core tier 1 capital requirement in the adverse stress scenario. The result confirms the adequacy of the Group capital raising proposals and the ability of the Group to remain above the required minimum capital ratio under the EBA severe adverse stress scenario. Furthermore, the proposed €1 billion of Contingent Capital would, if required, add a further 1.6% to the Group's Core tier 1 ratio, bringing it up to 8.7% under the EBA adverse stress scenario at 31 December 2012.

On 8 December 2011 the EBA announced the results of its capital exercise incorporating a capital buffer against sovereign debt exposures. Bank of Ireland passed the capital exercise with a Core tier 1 ratio of 12.9% which was 3.9% or €2.7 billion in excess of the 9% Core tier 1 requirement set by the EBA.

Information on the Recapitalisation of the Bank in the years ended 31 December 2011 and 31 December 2010 is shown in notes 49 and 50 to the consolidated financial statements.

The Government introduced the Credit Institutions Financial Support (CIFS) scheme on 30 September 2008 which guaranteed the deposits and certain liabilities of covered institutions and expired on 29 September 2010.

On 9 December 2009, the Minister for Finance commenced the Eligible Liabilities Guarantee (ELG) scheme which is intended to facilitate participating institutions issuing debt securities and taking deposits with a maturity of up to five years on either a guaranteed or unguaranteed basis, provided the relevant liabilities are acquired during an Issuance Window which was initially scheduled to expire on 29 September 2010 but which has subsequently been extended as set out below. The Bank joined the scheme on 11 January 2010. The costs of participating in the ELG scheme may be changed at the Minister for Finance's discretion.

On 1 June 2011, the Minister for Finance announced that the European Commission approved an extension of a modified ELG scheme to enable the issuance period to extend to 31 December 2011 subject to six monthly state aid approval by the European Commission (which is the maximum period permitted for such approval under the European Commission's policy on guarantee schemes in the financial sector). The extension of the ELG scheme was initially approved by the European Commission until 31 December 2011. The Irish Government has subsequently extended the ELG scheme for a further period of one year to 31 December 2012 and the EU Commission has approved the extension to 30 June 2012. Debt securities and deposits issued under the ELG scheme prior to 30 June 2012 will be covered to maturity, subject to a maximum maturity of five years. An approval by the EU Commission of a further extension of the ELG scheme to 31 December 2012 would ensure that debt securities and deposits issued under the ELG scheme prior to 31 December 2012 would be covered up to their maturity, subject to a maximum term of five years.

Under the ELG scheme and the CIFS scheme, the Minister for Finance may impose restrictions on the expansion of capital and lending activity of the Group as a covered institution, the declaration and payment of dividends and the implementation of buy-backs or share redemptions. No covered institution, including the Group, may acquire shares in any other credit institution or financial institution, establish subsidiaries or enter into or acquire new businesses where such activities would increase the liability of the covered institution under the ELG scheme or the CIFS scheme. In addition, the NTMA may issue directions to covered institutions to comply with some or all of the provisions of conduct, transparency and reporting requirements applicable to covered institutions under the ELG scheme and the CIFS scheme. These restrictions continue under the terms of the ELG scheme and survive the expiry of the CIFS scheme.

As a Participating Institution in NAMA, the Bank is subject to additional directions from the Central Bank and/or the Minister for Finance as to the conduct of its business. Under section 206 of the NAMA Act, the Central Bank may, with the approval of the Minister for Finance, give a direction to a Participating Institution in order to achieve the purposes of the NAMA Act. A direction under this section may restrict balance sheet growth, restrict the institution's ability to take over other credit institutions, require balance sheet reductions, or restrict or require consolidation and merger of Participating Institutions. Under section 207 of the NAMA Act the Central Bank may also direct a Participating Institution in writing to make any report that the Central Bank considers necessary to monitor the Participating Institution's compliance with the obligations under or by virtue of the NAMA Act. Pursuant to section 208 of the NAMA Act, a Participating Institution may also be directed by the Minister for Finance to draw up, or amend a restructuring or business plan and take reasonable steps to ensure than any draft business plan

submitted to the Minister for Finance accurately contains all relevant information. If the Minister for Finance approves a draft business plan, the Participating Institution is obliged to take reasonable steps to implement that plan.

Section 131 of the NAMA Act provides that a Participating Institution from which NAMA has acquired an Eligible Bank Asset may be obliged to continue to service (i.e. manage) the Eligible Bank Asset and a Participating Institution must comply with directions given by NAMA in respect of servicing such assets. In addition, Section 133 of the NAMA Act provides that NAMA may, for the furtherance of the achievement of its purposes under the Act, give directions to a Participating Institution to deal in a specified way with an Eligible Bank Asset which was not acquired. In exercising servicing obligations for NAMA, a Participating Institution must ensure that all relevant authorisations, consents and licences are in place. It is also possible that NAMA may itself service Eligible Bank Assets that it acquires.

On 30 March 2010 the Minister for Finance brought into force the Credit Review Guidelines regarding lending practices and procedures relating to the review of decisions of Participating Institutions, including the Bank, to refuse credit. The guidelines set out the procedures to be operated by the Credit Reviewer. The Credit Reviewer has the power to review a Participating Institution's decision to refuse a credit application for between €1,000 and €250,000 by an SME, a sole trader or a farming enterprise. Where the Credit Reviewer makes a recommendation that, considering the viability and repayment capacity of the applicant, the credit facilities should have been granted, the Participating Institution is required to either comply with the recommendation or issue an explanation as to why compliance with the recommendation is not appropriate. The guidelines do not grant the Credit Reviewer the power to override the lending decision of the Participating Institution.

In addition to the power to review individual applications, the Credit Reviewer also has a general power to review the lending policies (including from the perspective of a particular sector) of each Participating Institution and to issue reports to the Minister for Finance following such a review.

4. New and proposed legislation impacting the regulation and supervision of the banking sector

The Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act 2011)

The introduction of the Credit Institutions (Stabilisation) Act 2010 created a mechanism for State intervention in the banking industry to a degree which could have a very significant adverse impact on the Group's operations. This legislation is scheduled to cease to have effect on 31 December 2012, to be replaced as far as the Group is concerned by the existing permanent resolution regime for all other relevant financial institutions, as provided by the Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act 2011). Under the Resolution Act 2011 the Central Bank is given the authority to take over, run and break up troubled financial institutions as it seeks to minimise the cost of a bank failure for taxpayers (this power rests with the Minister under the Stabilisation Act). A special resolution fund is also to be set up, with a levy to be placed on banks to cover the cost of the Central Bank assuming control of a financial institution. Both the Resolution Act and the Stabilisation Act allow the Central Bank and the Minister respectively to require banks to be managed in the national interest rather than shareholders' interest. Under the Resolution Act, the Central Bank is also given the power to make an application to the High Court to appoint a special manager to run troubled banks and is also allowed to remove any staff directors or consultants. It can also create 'bridge banks' to take control of deposits and loans of a failed Institution pending their transfer to another bank.

On 24 January 2012 the Department of Justice published the heads of the proposed "Draft General Scheme of Personal Insolvency Bill" (the Draft Bill). The Government has indicated that a draft of the Bill in a form in which it can be introduced to parliament will be published by end of April 2012. The contents of the Draft Bill maybe subject to change throughout the stages of the legislative process.

The Draft Bill proposes the introduction of three non-judicial debt settlement procedures for individuals and a further reform of the bankruptcy regime (following initial reforms in 2011). Two of the proposed new arrangements will concern unsecured debt and will allow for the write-down or restructuring of unsecured debt owed by certain eligibile individuals. The third proposed new arrangement will allow for the write-down or restructuring of both secured and unsecured debt owed by certain eligibile individuals.

The Bank has and will continue to engage constructively with all stakeholders in connection with the process.

The Group's subsidiary bank in the United Kingdom, Bank of Ireland (UK) plc, comprises the Group's Post Office joint venture, its branch business in Northern Ireland, assets from its former intermediary mortgage business, and other parts of its UK business banking operations.

Bank of Ireland (UK) plc, a wholly owned subsidiary of the Group, commenced business on 1 November 2010. It is a United Kingdom registered bank which is directly authorised and regulated by the FSA and therefore subject to the full FSA prudential and conduct of business regulatory regime.

Bank of Ireland (UK) plc has, since its inception, undertaken the majority of Group banking business within the United Kingdom, which includes current account banking services, lending and deposit gathering through the Northern Ireland branch network and business banking relationship managers; all new residential mortgage lending within the United Kingdom; and certain business and consumer credit provision activities.

As well as banking activities undertaken in its own name Bank of Ireland (UK) plc also owns and manages the Group interest in its financial services joint venture with the Post Office Limited. Bank of Ireland (UK) plc also acts as the product provider for deposits, residential mortgages and other banking products provided under this joint venture arrangement. As a consequence of these joint venture arrangements Post Office Limited is an appointed representative of Bank of Ireland (UK) plc for those activities it carries out which are regulated by the FSA.

As a consequence of Bank of Ireland (UK) plc being authorised by the FSA, deposits held with the firm are protected by the Financial Services Compensation Scheme (FSCS) which protects the first £85,000 of deposits, per depositor, per institution.

Under the Banking Consolidation Directive, the Bank of Ireland has the right to provide banking services on a cross border basis, or through the establishment of a branch, to clients located in other EEA member states (known as host member states) on the basis of its home (Irish) authorisation, without the need for separate authorisation by the competent authorities of those host member states. This is known as passporting.

The Bank of Ireland has exercised its EU passport rights to provide banking services in the United Kingdom through its UK branch and also the provision of services on a cross border basis. These services consist of corporate banking and the management of those residential mortgage contracts within the United Kingdom that have not been transferred to Bank of Ireland (UK) plc.

The powers of the FSA in relation to passported EEA credit institutions (such as the Bank of Ireland) are less extensive than those which it has in relation to UK authorized credit institutions (such as Bank of Ireland (UK) plc). Pursuant to the principle of home country control incorporated in the Banking Consolidation Directive, the competent authority of the home country (in Ireland, the Central Bank) has primary responsibility for the supervision of credit institutions incorporated in another EEA state. The FSA, however, retains specific responsibility, in conjunction with the Central Bank, for supervising the liquidity of branches of EEA credit institutions which operate in the United Kingdom. The FSA also has the right to carry out on-the-spot verifications of supervisory information relating to branches to ensure that EEA credit institutions carrying on activities listed in the Banking Consolidation Directive in the United Kingdom take sufficient steps to protect against risks arising from their open positions on financial markets in the United Kingdom. The FSA is also able to apply conduct of business rules to credit institutions providing banking services in the United Kingdom. For example, in relation to deposit taking, it has made rules about conduct of business, approval of advertisements, the handling of complaints and the avoidance of money laundering.

Under the Banking Consolidation Directive as implemented in the United Kingdom, the FSA is empowered in specified circumstances to impose a prohibition on, or to restrict the listed activities of, an EEA credit institution providing services into the United Kingdom. Consistent with the allocation of supervisory responsibilities in the Banking Consolidation Directive, the FSA would usually exercise its power only after consulting the relevant home state authority which, as a "consolidated supervisor" under the Banking Consolidation Directive, amongst other things, coordinates the gathering and dissemination of information amongst any relevant supervisory authorities. The home state authority also provides for the exchange of information and the planning and co-ordination of supervisory activities in crisis situations and in cases where the authorities become aware of contraventions of the law by institutions covered by the Banking Consolidation Directive operating in their territory. In addition to being able to enforce its conduct of business rules, the FSA also has certain enforcement powers under UK legislation.

As the Group has established a place of business in England, it is subject to the provisions of the United Kingdom Companies Act 2006 that affect overseas companies.

In respect of its banking operations in Northern Ireland, the Group is empowered under the Bank of Ireland Act 1821 to issue bank notes as local currency, and is subject to the provisions of the Bankers (Northern Ireland) Act 1928, the Bank of Ireland and Subsidiaries Act 1969 and the UK Financial Services and Markets Act 2000 (as amended) (FSMA) in respect thereof. The Group intends to transfer the note issue activities to Bank of Ireland (UK) plc. A private bill to enable this to happen (the Bank of Ireland (UK) plc Bill) has been passed by the UK Parliament.

Since 1 December 2001, the FSA's power and responsibilities derive from the FSMA. The scope of the FSMA was extended in 2004 to include the sale and administration of certain retail mortgages and long-term care insurance, and in 2005 for general insurance intermediation. It was further extended in 2009 to include the provision of certain banking services that were previously covered by the Banking Code.

The FSA's basic method of supervising banks involves the regular reporting of statistical information and a regular set of returns giving balance sheet and consolidated statement of income data, material on the

maturity structure of assets and liabilities, sector—analysis of business and details of concentration of risk in assets and deposits. Review meetings are held by the FSA with the management of regulated firms. Under the risk based approach introduced in 2001, the FSA's supervision of banks is based on a systematic analysis of the risk profile of each bank. The FSA also publishes requirements it expects banks to meet on matters such as capital adequacy, limits on large exposures to individual entities and groups of closely connected entities, and liquidity.

In order to maintain authorisation under the FSMA, regulated firms (such as Bank of Ireland (UK) plc) must be able to demonstrate that they meet (and will continue to meet) a number of threshold conditions set out in the FSMA. For example, authorised firms must have adequate financial resources, not have close links of a nature that would impede the FSA's supervision of the firm and generally satisfy the FSA that they are a fit and proper person. In addition, firms are subject to the rules set out in the FSA Handbook, which also provides guidance on the application and interpretation of these rules. The FSA Handbook contains rules governing senior management arrangements, systems and controls, conduct of business, training and competence, money laundering and complaints handling. Any person within an FSA-regulated firm performing a controlled function will also need to be personally approved by the FSA under its Approved Persons regime. Approved persons are individually regulated by the FSA, and personally accountable to it, and must meet ongoing standards of conduct and fitness and propriety. The FSA has the power to take a wide range of disciplinary actions against regulated firms and any FSA approved persons, including private warnings, public censure, the imposition of fines, the variation, suspension or termination of the firm's authorisation or the removal of approved status from individuals.

The regulation of retail mortgages under the FSMA is in relation to regulated mortgage contracts, which are, broadly speaking, owner occupier credit agreements made on or after 31 October 2004 with individuals (whether consumer or business customers) and secured by first ranking security over land in the United Kingdom. Subject to exemptions and exclusions: (a) a regulated mortgage contract is unenforceable against the borrower without a court order if the lender or the broker did not hold FSA authorisation; and (b) any qualifying credit, which is any credit to an individual secured on land in the United Kingdom, is unenforceable against the borrower without a court order if it results from a financial promotion that is not issued or approved by an FSA authorised person. An individual borrower may have a claim for damages against an FSA authorised person for breach of FSA Handbook rules.

As a result of the EU Third Money Laundering Directive, the UK Money Laundering Regulations 2007 place a requirement on banks to verify the identity and address of customers opening accounts in the United Kingdom, and to keep records to help prevent money laundering and fraud. Guidance in respect of the Money Laundering Regulations 2007 is contained in the Guidance Notes of the Joint Money Laundering Steering Group, including in respect of the identification of new customers, record keeping and otherwise.

On 1 November 2009, the FSA introduced its Banking Conduct Regime for retail banking. The main constituents of the regime are: (a) extending the FSA's principles for businesses as they apply to deposit taking, from prudential matters only, to conduct of business matters in addition; (b) conduct of business requirements in the Payment Services Regulations 2009 ('PSR'), which apply to certain payment services made in euro or sterling; and (c) FSA Handbook rules on banking conduct of business, which apply to deposit taking in respects not covered by the PSR. On 1 November 2009, the British Bankers' Association, the Building Societies Association and the UK Cards Association launched The Lending Code, a voluntary code on unsecured lending to personal and small business customers, which is monitored and enforced by the Lending Standards Board.

Under the UK Banking Act 2009 (the Banking Act), substantial powers have been granted to HM Treasury, the Bank of England and the FSA (the Authorities) as part of a special resolution regime (SRR).

These powers enable the Authorities to deal with a UK bank (such as the Bank of Ireland (UK) plc), building society or other UK institution with permission to accept deposits pursuant to FSMA (each a relevant entity) in circumstances in which the Authorities consider its failure has become highly likely and a threat is posed to the public interest. The SRR consists of three stabilisation options and two insolvency and administration procedures applicable to UK banks which may be commenced by the Authorities. The stabilisation options provide for: (i) private sector transfer of all or part of the business of the relevant entity; (ii) transfer of all or part of the business of the relevant entity to a bridge bank established by the Bank of England; and (iii) temporary public ownership (nationalisation) of the relevant entity. In each case, the Authorities have been granted wide powers under the Banking Act including powers to modify contractual arrangements in certain circumstances and powers for HM Treasury to disapply or modify laws (with possible retrospective effect) to enable the powers under the Banking Act to be used effectively.

The purpose of the stabilising options is to address the situation where all or part of a business of a relevant entity has encountered, or is likely to encounter, financial difficulties, giving rise to wider public interest concerns. Accordingly, the stabilisation options may only be exercised if (a) the FSA is satisfied that a relevant entity (such as the Bank of Ireland (UK) plc) is failing, or is likely to fail, to satisfy the threshold conditions within the meaning of section 41 of the FSMA (which are the conditions that a relevant entity must satisfy in order to retain its authorisation to accept deposits), (b) following consultation with the other Authorities, the FSA determines that it is not reasonably likely that (ignoring the stabilising options) action will be taken that will enable the relevant entity to satisfy those threshold conditions, and (c) the Authorities consider the exercise of the stabilisation options to be necessary, having regard to certain public interest considerations (such as the stability of the UK financial systems, public confidence in the UK banking system and the protection of depositors). It is therefore possible that one of the stabilisation options could be exercised prior to the point at which any insolvency proceedings with respect to the relevant entity could be initiated.

HM Treasury or the Bank of England may exercise extensive share transfer powers (applying to a wide range of securities) and property transfer powers (including powers for partial transfers of property, rights and liabilities subject to certain protections made under The Banking Act 2009 (Restrictions of Partial Property Transfers) Order 2009) in respect of the Bank of Ireland (UK) plc. Exercise of these powers could involve taking various actions in relation to any securities issued by the Bank of Ireland (UK) plc (including ordinary shares) without the consent of the Bank (as its sole shareholder), including (among other things): (i) transferring the shares notwithstanding any restrictions on transfer and free from any trust, liability or encumbrance; (ii) converting the shares into another form or class; (iii) modifying or disapplying certain terms of the shares; and/or (iv) where property is held on trust, removing or altering the terms of such trust.

The FSMA established the Financial Services Compensation Scheme (FSCS). This applies to the activities of Bank of Ireland (UK) plc but not those of Bank of Ireland in the UK (which are covered by the Irish compensation scheme arrangements summarised above), The FSCS pays compensation to eligible customers of FSA authorised financial services firms that are unable, or likely to be unable, to pay claims against them. The levels of compensation are, for example, for firms declared in default on or after 1 January 2010 (31 December 2010 deposits), per customer, per firm and per type of claim: (a) for deposits, 100% of the first £85,000 (100% of the first sterling amount equivalent to €100,000 for firms declared in default on or after 1 January 2011); (b) for mortgage advice and arranging, 100% of the first £50,000; and (c) for insurance, 90% of the claim with no upper limit (except compulsory insurance is protected in full). Claims on the FSCS are funded by loans from the Bank of England and by levies on FSA authorised firms. FSA authorised deposit takers may be required to pay increased levies to repay such loans from the Bank of England.

With effect from 31 March 2012 all new and existing instant access deposits made with Bank of Ireland (UK) plc will no longer be covered by the Irish ELG. Existing depositors with fixed term deposits will remain covered by the Irish ELG until maturity or 30 March 2017, whichever date is earlier.

The FSMA also established the Financial Ombudsman Service (FOS), which determines complaints by eligible complainants in relation to FSA authorised financial services firms, consumer credit licensees and certain other businesses, in respect of activities and transactions within its jurisdiction. These arrangements cover the activities of both Bank of Ireland (UK) plc and the Bank of Ireland in the UK.

The FOS determines complaints on the basis of what, in its opinion, is fair and reasonable in all the circumstances of the case. The maximum level of financial award by the FOS is £150,000 (effective January 2012) plus interest and costs. The FOS may also make directions awards, which direct the business to take steps as the FOS considers just and appropriate.

In the United Kingdom, persons carrying on consumer credit business, consumer hire business or an ancillary credit business need a consumer credit licence from the UK Office of Fair Trading (OFT) under the UK Consumer Credit Act 1974 (CCA). The OFT from time to time issues general or sector specific guidance on what it expects of consumer credit licensees, and breaches of law and of OFT guidance may be taken into account by the OFT in determining whether a person is fit to hold a licence. The OFT has certain disciplinary powers in relation to consumer credit licensees, including imposing requirements and financial penalties for breach of such requirements. Various members of the Group are consumer credit licensees in relation to regulated consumer credit lending and mortgage broking.

The regulation of credit under the CCA is in relation to regulated consumer credit agreements, which are credit agreements made with individuals (whether consumer or business customers) subject to any applicable financial limits and exemptions. For example, a regulated mortgage contract under the FSMA is not a regulated consumer credit agreement under the CCA. A regulated consumer credit agreement is unenforceable against the borrower: (a) without an OFT order if the lender or the broker did not hold a consumer credit licence in relation to regulated consumer credit lending or broking respectively; or (b) without a court order, or totally in certain circumstances, if agreement requirements were not complied with. A borrower may have a claim against a lender in certain circumstances in relation to misrepresentation or breach of contract by a supplier in a transaction financed by a regulated consumer credit agreement.

The OFT is also the consumer and competition authority under the UK Enterprise Act 2002. The OFT and other bodies may enforce consumer legislation under the Enterprise Act 2002 by seeking an informal undertaking, or a formal undertaking, from a business, or seeking a court enforcement order against a business.

Since the May 2010 UK general election, a number of proposals for reform have been brought forward. Those that are likely to have a particular affect on the Group are summarised below.

In 2010, the government outlined its proposals for a new regulatory system. It announced that the FSA would be succeeded by two new regulatory authorities—the Prudential Regulation Authority (PRA), responsible for the prudential supervision of banks and insurance, and the Financial Conduct Authority

(FCA), focusing on consumer protection and market regulation—creating a 'twin peaks' style regulatory model in the UK.

The FSA have made progress towards establishing the new regulatory structure, setting out the operating philosophies and vision for the PRA and FCA and working on the detailed design of the two organisations.

During 2012/13, the FSA aim to achieve two significant milestones towards its transition to the new regulatory system:

The FSA's transition plans are designed to ensure an orderly and progressive transition to the new regulatory system, together with the opportunity to refine its thinking and processes. During the transition, the FSA will remain as a single regulatory authority and it will continue to deliver against its statutory objectives and business priorities.

The UK Government is consulting on proposed principles for a new category of simple products, giving consumers a straightforward option for comparing and buying products. It is intended that simple products should ensure that people understand the products they need, help them make better choices, and encourage competition in the market.

The UK Government is considering the merits of transferring responsibility for consumer credit regulation from the Office of Fair Trading (OFT) to the new the new conduct of business regulator the Financial Conduct Authority (the creation of which forms part of its wider proposals for reforming the UK regulatory system—see above).

The FSA has implemented (from 1 December 2010) a package of measures to ensure customers are treated more fairly when buying or complaining about Payment Protection Insurance including:

The UK Government has established the Independent Commission on banking which published an Interim Report in March 2011 and a final report in September 2011. Amongst the suggestions addressed were that:

In December 2011, the UK government published its response to the independent Commission on Banking's final report on recommended reforms to improve stability and competition in UK banking, which included some recommendations for inclusion in the Financial Services Bill. The government has confirmed that it will be implementing the main recommendations of the report in full—namely, that high-street banking activities be separated from investment banking activities by a ring-fence, that banks hold a higher capital buffer and that competition in the banking sector be strengthened. Primary and secondary legislation relating to the ring-fence will be completed within this Parliament.

The FSA's Mortgage Market Review has been ongoing since 2010. In December 2011, the FSA issued a consultation paper as part of the Review, proposing a future regime with the following key features:

In the United States, the Bank, its Connecticut branch, its representative offices and certain of its US non-bank subsidiaries are subject to a comprehensive regulatory structure involving numerous federal and state statutes, rules and regulations.

The Bank operates a branch in Connecticut from which it conducts a wholesale banking business. The branch is licensed by and is subject to regulation and examination by the Connecticut Department of Banking. The Bank has representative offices in the States of New York and Illinois. These representative offices are licensed by their respective states and are subject to the laws and regulations of those states. In addition, the Board of Governors of the Federal Reserve System exercises supervisory and regulatory authority over the branch, the representative offices and has umbrella or overall supervisory responsibility

for the US activities of the Group. US and State laws and regulations, including prudential restrictions, limit the permissible US activities of a foreign bank. For example, the branch has limits on the amount of credit it may grant to a single borrower, the branch may not accept retail deposits, and branch deposits and obligations are not insured by the US Federal Deposit Insurance Corporation or any other United States government agency. In addition, the Connecticut Department of Banking has the authority to take possession of the business and property of the Group located in Connecticut in certain circumstances relating to the branch. Such circumstances generally include violations of law, unsafe business practices and insolvency.

By operating a branch in the United States, the Bank and its subsidiaries are subject to regulation by the Board of Governors of the Federal Reserve System under various laws, including the Bank Holding Company Act of 1956, as amended (BHCA), and the International Banking Act of 1978. In this regard, the Bank has elected to become a 'financial holding company' (FHC) under the BHCA. FHCs may engage in a broader spectrum of commercial activities, including underwriting and dealing in securities and merchant banking activities, than are permitted to banking organisations that are not FHCs. To maintain its FHC status, the Bank is required to meet or exceed certain capital ratios and its branch is required to meet or exceed certain examinations ratings. The failure to maintain FHC status could limit the activities of the Bank and its subsidiaries in the US and it may have other adverse consequences.

The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) is broad and sweeping, and will change the way in which the Group is regulated in the US and in some cases outside the US. Since enactment of the Dodd-Frank Act in July 2010, there has been a stream of proposed regulations and final regulations issued by the various financial sector administrative agencies (e.g., the SEC, the CFTC, the Federal Reserve Board) and others are expected. These regulations include new rules for derivatives trading, prohibitions on proprietary trading and the sponsorship of, and investment in, hedge funds and private equity funds, new regulations for foreign investment advisors and heightened prudential standards for large banking organisations. The Dodd-Frank Act also makes changes to the corporate governance requirements applicable to Boards, stricter controls for determining conflicts of interest, procedures for receipt, retention and treatment of complaints, and say-on-pay of executive compensation and severance payments for departing employees. As of this date, it is still uncertain whether the cost or impact of compliance with the Dodd-Frank Act will be materially adverse (measured by revenue) to the Group. A definitive analysis of the effects of the legislation will not be available until all the final regulations have been fully adopted.

A major focus of US governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing and enforcing compliance with US economic sanctions issued by the Office of Foreign Assets Control. The Bank Secrecy Act as amended by the USA PATRIOT Act imposes obligations on the branch and subsidiaries to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to ensure compliance with US economic sanctions against designated foreign countries, nationals and others. Failure of a financial institution to maintain and implement adequate programmes to combat money laundering and terrorist financing or to ensure economic sanction compliance, could have serious legal, monetary and reputational consequences for the institution.

The Isle of Man Depositors Compensation Scheme (the Scheme) was established by the Depositors' Compensation Scheme Regulations 2010, in which Bank of Ireland (IOM) Limited, as a licensed deposit taker, participates. The Scheme compensates depositors with money in current and deposit accounts in financial institutions in the Isle of Man (including in the Bank) with up to £50,000 of net deposits (loans may be netted off against any deposits held with the same deposit taker) per individual depositor or £20,000 for most other categories of depositor. Cover is calculated per depositor, per deposit taker, if a bank fails.

Participants in the Scheme may be directed, by written notice, to make contribution levies in respect of the Scheme compensation fund. The net total amounts to be provided to the Fund in respect of all compensation costs arising from defaults in any period of ten years must not exceed—(a) £100,000,000 from the Treasury; and (b) £100,000,000 from all participants. These levies may, in any one financial year of the Scheme, equate to the greater of £50,000 and a sum representing 0.175% of the average deposits of the participant as determined by the Scheme Manager, up to a maximum of £500,000. In addition, participants in the Scheme may be directed to provide security in respect of any present or future levy contributions.

Bank of Ireland (IOM) Limited became a participating institution for the purposes of the ELG on 11 January 2010. Deposits not covered by the Isle of Man Scheme are covered by the ELG.

The Irish economy returned to growth, albeit modest, in 2011 after three years of recession: the Central Statistics Office (CSO) estimates that GDP last year rose by 0.7% in volume terms. The recovery has been led by exports (which now account for approximately 100% of GDP, with imports at 75%), which grew by 4.1% in 2011 (Source: CSO), offset by a 0.7% decline in imports. Domestic spending remains weak, however: consumer spending fell by 2.7% in 2011, government spending declined by 3.7%, while capital spending fell by over 10% (Source: CSO). The latter category includes construction spending which has fallen substantially since 2007, notably in terms of private residential construction. The Central Bank expects the economy to expand again by 0.5% in 2012, with export growth again offsetting a further decline in domestic spending.

Employment in Ireland rose for the first time in four years in the final quarter of 2011 (Source: CSO), and although the labour force has also fallen (primarily due to net emigration), the unemployment rate has risen sharply, from a low of 4.5% in 2006 to 14.6% in the latter part of 2011 and still remains above 14%. Inflation, as measured by the Consumer Price Index (CPI), rose to an average of 2.6% in 2011 from (0.9%) the previous year, reducing real household income growth and consumer spending. Interest rates in Ireland are set by the European Central Bank (ECB) and the ECB raised the repo rate in the first half of 2011, from 1% to 1.5%, but reduced it again back to 1% in the final two months of the year. Bank lending to the private sector is contracting (Source: Irish Central Bank) and the CSO data shows that residential property prices started falling in 2007 and at January 2012 had declined by over 48% from the peak. Commercial property prices have also fallen steeply, by approximately 65% (Source Investment Property Databank (IPD) index) and the Irish Government reduced the stamp duty on non-residential property transactions from 6% to 2% in the 2012 Budget and introduced a tax incentive for buyers of commercial property.

The downturn in the economy and the decision by the Irish government to provide capital support to the domestic banking system contributed to a substantial increase in Ireland's annual fiscal deficit and in total sovereign debt: Standard & Poors (S&P) has cut Ireland's sovereign debt rating to BBB+. In November 2010 the Government agreed a package with the IMF, the EU and the ECB ('the troika') incorporating official loans (and some bilateral loans) amounting to €67.5 billion to be drawn down as required to fund the fiscal deficit and to aid in the recapitalisation of the banking system. In return the Irish Government is required to meet quarterly fiscal targets and has committed to reducing the annual fiscal deficit to under 3% of GDP by 2015, from a Department of Finance estimate of 9.8% in 2011. The 2012 Budget projected a deficit of 8.6% of GDP. Ireland's membership of the euro also requires adherence to a set of fiscal rules and the Irish Government has announced that a referendum will be held on whether Ireland should ratify a new 'Fiscal Compact', which stipulates that members must run balanced budgets and enshrine that in domestic law.

The UK economy returned to growth in 2010 after a recession in the previous year and expanded again by 0.8% in 2011(Source: Office for National Statistics (ONS)). The independent Office for Budget Responsibility (OBR) expects the economy to grow by 0.8% in 2012, although ONS data shows that GDP contracted by 0.2% in the final quarter of 2011. The unemployment rate has risen to 8.4% in the final quarter of 2011 from less than 5.5% in 2007. Inflation, as measured by the CPI, has been above the Bank of England's (BOE) 2% target for some time (averaging 4.5% in 2011 and 3.3% in 2010) but the BOE believed that there was a significant risk that inflation would eventually fall well below the target. Consequently the BOE cut interest rates to an historic low of 0.5% and has embarked on more unconventional policies, including the purchase of £325 billion in government bonds, in an effort to boost credit creation and stimulate economic activity. Mortgage lending has begun to increase, albeit modestly, (Source: Bank of England), although it is still very weak relative to the position in 2007, and house prices have also risen by approximately 10% from the lowest level (Source: Nationwide index). Commercial property values also fell substantially in the recession but have also increased (Source: IPD index.)

2011 has been another challenging year for Bank of Ireland but also one in which the Group has made significant progress. The Group has remained focussed on its key priorities of developing its relationships with its customers whilst strengthening capital, funding the balance sheet, actively managing our credit and other risks and rigorously managing costs.

The Group further strengthened its capital position by the successful generation and raising of the €4.2 billion in incremental equity capital (including a 'buffer' of €0.5 billion) required under the 2011 Prudential Capital Assessment Review (2011 PCAR).

The Group also made substantial strides towards its deleveraging objectives by front-loading and announcing €8.6 billion of our three year target of €10 billion in divestments of loan assets at a cost within the base case discounts assumed in PCAR 2011. Of the €8.6 billion announced during 2011, €7.6 billion had been completed and derecognised by 31 December 2011. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months.

In addition, the Group achieved strong momentum and growth in customer deposits in the second half of the year, following its capital raise, and as a result, the Group's loan to deposit ratio has reduced from 175% at 31 December 2010 to 144% at 31 December 2011. The increase in customer deposits together with the balance sheet deleveraging, has significantly reduced the Group's requirement for wholesale funding by c.27% or €19 billion during the year ended 31 December 2011. The Group also raised €4.2 billion of unguaranteed secured term funding which, together with its participation in the ECB's December 2011 and March 2012 three year LTRO offerings, increased the tenure of its wholesale funding.

The strategic shape of the Group has been re-confirmed with the EU Commission's approval of the Group's updated EU viability and restructuring plan, and the Group is ahead of schedule in implementing the business disposals required under the plan.

However, operating income remains under pressure and loan losses continue to be at an elevated level.

The environment in which the Group operates remains difficult, particularly in Ireland reflecting the impact of the significant contraction in the Irish economy, the fiscal adjustment programme, high unemployment levels, elevated levels of business insolvencies, together with the fall in property values which has taken place and ongoing illiquidity in the Irish property markets. Improvements in the Group's UK Mortgage, Corporate Banking and unsecured consumer books have been offset by continued deterioration in the arrears profile in its Irish Mortgage book and ongoing weakness in the property sector, with Irish business customers who have a high dependency on the domestic economy continuing to face difficult conditions, which are impacting on their credit profile. Impairment charges on loans and advances to customers peaked at €2.9 billion in 2009. While these impairment charges have reduced since then, they have remained at an elevated level of c.€1.9 billion in 2010 and 2011. The Group expects the impairment charges to reduce from this level trending over time towards a more normalised impairment charge as the Irish economy recovers. The pace of the reduction will be particularly dependent on the future performance of the Group's Irish Residential mortgage book and commercial real estate markets.

The final asset transfers to NAMA were completed in October 2011. In total, c.€10 billion of assets have now transferred to NAMA at an average loss on disposal, including impairments, of 44%.

Under the 2011 PCAR, the Group was required to generate incremental equity capital of €4.2 billion, together with a €1.0 billion Contingent Capital instrument to be provided by the State. The Group successfully generated and raised the required equity capital through a combination of voluntary liability management exercises and a Rights Issue. The equity capital raised and generated was primarily from private sources with the State investing c.€0.2 billion in equity capital to ensure that the State maintained its desired minimum 15% shareholding in the Bank. The Capital Raising exercises brought onto the Group's Share Register a number of significant international institutional investors and fund managers.

At 31 December 2011, the Group's Core tier 1 and Total capital ratios were 15.1% (14.3% PCAR/EBA stress test basis) and 14.7% respectively, compared to its 31 December 2010 Core tier 1, and Total capital ratios of 9.7%, and 11.0% respectively. Risk weighted assets continue to decline in line with the deleveraging of the Group's balance sheet partly offset by some Risk Weighted Assets (RWA) re-weighting based on credit model experience.

The Group's deleveraging plan envisages reducing the size of its loan book from €114 billion at 31 December 2010 to c.€90 billion at 31 December 2013, by divesting €10 billion of certain loan portfolios/lending businesses, and net redemptions of c.€14 billion. During the course of 2011, the Group undertook a range of divestment initiatives across its international businesses announcing divestments totalling €8.6 billion of which €7.6 billion had been completed and derecognised by 31 December 2011. These were achieved at an average discount of 7.1% and were well within the base case discounts assumed as part of the March 2011 PCAR process. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months. The Group expects to be able to complete the remaining divestments well within the envisaged time frame and expects that the aggregate discounts on our €10 billion divestments will be achieved within the overall base case discount assumed in PCAR 2011.

Wholesale funding markets remained difficult in 2011, particularly for eurozone banks. Heightened concerns regarding European sovereign debt resulted in renewed instability in financial markets in the second half of the year adversely impacting market sentiment, restricting access to wholesale funding markets for both sovereigns and financial institutions across Europe. However, despite the difficult funding environment, the Group raised unguaranteed secured term funding of €4.2 billion utilising securities backed by its UK mortgage portfolios. This term funding together with the Group's participation in the ECB's three year December 2011 Long Term Refinancing Operation (LTRO) (€7.5 billion) and March 2012 LTRO (€4.8 billion) enabled the Group to lengthen the tenure of its wholesale funding such that 55% of its wholesale funding at 31 December 2011 had a remaining maturity of more than one year, compared to 32% at 31 December 2010.

The Group achieved strong momentum and growth in its customer deposits in the second half of the year, representing good progress towards its goal of funding its loan books by customer deposits and term funding. The Group increased its deposit base by 8%, which, together with the reduction in the size of its loan books, resulted in an improvement in its loan to deposit ratio to 144% at 31 December 2011 compared to 175% at 31 December 2010. Despite euro turmoil and a difficult and very competitive market, retail customer deposits in Ireland increased by 2% while retail deposits in the UK increased by 25%.

Increased deposits, balance sheet reductions and the raising of term funding have enabled the Group to significantly reduce the liquidity it receives from Monetary Authority sources such that drawings under exceptional liquidity facilities from the Central Bank at 31 December 2010 of €8 billion were repaid during the financial year to a €nil position at 31 December 2011.

The quantum of the Group's deposits and funding which had recourse to the State's ELG scheme reduced from an average of c.€69 billion during 2010 to an average of c.€44 billion during 2011 reflecting the aforementioned reduction in wholesale funding requirements and increases in the quantum of deposits in Ireland and the UK which have recourse to non-ELG deposit protection schemes. In December 2011, the Group obtained approval to accept non-ELG covered deposits from corporate customers.

Bank of Ireland remains committed to supporting, protecting and growing both existing and new customer relationships in its core Irish and international businesses while contributing positively to economic recovery, particularly in Ireland. The Group has met its lending commitments in 2011 in terms of the provision of lending capacity of €3 billion to the SME sector in Ireland, complemented by delivering on its commitments for the provision of specialised loans and venture capital funds for that sector. At the time of the recapitalisation in July 2011, Bank of Ireland also committed to the Minister of Finance to provide lending capacity of €3.5 billion and €4 billion for the years ending 31 December 2012 and 31 December 2013 respectively for new or increased credit facilities for SMEs. The Group has continued to provide lending capacity to the Irish owner occupier mortgage market providing one in every two mortgages to Irish customers in H2 2011, albeit in a very subdued market. The Group's Irish Corporate Banking and Treasury businesses continued to strongly support its Irish Corporate customers with a consistent long-term relationship based approach to their needs.

In the UK, the Group's successful joint venture with the UK post office continues to exceed our expectations in terms of the number of new savings customers that it has attracted as well as strong retention of existing customers. Sales of the Group's other financial services products through the Post Office were in line with its expectations. The Group's commitment to the UK market and the robustness of that commitment is demonstrated and underpinned by the establishment of the Group's UK regulated banking subsidiary in November 2010. The Group has continued to invest in meeting our customers' needs through developing new products and service offerings and enhancing its infrastructure. The Group is

making a significant investment in improving our payment systems and eBanking and telebanking/mobile propositions.

Through the implementation of its strategy and by focusing on its key priorities, the Group has made substantial progress on de-risking, deleveraging and strengthening the Group's balance sheet. The future strategic shape of the Group has been clarified giving it strong market positions in its chosen markets for its core businesses. The Group has been making material embedded reductions in its cost base with a more robust and efficient infrastructure being delivered.

Trading conditions in the Group's Irish and UK markets remain challenging with economic growth now forecast to be lower than previously envisaged and weak consumer and business confidence in the domestic economies continuing to prevail. This is adversely impacting on the demand for its products and progress towards the normalisation of impairment charges in its loan books. It is now anticipated that euro and sterling interest rates will remain lower for a longer period than previously expected and whilst funding markets have shown some improvement they remain volatile. Consequently, recovery in the Group's net interest margins has become more difficult.

The Group remains focussed on all of its targets and their achievement over time. It remains on track to meet its balance sheet restructuring and cost reduction targets within the previously envisaged time-frames. However, the timing and pace of achieving its income related targets are dependent on the pace of economic recovery and the trajectory of interest rates.

Having made considerable progress on its balance sheet and cost priorities, which will continue to require very close attention, the Group remain very focussed on its other key priorities in 2012 with an emphasis on the management of credit risks, reducing the cost of funding (including the cost of ELG) and improving margins and fee income whilst further developing its customer franchises in its core businesses.

The global economy slowed in 2011 with the consensus expecting weaker growth in 2012. Markets have been volatile, reflecting concerns about sovereign debt developments in the eurozone and the scale of the growth slowdown, notably in the eurozone and the UK. Risk aversion has been a recurring feature, in large part driven by developments in the euro debt crisis with the latter remaining a key risk to the global outlook. The ECB has responded by easing monetary policy and providing longer term funding to the banking sector in an effort to avoid a credit crunch. European Governments are also in the process of agreeing new fiscal rules which it is hoped will strengthen public finances in member countries and hence boost investor confidence. The US, in contrast, has ended 2011 on a stronger note and the consensus expects that outperformance relative to Europe will continue in 2012.

Irish GDP grew by 0.7%⁽⁴⁾ in 2011 following three years of contraction, although GNP, which adjusts for external profit and interest flows, recorded a 2.5%⁽⁴⁾ decline following a modest rise of 0.3%⁽⁴⁾ the previous year. However, the growth last year was due to a strong first half of the year as the economy contracted in the second half. Exports grew by 4.1% in 2011, which helped to offset another decline in domestic demand. Consumer spending fell by 2.7% last year, government consumption slid by 3.7% and capital investment fell for a fourth consecutive year, by 10.6% . On a quarterly basis, GDP declined by 0.2% in Q4 following a 1.1% fall in Q3, which means the economy slipped back into recession over the second half of the year. Exports fell by 1.1% in Q4 from the previous quarter, reflecting the slowdown in the international

economy generally, though consumer spending increased by 0.5% while capital spending rose by 14%. Risks to the Irish economy exist on the external front, given the slowdown in Europe in particular.

Domestic demand continued to fall in 2011 and a further decline is expected in 2012. Households have increased their savings ratio and repaid debt with rising inflation and job losses impacting adversely for consumers. Consumption is also likely to fall in 2012, although a deceleration in inflation may limit the expected decline in real incomes. The labour market remains weak with the unemployment rate remaining above 14%. Employment did rise in Q4 11, the first increase in employment in a quarter in four years, but it is unlikely that employment growth can be sustained through 2012. Capital spending has been volatile on a quarterly basis, notably investment in machinery and equipment, but remains on a moderating downward trend, although the continuing inflow of Foreign Direct Investment in 2011 may translate into a recovery in capital spending at some stage in 2012.

Mortgage lending is contracting on an annual basis and residential property prices are still falling, although lending to non-financial corporates has risen modestly over recent months. Commercial property prices are also still in decline, and are now some 65% below the peak⁽³⁾. The Government finances are improving and the fiscal targets under the EU/IMF programme are being met, with a deficit of under 10% of GDP last year⁽⁴⁾. The Government plans to impose further austerity measures until 2014 to reduce this deficit to under 3% of GDP in 2015⁽⁴⁾.

Growth has slowed in the UK and the economy has already posted one quarter of negative growth (Q4 2011) and at least one more quarter of contraction is likely. Growth for 2011 as a whole was 0.8%⁽⁶⁾ and may not be much better than 0.5% for 2012⁽⁵⁾. Unemployment in the UK stood at 8.4%⁽⁶⁾ in the three months to the end of January 2012 and the consensus forecast is for it to be higher in the face of sub-trend economic growth. Mortgage approvals have picked up of late but at around 50,000⁽⁷⁾ a month are about half the level recorded in a more normal economic and credit environment. The UK property sectors have showed signs of uneven recovery since 2009 but uncertainty remains around the pace and scale of future performance: residential prices have risen by c.10% from the trough in February 2009 according to the Nationwide index, but are still 11% below the peak, while the pace of capital growth recorded in commercial property has slowed in 2011⁽³⁾.

See item 4 'Information on the Company—Economic conditions affecting the Group'.

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Details of these critical accounting estimates and judgements are set out on pages F-41 to F-44 of this document.

The Group's exposure to liquidity risk is governed by the Group's liquidity and funding policy approved by the Court and the Group Risk Policy Committee (GRPC). The objective of the policy is to ensure that the Group can meet its obligations, including deposit withdrawals and funding commitments, as they fall due. The operation of this policy is delegated to the Group's Asset and Liability Committee (ALCO).

See the capital management section on pages 243 to 246 in Item 11 'Quantitative and Qualitative Disclosures about Market Risk' for further details about our capital management objectives and policies.

Lending commitments are agreements to lend to customers in accordance with contractual provisions; these are either for a specified period or, as in the case of credit cards and overdrafts, represent a revolving credit facility which can be drawn down at any time, provided that the agreement has not been terminated. The total amounts of unused commitments do not necessarily represent future cash requirements, in that commitments often expire without being drawn upon.

Further information on Off Balance Sheet items is shown in note 47 to the consolidated financial statements.

The Group changed its financial year end from 31 March to 31 December with effect from 31 December 2009. As a consequence of this change, the income statements for the Group are presented for the year ended 31 December 2011 compared to the year ended 31 December 2010 and the nine month period ended 31 December 2009. The balance sheets are 31 December 2011 compared to 31 December 2010.

The analysis of the impairment charge for the year ended 31 December 2010 and the nine month period ended 31 December 2009 between loans and advances to customers and assets held for sale to NAMA has been re-presented on the basis of the loans sold to NAMA during the year ended 31 December 2011 and the year ended 31 December 2010 to enhance comparability with no change to the total impairment charge.

The Group income statement has been presented on a statutory basis while the individual divisional income statements have been presented on an underlying basis in accordance with IFRS 8—Operating Segments. Information on the divisions and their underlying performance is shown in note 2 to the Consolidated Financial Statements – Operating segments (page F-47 to F-55).

Underlying excludes non-core items which are those items that the Group believes obscure the underlying performance trends in the business. The Group has treated the following items as non-core: gain on liability management exercises, loss on deleveraging of financial assets, gains or charges arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through

profit or loss', gain on disposal of business activities, gross-up for policyholder tax in the Life business, cost of restructuring programmes, impact of changes in pension benefits, investment return on treasury stock held for policyholders and impact of 'coupon stopper' on subordinated debt. See page 58 for further information.

The divisional underlying performance is reconciled to the Group statutory performance on pages 106 to 108.

References to 'the State' throughout this document should be taken to refer to the Republic of Ireland, its Government and, where and if relevant, Government departments, agencies and local Government bodies.

Percentages presented throughout this report are calculated on the absolute underlying figures and so may differ from the percentage variances calculated on the rounded numbers presented.

As part of the EU/IMF programme the Central Bank of Ireland (Central Bank) undertook a Prudential Capital Assessment Review (2011 PCAR) which incorporated a Prudential Liquidity Assessment Review (2011 PLAR) in the first quarter of 2011. The PCAR is an assessment of forward-looking prudential capital requirements, arising under a base case and stress case, with potential stressed loan losses, and other financial developments, over a three year (2011-2013) time horizon. The PLAR is an assessment of the deleveraging measures that the banking system is required to implement in order to reduce its reliance on short term wholesale funding and liquidity support from Monetary Authorities. The Group's deleveraging plan was agreed with the Central Bank as part of the PLAR exercise.

On 31 March 2011 the Central Bank announced the results of the 2011 PCAR, which required the Group to generate incremental equity capital of €4.2 billion (including a regulatory buffer of €0.5 billion).

In addition, €1.0 billion of Contingent Capital was also required through the issue of a debt instrument which, under certain circumstances, would convert to equity capital.

The Group's 2011 Recapitalisation of the Bank was completed in December 2011 and included a number of elements:

In the year ended 31 December 2011, the Debt for Equity offers including certain Canadian Dollar 2015 notes, the completion of the Kildare/Brunel securitisation liability management exercise and the repurchase of a number of Capital securities generated Core tier 1 capital of €2,451 million.

While the National Pensions Reserve Fund Commission (NPRFC) was originally granted an option to make a direct placing of up to 795 million units of ordinary stock at €0.10, it was announced on 8 July 2011 that the NPRFC would not be proceeding with this option.

On 8 July 2011 the Group announced a Rights Issue, underwritten by the NPRFC, of 19.1 billion units of ordinary stock at a price of €0.10 per unit to generate gross proceeds of €1.9 billion.

Total fees and other costs of €146 million were payable in connection with the Debt for equity offers (including the Debt for cash offers) and the underwritten Rights Issue.

On 25 July 2011, the Irish Government announced its agreement to sell up to 10.5 billion units of ordinary stock at €0.10 per unit (subject to certain conditions) to a group of significant institutional investors and fund managers. These investors are Fairfax Financial Holdings, WL Ross, Capital Research, Fidelity Investments and Kennedy Wilson. The Bank has been advised that each of these investors will manage their individual stockholdings independently.

Following the completion of the 2011 Recapitalisation of the Bank and the significant investment in Bank of Ireland, the State's stockholding in the Bank reduced to 15.1% of the Bank's fully diluted ordinary stock while the combined stockholding of the new group of significant institutional investors and fund managers is 34.9% .

In July 2011 the Group issued a Contingent Capital note to the State with a nominal amount of €1 billion and a maturity of five years. This Contingent Capital note is classified as a subordinated liability and it qualifies as Tier 2 capital. Further details are set out in note 42 to the Consolidated Financial Statements.



Net interest income	1,534		2,219		2,170
Other income (net of insurance claims)	2,381		2,377		1,437

Total operating income (net of insurance claims)	3,915		4,596		3,607
Operating expenses	(1,642	)	(1,070	)	(1,395	)
Impairment charges on financial assets (excluding assets sold to NAMA)	(1,960	)	(2,027	)	(2,335	)
Impairment charges on assets sold to NAMA	(44	)	(257	)	(1,722	)
Gain/(loss) on sale of assets to NAMA including associated costs	33		(2,241	)	—
Loss on deleveraging of financial assets	(565	)	—		—
Share of results of associates and joint ventures (post tax)	39		49		35
Profit/(loss) on disposal of business activities	34		—		(3	)

Total loss before tax	(190	)	(950	)	(1,813	)
Taxation	230		341		344

Profit/(loss)	40		(609	)	(1,469	)

Attributable to non-controlling interests	(5	)	5		(9	)
Attributable to stock holders	45		(614	)	(1,460	)

Profit/(loss)	40		(609	)	(1,469	)

Basic EPS per share	(0.7c	)	(21.5c	)*	(105.5c	)*

Diluted EPS per share	(0.7c	)	(21.5c	)*	(105.5c	)*

The period on period changes in 'net interest income' and 'net other income' are affected by certain IFRS income classifications. Under IFRS, certain assets and liabilities can be designated at 'fair value through profit or loss' (FVTPL). Where the Group has designated liabilities at 'fair value through profit or loss', the total fair value movements on these liabilities, including interest expense, are reported in 'net other income'. However, the interest income on any assets which are funded by these liabilities is reported in 'net interest income'. In addition, debt is raised in a variety of currencies and the resulting foreign exchange and interest rate risk is managed using derivative instruments-the cost of which is reported in 'net other income'.

The following table shows net interest income for the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009.

Net interest income of €1,534 million decreased by €685 million in the year ended 31 December 2011 from €2,219 million for the year ended 31 December 2010.

The Group has incurred higher Government guarantee fees in the year ended 31 December 2011 compared to the year ended 31 December 2010. Government guarantee fees of €449 million for the year ended 31 December 2011 compares to a charge of €343 million for the year ended 31 December 2010. The increase of €106 million reflects the higher fee structure associated with the ELG scheme partly offset by the reduction in the level of liabilities guaranteed. As the fees payable under the ELG scheme are directly attributable to and incremental to the issue of a security or the raising of a deposit, they are included in the calculation of the effective interest rate of that security or deposit and classified, under accounting rules, as part of 'Net interest income'. The fees payable under the Credit Institutions Financial Support (CIFS) scheme relate to the average balances of covered liabilities during the period, including liabilities that may have existed at the date of the introduction of the scheme. Therefore they are not directly attributable to or incremental to the issue of a specific security or the raising of a deposit and, under accounting rules, are classified as part of 'Net other income'. The CIFS scheme expired on 29 September 2010.

The decrease in net interest income of €685 million is primarily due to a reduction in average interest earning assets arising from sale of assets to NAMA, disposal of loan portfolios and loan repayments, and the increase in Government guarantee fees outlined above.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Net interest income of €2,219 million increased by €49 million in the year ended 31 December 2010 from €2,170 million for the nine month period ended 31 December 2009.

The Group incurred higher Government guarantee fees in the year ended 31 December 2010 compared to the nine month period ended 31 December 2009. On 11 January 2010, the relevant deposit taking entities within the Group were accepted as participating financial institutions in the Eligible Liabilities Guarantee (ELG) scheme. In the year ended 31 December 2010 the Group incurred fees of €275 million under the ELG scheme. As the fees payable under the ELG scheme are directly attributable to and incremental to the issue of a security or the raising of a deposit, they are included in the calculation of the effective interest rate of that security or deposit and classified, under accounting rules, as part of 'Net interest income'. The fees payable under the Credit Institutions Financial Support (CIFS) scheme relate to the average balances of covered liabilities during the period, including liabilities that may have existed at the date of the introduction of the scheme. Therefore they are not directly attributable to or incremental to the issue of a specific security or the raising of a deposit and, under accounting rules, are classified as part of 'Net other income'. The CIFS scheme expired on 29 September 2010.

The increase in net interest income is primarily due to the longer reporting period and improved asset pricing. These increases were partly offset by the cost of the ELG scheme, the increased cost of deposits in highly competitive markets, the higher cost of wholesale funding and lower average earning assets.

In January 2010 the European Commission imposed restrictions on the Group's ability to make coupon payments on certain subordinated liabilities unless under a binding legal obligation to do so (a 'coupon stopper' provision). On 31 December 2009 the Group expected that it would be precluded from making coupon payments for two subsequent years and therefore, under the effective interest rate method of accounting, the Group recognised a gain of €67 million in its financial statements for the nine months ended 31 December 2009. The European Commission stated on 15 July 2010 that the 'coupon stopper' provision would cease on 31 January 2011. Consequently the Group has recognised a charge of €36 million in the year ended 31 December 2010 to reflect this change.

The table below sets out a reconciliation of net interest income under IFRS to net interest income after adjusting for IFRS classifications.

Net interest income is impacted by the classification of certain income between interest expense and other income (net of insurance claims) under IFRS which relates to the designation of certain financial instruments under the fair value option. This treatment resulted in additional net interest income of €102 million for the year ended 31 December 2011 (year ended 31 December 2010: €175 million; nine month period ended 31 December 2009: €71 million), offset by a similar reduction in 'other income (net of insurance claims)' in the three reporting periods. After adjusting for the impact of the IFRS classifications, the Group's net interest income decreased by €612 million in the year ended 31 December 2011 (year ended 31 December 2010: decreased by €55 million).

The main drivers of the IFRS income classifications (which are classified as part of other income under IFRS) in the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009 are outlined below.

The decrease in the year ended 31 December 2011 compared to the year ended 31 December 2010 is largely due to changes in the composition of derivatives within the banking book and movements in interest rates, partially offset by the higher cost of deposits (at fair value through profit or loss).

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

The significant increase in the year ended 31 December 2010 compared to the nine month period ended 31 December 2009 is largely as a result of the de-designation by the Group of a number of hedging derivatives in the year ended 31 December 2010. These derivatives no longer qualify for hedge accounting under IFRS, meaning the interest cost of these derivatives was recognised in trading expense in the year ended 31 December 2010, whereas this cost was recognised in net interest income for the nine month period ended 31 December 2009.

The following table sets forth the Group's net interest margin for the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009.

The Group net interest margin for the year ended 31 December 2011 declined by 31 basis points to 1.08% as compared to a net interest margin of 1.39% for the year ended December 2010. 15 basis points of the decrease is due to the cost of the ELG scheme and 4 basis points is due to the classification of certain items under IFRS.

Net interest income (before deducting the cost of the ELG scheme and excluding the impact of IFRS income classification) of €1,881 million for the year ended 31 December 2011 has declined by €438 million compared to €2,319 million for the year ended 31 December 2010. The reduction is due to an 11% reduction in average earning assets in 2011 together with a lower net interest margin.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

The Group net interest margin for the year ended 31 December 2010 declined by 29 basis points to 1.39% as compared to a net interest margin (annualised) of 1.68% for the nine month period ended 31 December 2009. 12 basis points of the decrease was due to the classification of certain income under IFRS as mentioned above in the net interest income section and the cost of the ELG scheme, which the Group joined in January 2010, which was €275 million in the year ended 31 December 2010.

Net interest income (before deducting the cost of the ELG scheme and excluding the impact of IFRS income classifications) of €2,319 million for the year ended 31 December 2010 increased by €220 million compared to €2,099 million for the nine month period ended 31 December 2009. The increase of €220 million was primarily due to the longer reporting period, partly offset by lower net interest income due to a 7% reduction in average earning assets in 2010 together with a lower net interest margin.

The key drivers of the remaining margin decrease of 17 basis points (annualised) were as follows:

The following table shows other income (net of insurance claims) for the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009.



Net insurance premium income	929		969		665
Fee and commission income	612		633		474
Fee and commission expense	(192	)	(257	)	(255	)
Net trading income/(expense)	19		225		(28	)
Life assurance investment income, gains and losses	(38	)	474		958
Gain on liability management exercises	1,789		1,402		1,037
Insurance contract liabilities and claims paid	(750	)	(1,268	)	(1,462	)
Other operating income	12		199		48

Other income (net of insurance claims)	2,381		2,377		1,437

Other income (net of insurance claims) of €2,381 million for the year ended 31 December 2011 increased by €4 million compared to €2,377 million for the year ended 31 December 2010. IFRS income classifications, as mentioned above have also impacted 'other income (net of insurance claims)' (a charge of €102 million in the year ended 31 December 2011 versus a charge of €175 million in the year ended 31 December 2010).

Following the successful completion in July 2011 of the Debt for Equity Exchange (including a cash offer) together with other liability management exercises completed by the Group during the year ended 31 December 2011 the Group recognised a gain of €1,789 million as follows:

During the year ended 31 December 2011 a gain of €56 million was recognised arising from the impact of the change in credit spreads relating to the Group's own debt and deposits accounted for at 'fair value through profit or loss'. These liabilities consist of certain subordinated debt, certain structured senior debt and tracker deposits. A gain of €360 million was recognised during the year ended 31 December 2010.

The principal other items within net other income, after adjusting for IFRS income classifications, which contributed to the increase in other income in the year ended 31 December 2011 included:

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Other income (net of insurance claims) of €2,377 million for the year ended 31 December 2010 increased by €940 million compared to €1,437 million for the nine month period ended 31 December 2009. IFRS income classifications, as mentioned above also impacted 'other income (net of insurance claims)' (a charge of €175 million in the year ended 31 December 2010 versus a charge of €71 million in the nine month period ended 31 December 2009).

Following the successful completion of liability management exercises during the year ended 31 December 2010 the Group recognised a gain of €1,402 million in its income statement as follows:

During the year ended 31 December 2010 a gain of €360 million was recognised arising from the impact of the change in credit spreads relating to the Group's issued notes and other deposits accounted for at 'fair value through profit or loss' compared to a charge of €6 million on these liabilities in the nine month period ended 31 December 2009. These liabilities consisted of certain subordinated debt, certain structured senior debt and tracker deposits.

The principal other items within other income (net of insurance claims) and after the impact of IFRS income classifications which contributed to the increase in other income (net of insurance claims) in the year ended 31 December 2010 included:

The following table sets out the Group's other operating expenses for the year ended 31 December 2011, the year ended 31 December 2010 and for the nine month period ended 31 December 2009.

Operating expenses of €1,642 million for the year ended 31 December 2011 were €572 million higher compared to operating expenses of €1,070 million for the year ended 31 December 2010. The main driver of the increase was a once-off credit of €733 million in the year ended 31 December 2010 following amendments to the Group's defined-benefit pension schemes. This was partly offset by cost savings arising from a reduction in underlying pension costs and business disposals in 2011.

Staff costs (excluding pension costs) of €772 million for the year ended 31 December 2011 were €64 million lower when compared to €836 million for the year ended 31 December 2010 as a result of lower staff numbers. Average staff numbers (full time equivalents) for the year ended 31 December 2011 of 13,671 were 613 lower than average staff numbers (full time equivalents) for the year ended 31 December 2010 of 14,284.

Pension costs reflected the implementation of benefit changes in the Group's defined benefit pension schemes in 2010.

Other costs of €782 million for the year ended 31 December 2011 were €11 million lower when compared to €793 million for the year ended 31 December 2010. Costs increases arose on property impairments, the transition of IT outsourcing contracts and higher regulatory costs related to the PCAR/PLAR 2011 process. This was more than offset by lower costs of restructuring and cost savings following business disposals.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Operating expenses of €1,070 million for the year ended 31 December 2010 were €325 million lower when compared to operating expenses of €1,395 million for the nine month period ended 31 December 2009 primarily due to the impact of amendments to defined benefit pension schemes of €733 million but also reflecting lower staff numbers, continued tight management of all costs and the impact of changes in pensions benefits.

Staff costs (excluding pension costs) of €836 million for the year ended 31 December 2010 were €196 million higher when compared to €640 million for the nine month period ended 31 December 2009 as a result of the longer reporting period partly offset by lower staff numbers. Average staff numbers (full time equivalents) for the year ended 31 December 2010 were 471 lower compared to average staff numbers (full time equivalents) for the nine month period ended 31 December 2009.

During 2010, the Group completed its review of its defined benefit pension schemes and made changes to pension benefits under these schemes. A pension credit to the income statement of €559 million for the year ended 31 December 2010 compared to pension costs of €149 million for the nine month period ended 31 December 2009 was primarily due to the changes to the pension benefits arising from the above review partly offset by the longer reporting period.

Impairment charges on loans and advances to customers

Residential mortgages	469	404	231
—Retail Ireland	444	341	159
—Retail UK	25	63	72
Non-property SME and corporate	497	609	655
—Republic of Ireland SME	281	291	339
—UK SME	74	126	46
—Corporate	142	192	270
Property and construction	893	719	1,281
—Investment	593	448	305
—Land and development	300	271	976
Consumer	80	127	166

Total impairment charges on loans and advances to customers	1,939	1,859	2,333

Impairment charges on loans and advances to customers of €1,939 million for the year ended 31 December 2011 were €80 million or 4% higher compared to impairment charges of €1,859 million for the year ended 31 December 2010.

The impairment charge on Residential mortgages increased by €65 million from €404 million for the year ended 31 December 2010 to €469 million for the year ended 31 December 2011. The impairment charge on Retail Ireland mortgages was €444 million for the year ended 31 December 2011. The impairment charge in the year ended 31 December 2010 of €341 million included an amount of approximately €100 million, to reflect a change in the Group's assumption of the expected peak to trough decline in residential property prices from 45% to 55% in the impairment provisioning models for Retail Ireland mortgages.

Excluding this item the year on year increase in the impairment charge was €203 million reflecting increasing default arrears (90 days or more past due), in the owner occupied and particularly in the Buy to let segments. This increase is primarily attributed to the general economic downturn in Ireland and affordability issues including falling disposable incomes and high unemployment levels. In addition, the rise in arrears since August 2011 appears to have been impacted by the implementation of the new code of conduct on mortgage arrears and the considerable public speculation about potential Government policy measures regarding customers in arrears.

While there has been some stabilisation in rents in 2011, overall rent levels are significantly down on peak (estimated to be down approximately 26% from peak⁽²⁾) and Buy to let borrowers are increasingly impacted by rising repayments as interest only periods come to an end, which particularly impacted default arrears in the second half of the year.

The impairment charge on Retail UK mortgages of €25 million for the year ended 31 December 2011 was €38 million lower compared with the year ended 31 December 2010. Default arrears (3+ payments past due) and the associated impairment charge on Retail UK mortgages (particularly in the Buy to let and self certified segments) in the year ended 31 December 2011, were lower than the year ended 31 December 2010, in an environment where residential property prices performed better than the Group had expected.

The impairment charge on the Non-property SME and corporate loan portfolio was €497 million for the year ended 31 December 2011 compared to €609 million for the year ended 31 December 2010.

Challenging economic conditions in Ireland, a continuation of poor consumer sentiment and the increase in the level of business insolvencies have negatively impacted trading conditions and caused general pressure on the Irish SME sector. Those sectors correlated with consumer spending or the property markets are particularly impacted. As a result the level of impairment charge, while it reduced in the year ended 31 December 2011 as compared to the year ended 31 December 2010, continues to be at an elevated level.

In the UK SME segment, rising inflation and concerns regarding the impact of fiscal austerity have combined to leave UK economic conditions subdued. The year on year reduction primarily reflects the non-reccurence of impairment charges on a small number of large individual cases in the year ended 31 December 2010.

Larger Irish corporate customers trading internationally and non-Irish based corporate customers continued to experience more favourable economic conditions with the impairment charge in the Corporate business lower in the year ended 31 December 2011 as compared with the year ended 31 December 2010.

The impairment charge of €893 million on the Property and construction portfolio for the year ended 31 December 2011 has increased by €174 million compared to the impairment charge of €719 million for the year ended 31 December 2010. The Property and construction portfolio amounted to €21 billion at 31 December 2011 comprising €17 billion of investment property loans and €4 billion of land and development loans.

The impairment charge on the investment property element of the Property and construction portfolio was €593 million for the year ended 31 December 2011 compared to €448 million for the year ended 31 December 2010.

The increase in the level of impaired loans and associated impairment charges is due to lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods, together with a requirement for increased incentives to attract new tenants. In addition, weaker consumer spending and sentiment is adversely affecting trading performance, yields and asset values across the retail and investment property sector. Falling asset values in the Republic of Ireland and Northern Ireland in particular, have also adversely impacted the level of the impairment charge in the year ended 31 December 2011.

The impairment charge on the land and development element of the Property and construction portfolio was €300 million for the year ended 31 December 2011 compared to €271 million for the year ended 31 December 2010 reflecting lower house prices, over supply of residential housing stock, and illiquid property markets in the Republic of Ireland and in Northern Ireland.

The impairment charge of €80 million on Consumer loans for the year ended 31 December 2011 is €47 million lower compared to the impairment charge of €127 million for the year ended 31 December 2010.

Consumer loans have reduced significantly reflecting accelerated repayments and subdued demand for new loans and other credit facilities. Default arrears and impairment charges were better than expectations, in both the Republic of Ireland and the UK.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Impairment charges on loans and advances to customers of €1,859 million for the year ended 31 December 2010 were €474 million or 20% lower compared to impairment charges of €2,333 million for the nine month period ended 31 December 2009.

Impairment charges on Residential mortgages increased by €173 million from €231 million for the nine month period ended 31 December 2009 to €404 million for the year ended 31 December 2010. The ongoing economic slowdown in Ireland including lower levels of employment, reduced disposable income and falling house prices continued to adversely impact the level of mortgage arrears which increased significantly in 2010. In addition the buy to let element of the Irish residential mortgage book was impacted by a lower demand for rental properties caused in part by net migration out of Ireland which, together with the existing levels of oversupply in the housing market put downward pressure on rental income. This led to an increase in impaired loans with a corresponding increase in the impairment charge. In the UK, the level of Residential mortgage arrears was up marginally year on year and the related impairment charge was below expectations.

The impairment charge on the Non-property SME and corporate loan portfolio was €609 million for the year ended 31 December 2010 compared to €655 million for the nine month period ended 31 December 2009. Despite the longer reporting period the impairment charge on this portfolio reduced. Losses in Corporate Banking in the year ended 31 December 2010 were significantly lower than in the nine month period ended 31 December 2009. In particular, the leveraged acquisition finance portfolio which is very well spread geographically and sectorally benefitted from the global economic recovery and achieved some provision write-backs. However the stressed economic conditions in Ireland, continued poor consumer sentiment and a heightened level of business insolvencies negatively impacted trading conditions and caused general pressure on the Non-property SME sector. Those SME sectors correlated with consumer spending were particularly impacted.

The impairment charge of €719 million on the Property and construction portfolio for the year ended 31 December 2010 reduced by €562 million compared to the impairment charge of €1,281 million for the

nine month period ended 31 December 2009. The Property and construction portfolio amounted to €24.4 billion at 31 December 2010 comprising of €19.8 billion of investment property loans and €4.6 billion of land and development loans.

The impairment charge on the investment property element of the Property and construction portfolio was €448 million for the year ended 31 December 2010 compared to €305 million for the nine month period ended 31 December 2009. Impairment charges on the investment property loan book increased due to the impact of underlying economic conditions, reduced asset values and low levels of transactions and illiquidity in property markets which continued, particularly in Ireland, to reduce rental flows and delay recovery prospects.

The impairment charge on the land and development element of the Property and construction portfolio was €271 million for the year ended 31 December 2010 compared to €976 million for the nine month period ended 31 December 2009. The impairment charge in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market which was significantly impacted by falling property prices, a negative outlook for asset values, oversupply of residential housing stock in Ireland and generally weak economic conditions, particularly in Ireland. In addition, the uncertainties which existed in the latter half of 2009 as the NAMA process evolved led to a low level of transactions in the Irish commercial property sector due to investor uncertainty.

The impairment charge of €127 million on the Consumer loan book for the year ended 31 December 2010 was €39 million lower compared to the impairment charge of €166 million for the nine month period ended 31 December 2009 despite the longer reporting period as the default rates were better than expected. In addition the loan book reduced faster than expected reflecting debt repayment and a dearth of demand for new loans and other credit facilities.

Impairment charges on assets sold to NAMA of €44 million for the year ended 31 December 2011 reduced by €213 million compared to the impairment charge of €257 million for the year ended 31 December 2010 as assets transfers to NAMA were largely completed in the prior year.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

The impairment charge on assets sold to NAMA of €257 million for the year ended 31 December 2010 which has reduced by €1,465 million compared to the impairment charges of €1,722 million for the nine month period ended 31 December 2009. The impairment charge in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market which was significantly impacted by falling property prices, a negative outlook for asset values, an oversupply of residential housing stock in Ireland and generally weak economic conditions, particularly in Ireland. In addition, the uncertainties which existed in the latter half of 2009 as the NAMA process evolved led to a low level of transactions in the Irish commercial property sector due to a lack of demand from investors.

The impairment charges on assets sold or held for sale to NAMA of €257 million in the year ended 31 December 2010 reflects the impact of underlying economic conditions, reduced asset values and low levels of transactions and illiquidity in property markets which have continued to reduce rental flows and delay recovery prospects.

An impairment charge on available for sale (AFS) financial assets of €21 million was incurred in the year ended 31 December 2011 due primarily to a charge of €16 million on subordinated debt issued by Irish Life and Permanent plc. In the year ended 31 December 2010, the Group incurred an impairment charge of €168 million. This included a charge of €98 million on a holding of subordinated debt issued by Allied Irish Banks plc. In addition, the Group incurred an impairment charge of €70 million on NAMA subordinated bonds following the decision by NAMA not to pay the discretionary coupon due on 1 March 2011. An impairment charge on Available for sale financial (AFS) assets of €2 million (€1 million each in Corporate Banking and Global Markets) was incurred in the nine month period ended 31 December 2009.

The gain/(loss) on sale of assets to NAMA reflects those assets that were sold to NAMA in the year ended 31 December 2011 and the year ended 31 December 2010 as set out below. There were no transfers to NAMA during the nine month period ended 31 December 2009.

Gain/(loss) on sale of assets to NAMA

Fair value of consideration⁽¹⁾			246				5,046
Assets transferred
—Loans sold to NAMA (nominal value)	(498	)			(9,340	)
—Derivatives sold to NAMA (fair value)	—				(61	)
—Impairment provisions at date of sale	198		(300	)	2,237		(7,164	)

Other items			(3	)			(123	)

			(57	)			(2,241	)

Adjustment to consideration in respect of assets transferred during 2010⁽²⁾			90				—

Gain/(loss) on sale of assets to NAMA			33				(2,241	)

During the year ended 31 December 2011, the Group sold €498 million of assets to NAMA (year ended 31 December 2010: €9,401 million) before impairment provisions at the date of sale of €198 million (year ended 31 December 2010: €2,237 million). The fair value of the consideration received for these assets amounted to €246 million (year ended 31 December 2010: €5,046 million). After taking account of other items and the adjustment to consideration in respect of assets transferred during 2010, the Group's gain on sale of assets to NAMA was €33 million (year ended 31 December 2010: a loss of €2,241 million).

The Group announced the deleveraging of financial assets with a carrying value of €8.6 billion during 2011 of which €7.6 billion had been completed and derecognised by 31 December 2011. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months. The assets of €1 billion which the Group has contracted to sell but where the sale had not completed by 31 December 2011 are reported as other assets classified as held for sale as at 31 December 2011 and further information is shown in note 17 on page F-71.

The taxation credit for the Group was €230 million for the year ended 31 December 2011 compared to a taxation credit of €341 million for the year ended 31 December 2010 due to losses incurred in both years (see note 20 on page F-75). The effective tax rate for the year ended 31 December 2011 was a credit of 121% compared to a credit of 36% for the year ended 31 December 2010.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

The taxation credit for the Group was €341 million for the year ended 31 December 2010 compared to a taxation credit of €344 million for the nine month period ended 31 December 2009 due to losses incurred in both periods (see note 20 on page F-75). The effective tax rate for the year ended 31 December 2010 was a credit of 36% compared to a credit of 19% for the nine months ended 31 December 2009.



Loans and advances to customers (after impairment provisions)	102	114
Assets held for sale to NAMA (after impairment provisions)	—	1
Liquid assets	31	30
Other assets	22	22

Total assets	155	167

Customer deposits	71	65
Wholesale funding	51	70
Subordinated liabilities	1	3
Other liabilities	22	22

Total liabilities	145	160

Stockholders' equity	10	7

Total liabilities and stockholders' equity	155	167

The Group's loans and advances to customers (after impairment provisions) at 31 December 2011 of €102 billion reflects a decrease of 11% when compared to the Group's loans and advances to customers of €114 billion at 31 December 2010. On a constant currency basis the Group's loans and advances to customers (after impairment provisions) at 31 December 2011 fell by 11% (€13 billion) when compared to the Group's loans and advances to customers of €114 billion at 31 December 2010. The key drivers of the decrease include significant progress on the deleveraging plan which includes the partial divestment of the following portfolios:

For further information on the loss on deleveraging of financial assets see note 17 on page F-71.

Other drivers include net loan repayments and generally subdued demand for new loans, notwithstanding the Group's efforts to generate new business from the Group's core franchises as well as the increase in impairment provisions partly offset by foreign exchange movements.

The composition of the Group's loans and advances to customers by division at 31 December 2011 was broadly consistent with the composition at 31 December 2010 as set out in the table below.

	31 December 2011						31 December 2010

Composition by portfolio Loans and advances to customers	€bn			%			€bn			%
Residential mortgages		57			53	%		60			51	%
—Retail Ireland		28			26	%		28			24	%
—Retail UK		29			27	%		32			27	%
—Retail UK (Stg£bn equivalent)		25			—			28			—
Non-property SME and corporate		27			25	%		31			26	%
—Republic of Ireland SME		11			11	%		11			9	%
—UK SME		4			3	%		4			3	%
—Corporate		12			11	%		16			14	%
Property and construction		21			19	%		24			20	%
—Investment		17			16	%		20			17	%
—Land and development		4			3	%		4			3	%
Consumer		3			3	%		4			3	%

Loans and advances to customers (before impairment provisions)		108			100	%		119			100	%
Impairment provisions		(6	)					(5	)

Loans and advances to customers (after impairment provisions)		102						114			(11	%)

This is presented in the balance sheet on page F-6 as:
Loans and advances to customers		100						114
Other assets classified as held for sale		2						—

Loans and advances to customers (after impairment provisions)		102						114			(11	%)

The Group's primary markets are Ireland and the UK and exposures originated and managed in these countries represent a material concentration of credit risk. Similarly, the Group exhibits a material concentration in Residential mortgages and in the Property and construction sector.

The Group's Residential mortgage portfolio is widely diversified by individual borrower and amounted to 53% of total loans at 31 December 2011 (31 December 2010: 50%). 48% of Residential mortgages relate to Ireland and 52% relate to the UK at 31 December 2011. The Group has previously announced its withdrawal from the intermediary sourced mortgage market in the UK. At 31 December 2011 this book amounted to £25 billion (before impairment provision).

The Property and construction sector accounted for 19% or €21 billion of total loans at 31 December 2011 (31 December 2010: 20% or €24 billion). This book consists primarily of investment loans.

The stock of impairment provisions on loans and advances to customers of €6.4 billion at 31 December 2011 reflects an increase of €1.4 billion when compared to the stock of impairment provisions of €5.0 billion on loans and advances to customers at 31 December 2010.

The Group's deleveraging initiatives contributed significantly to the reduction in loans and advances to customers as at 31 December 2011.

For further information on the assets held for sale see note 30 to the Consolidated Financial Statements. Further analysis and commentary on changes in the loan portfolios, asset quality and impairment is set out in the Risk Management Report. See pages 175 to 253.

The Group's assets held for sale to NAMA (after impairment provisions) at 31 December 2011 were €nil. During the year ended 31 December 2011, the reduction in assets of €0.8 billion held for sale to NAMA reflects transfers to NAMA of €0.3 billion and changes in the eligibility of assets of €0.5 billion.

The composition of the Group's assets held for sale to NAMA by portfolio and by division at 31 December 2010 is set out in the tables below:

The movement in assets held for sale to NAMA and the related impairment provisions during the year ended 31 December 2011 is shown below:

The Group's holding of liquid assets at 31 December 2011 of €31 billion has increased by €1 billion when compared to 31 December 2010. Of the €31 billion Group liquid assets, c.€8 billion relates to Bank of Ireland (UK) plc holdings and c.€1 billion relates to Isle of Man holdings. Liquid assets in excess of regulatory liquidity requirements were held in Bank of Ireland (UK) plc as the Group awaits regulatory approval for the transfers of loans to Bank of Ireland (UK) plc. The Group expects its excess holdings of liquid assets in Bank of Ireland (UK) plc to reduce during 2012 as regulatory approval is received.

In the year ended 31 December 2011, a quantity of the NAMA bonds have been repaid by 25% of the redemptions expected by 2013, 80% of the redemptions expected by 2017 and 100% of the redemptions expected by 2019.

Further details of the AFS portfolio and information on NAMA bonds are set out on pages 202 and 204.

Customer deposits comprise demand, notice and term deposits as well as credit balances on current accounts.

Group customer deposits were €71 billion at 31 December 2011 compared to €65 billion at 31 December 2010 as set out in the table below. Following the successful recapitalisation of the Group in July 2011 the Group has experienced a strong growth in deposit balances (growing by €8 billion between July 2011 and December 2011). Key drivers of this increase included a significant Group wide focus on deposit gathering,

new product developments and maximisation of cross selling and new business opportunities through our distribution channels in Ireland and the UK.

Customer deposits

Retail Ireland	36		35
—Deposits	25		24
—Current account credit balances	11		11
Retail UK	27		21
Retail UK (Stg£bn equivalent)	22		18
—UK Post Office	16		11
—Other Retail UK	6		7
Corporate and Treasury	8		9
—Corporate and Treasury deposits	8		8
—BoISS related	—		1
Total customer deposits	71		65

Loan to deposit ratio	144	%	175	%

The Group's loan to deposit ratio was 144% at 31 December 2011, compared to 175% at 31 December 2010 which is in line with the targets that were set out in the PCAR/PLAR 2011.

During 2011, despite continuing intense competition, the Group's retail customer deposit base in Ireland increased by €1 billion or 2% supported by the launch of a number of successful personal and business deposit products and ongoing management of maturing deposits and new business opportunities. The Group did not purchase any deposit books in 2011 and the Retail book continues to be of a granular nature. Current account credit balances amounted to €11.3 billion at 31 December 2011 as compared with €11.5 billion at 31 December 2010.

The Group's retail deposit gathering activities in its joint venture with the UK Post Office continue to exceed expectations on both retention rates and new deposit growth as balances amounted to £16 billion at 31 December 2011, which represents an increase of £5.0 billion or 44% since 31 December 2010. The Group's deposit gathering strategy in the UK has been successfully underpinned by the incorporation in November 2010 of the Group's UK licensed banking subsidiary—Bank of Ireland (UK) plc. Deposits in the Group's offshore unit declined by €0.6 billion in 2011, however they stabilised in the second half of the year following the recapitalisation of the Group.

Corporate and Treasury deposits amounted to €7.7 billion at 31 December 2011 as compared with €9.4 billion at 31 December 2010. The net decrease of €1.7 billion is a result of the disposal of BoISS whose customers had placed deposits of c.€1 billion with the Group at 31 December 2010, and a reduction in corporate balances in the first half of 2011. Corporate balances experienced growth of c.€1 billion in the second half of the year following the recapitalisation of the Group indicating a stabilisation of the Group's core corporate deposit base.

Customer deposits at 31 December 2011 of €71 billion (31 December 2010: €65 billion) do not include €2.2 billion (31 December 2010: €1.9 billion) of savings and investment-type products sold by Bank of Ireland Life. These products have a fixed term (typically of five years) and consequently are an additional stable source of retail funding for the Group.

At 31 December 2011, €43 billion of the Group's customer deposits are guaranteed under the Irish Deposit Guarantee Scheme (DGS) and the UK Financial Services Compensation Scheme (FSCS) (31 December

2010: €35 billion), while €26 billion are covered by the Eligible Liabilities Guarantee Scheme (31 December 2010: €29 billion).

On a constant currency basis the Group's customer deposits at 31 December 2011 grew by 7% (€4.3 billion) when compared to the Group's customer deposits at 31 December 2010.

	31 December 2011					31 December 2010

Wholesale funding sources	€bn		%			€bn		%
Secured funding		40		78	%		53		76	%
—Monetary authority (gross)		23		45	%		33		47	%
—Covered bonds (asset backed securities)		6		12	%		7		10	%
—Securitisations		4		8	%		5		7	%
—Private market repo		7		14	%		8		11	%
Unsecured funding		11		22	%		17		24	%
—Senior debt		9		18	%		13		19	%
—Bank deposits		2		4	%		3		4	%
—Commercial Paper and Certificates of Deposits		—		—			1		1	%

Total Wholesale funding		51		100	%		70		100	%

Wholesale funding > 1 year to maturity		28		55	%		22		32	%
Wholesale funding < 1 year to maturity		23		45	%		48		68	%
Drawings from Monetary Authorities (net)		22		—			31		—

Wholesale funding requirements reduced from €70 billion at 31 December 2010 to €51 billion at 31 December 2011 primarily due to:

The Group's senior unsecured debt at 31 December 2011 of €9 billion has reduced by €4 billion from €13 billion at 31 December 2010.

During 2011, the Group has raised secured term funding from private market sources amounting to c.€4.2 billion with an average maturity (at date of issue) of 2.4 years and an average spread equivalent to 250 basis points over three month Euribor.

In early December 2011, the Group announced it would not call notes issued by the Brunel and Kildare securitisation vehicles on the relevant call dates in March 2012 and April 2012, with any future redemption decisions being taken on an economic basis and having regard to prevailing market conditions.

In December 2011, the Group participated in the ECB three year Long Term Refinancing Operation (LTRO) raising c.€7.5 billion funding with a maturity in January 2015 by converting the term of its existing drawings from short term to longer term with no new drawings.

policy operations. These bonds have a liquidity value of €8.45 billion. They have consistently rolled over on a quarterly basis and the current maturity date is April 2012.

In March 2012, the Group participated in the second ECB three year LTRO when it converted c.€4.8 billion of mainly shorter term funding to three year funding with a maturity of February 2015.

The drawings under the exceptional liquidity facilities from the Central Bank at 31 December 2010 of €8 billion were repaid during the financial year such that drawings at 31 December 2011 were €nil.

At 31 December 2011, 55% of wholesale funding had a term to maturity of greater than one year compared with 32% at 31 December 2010, reflecting secured term funding raised and the participation in the ECB's three year LTRO offerings. The Group's unsecured maturities are €2.7 billion in 2012 and €2.6 billion in 2013.

The refinancing requirement for the Group from unsecured wholesale maturities remains low in 2012. This reflects the overall reduction in wholesale funding achieved to date and expected futher reductions in wholesale funding in line with PLAR targets.

At 31 December 2011, the Group's subordinated liabilities amounted to €1.4 billion compared to €2.8 billion at 31 December 2010.

In February 2011, the Group exchanged €103 million nominal value of certain Canadian dollar Lower tier 2 securities for €56 million of euro and Canadian dollar medium term notes due in 2012. This generated additional Core tier 1 capital of €46 million whilst reducing Total capital by a net €56 million.

In June 2011, as part of the 2011 Capital raise the Group launched a number of Liability Management Exercises between June 2011 and December 2011 which resulted in a reduction of €2.2 billion in subordinated liabilities and generated €2.1 billion of Core tier 1 capital.

In addition, the Group exercised call options in respect of €0.1 billion of subordinated liabilities which generated further Core tier 1 capital for the Bank of €0.1 billion.

In July 2011, the Group issued a Contingent Capital note (CCN) with a nominal value of €1 billion and a maturity of five years to the State and received cash of €985 million, (net of a fee of €15 million). For further information see page F-131.

The Capital contribution of €116 million reflects the difference between the net proceeds received and the fair value of the note on date of issue.

The embedded derivative asset reflects the embedded option to convert the note to ordinary capital stock of the Bank in the event of the Bank's Core tier 1 falling below 8.25%. The embedded derivative asset value of €83 million at 31 December 2011 reflects a charge of €8 million attributed to the mark to market movement on the derivative during the period. The charge of €49 million at 31 December 2011 reflects a fair value hedge adjustment and an effective interest rate adjustment on the subordinated liability for the period.

Movements in Stockholders' Equity

Stockholders' equity at beginning of period	7,351		6,387
Movements:
Profit/(loss) attributable to stockholders	45		(614	)
Dividends on preference stock	(222	)	—
Capital Raising
Net new equity capital issued	2,557		1,006
Foreign exchange movements	180		157
Cash flow hedge reserve movement	314		275
Pension fund obligations	(117	)	391
Available for sale (AFS) reserve movements	103		(220	)
Reissue of stock/treasury stock	(1	)	(7	)
Other movements	(8	)	(24	)

Stockholders' equity at end of period	10,202		7,351

Stockholders' equity increased from €7,351 million at 31 December 2010 to €10,202 million at 31 December 2011, primarily due to new equity capital issued during 2011.

The profit attributable to stockholders of €45 million for the year ended 31 December 2011 compares to the loss attributable to stockholders of €614 million in the year ended 31 December 2010.

On 21 February 2011, the Group paid a dividend of €214.5 million on the 2009 Preference Stock (€1.8 billion outstanding) held by the NPRFC and dividends due of €3.7 million on its euro and sterling Preference Stock. On 17 August 2011, the Group paid dividends due of €3.4 million on its euro and sterling Preference Stock.

Foreign exchange movements relate primarily to the impact on the translation of the Group's net investments in foreign operations arising primarily from the 3% strengthening of the sterling against euro in the year ended 31 December 2011.

The cash flow hedge reserve movement reflects the impact of changes in interest rates on the mark to market value of cash flow hedge accounted derivatives. Over time, the reserve will flow through the income statement in line with the underlying hedged instruments.

The movement in retirement benefit obligations is primarily driven by movements in asset values and changes to key assumptions used in the calculation of the schemes' liabilities, including the discount rate, the inflation rate, the rate of increases in salaries and in pension payments.

The AFS reserve movement in the year ended 31 December 2011 is driven by tightening credit spreads, particularly on the portfolio of Irish Government bonds and the transfer of €21 million to the income statement arising from the impairment of bonds including Irish Life and Permanent plc.

Other assets, at 31 December 2011, include derivative financial instruments with a positive fair value of €6.4 billion compared to a positive fair value of €6.4 billion at 31 December 2010.

At 31 December 2011, the deferred tax asset was €1.4 billion, an increase of €0.3 billion compared to €1.1 billion at 31 December 2010.

Other liabilities, at 31 December 2011, include derivative financial instruments with a negative fair value of €6.0 billion compared to a negative fair value of €5.4 billion at 31 December 2010. The increase of €0.6 billion in the fair value of derivative liabilities is due to the impact of the movement in foreign exchange rates (particularly the euro/sterling exchange rate) and interest rates on the negative fair value of the derivatives during the year ended 31 December 2011.

Other liabilities, at 31 December 2011, also includes a pension deficit of €0.4 billion (31 December 2010: €0.4 billion).

At 31 December 2011, Bank of Ireland Life assets and liabilities were €12.0 billion, a decrease of €0.5 billion compared to €12.5 billion at 31 December 2010, primarily due to adverse investment returns on policyholder managed funds in the year.

The following table outlines the components of the Group's regulatory capital together with key capital ratios at 31 December 2011 and 31 December 2010.



Capital Base
Total equity	10,252		7,407
Regulatory adjustments	(146	)	270
—Available for sale reserve	725		828
—Retirement benefit obligations	414		424
—Pension supplementary contributions	(117	)	(174	)
—Cash flow hedge reserve	(79	)	235
—Other intangible assets and goodwill	(380	)	(435	)
—Own credit spread adjustment (net of tax)	(372	)	(366	)
—Dividend expected on 2009 Preference Stock	(162	)	(188	)
—Other adjustments	(59	)	(54	)
—Capital contribution on Contingent Capital	(116	)	—
Core tier 1 capital	10,106		7,677

Regulatory deductions	(498	)	(580	)
—Expected loss deduction	(366	)	(454	)
—Securitisation deduction	(85	)	(80	)
—Deduction for unconsolidated investments	(47	)	(46	)
Core tier 1 capital (PCAR/EBA stress test basis)	9,608		7,097
Tier 1 hybrid debt	92		579

Total tier 1 capital	9,700		7,676

Tier 2
Tier 2 undated debt	94		183
Tier 2 dated debt	1,172		2,018
IBNR provisions	111		174
Revaluation reserves	6		14
Regulatory deductions	(498	)	(580	)
—Expected loss deduction	(366	)	(454	)
—Securitisation deduction	(85	)	(80	)
—Deduction for unconsolidated investments	(47	)	(46	)
Other adjustments	55		54

Total tier 2 capital	940		1,863

Total tier 1 and tier 2 capital	10,640		9,539
Regulatory deductions
—Life and pension business	(748	)	(816	)

Total Capital	9,892		8,723

Risk Weighted Assets (RWA) at 31 December 2011 are €11.9 billion lower than 31 December 2010. This decrease is mainly due to a reduction in the quantum of loans and advances to customers and the impact of a higher level of impaired loans at 31 December 2011 as compared to 31 December 2010 partly offset by the impact of foreign exchange movements and RWA re-weighting based on credit model experience.

The Core tier 1 ratio at 31 December 2011 of 15.1% (14.3% PCAR/EBA stress test basis) compares to 9.7% at 31 December 2010. The net increase of 5.4% is primarily due to the Core tier 1 capital generated of €4.2 billion following the 2011 recapitalisation of the Bank together with the impact of lower RWA's partly offset by underlying losses in the year ended 31 December 2011.

The Tier 1 ratio at 31 December 2011 of 14.4% compares to 9.7% at 31 December 2010. The net increase of 4.7% is primarily due to the Core tier 1 capital generated of €4.2 billion following the 2011 recapitalisation of the Bank together with the impact of lower RWA's partly offset by underlying losses in the year ended 31 December 2011 and the exchange and repurchase of Tier 1 hybrid debt.

The Total capital ratio at 31 December 2011 of 14.7% compares to 11.0% at 31 December 2010. The net increase of 3.7% is primarily due to the Core tier 1 capital generated of €4.2 billion following the 2011 recapitalisation of the Bank together with the issue of a €1 billion Contingent Capital note (CCN) to the State and lower RWA's and lower regulatory deductions partly offset by underlying losses and the exchange and repurchase of Tier 1 and Tier 2 debt.

The Group issued a CCN with a nominal value of €1 billion and a maturity of five years to the State in July 2011. This Tier 2 classified note would convert into Bank of Ireland ordinary stock on a breach of the Core tier 1 or Common Equity tier 1 trigger ratio of 8.25% or on a 'Non-Viability event' as determined by the Central Bank. At 31 December 2011, the Core tier 1 ratio of the Group as calculated under the methodology set out in the CCN was 14.3%. Further details on the recapitalisation of the Bank are set out in note 49 to the Consolidated Financial Statements.

As set out in note 9 to the Consolidated Financial Statements, the Group has repurchased and/or exchanged certain subordinated liabilities and mortgage-backed securities at significant discounts to their nominal amounts.

In the first quarter of 2011, the Central Bank undertook a Prudential Capital Assessment Review (2011 PCAR) which incorporated a Prudential Liquidity Assessment Review (2011 PLAR). Information on the Group's deleveraging plan to meet the 2011 PLAR is set out in note 17 to the Consolidated Financial Statements.

On 31 March 2011 the Central Bank announced the results of the 2011 PCAR, which required the Group to generate incremental equity capital of €4.2 billion including a regulatory buffer of €0.5 billion. In addition €1.0 billion of Contingent Capital was also required through the issue of a debt instrument which under certain circumstances would convert to equity capital.

Following the announcement of the results of the 2011 PCAR by the Central Bank on 31 March 2011, the Group undertook a range of initiatives to generate the incremental capital required. Ultimately these initiatives, the principal elements of which were approved at the Extraordinary General Court on 11 July 2011 and 9 September 2011, included the following:

The completion of the above has enabled the Group to satisfy the requirement of the 2011 PCAR to generate €4.2 billion of additional equity capital and €1 billion of Contingent Capital.

The following table summarises the balance sheet impact of the 2011 Recapitalisation of the Bank.



Liability management exercises
Gain arising on the liability management exercises (note 9)⁽¹⁾	1,804		—	—		—		1,804
Issue of ordinary stock	—		288	377		—		665
Repurchase of US$150 million Floating Rate Note⁽²⁾	40		—	—		(58	)	(18	)

Impact of liability management exercises	1,844		288	377		(58	)	2,451

Rights issue	—		954	954		—		1,908

	1,844		1,242	1,331		(58	)	4,359

Transaction costs
Liability management exercises
—Recognised in the income statement⁽¹⁾	(32	)	—	—		—		(32	)
—Transferred from retained earnings to stock premium	16		—	(16	)	—		—
Rights issue	—		—	(114	)	—		(114	)
Taxation	(45	)	—	—		—		(45	)

2011 recapitalisation of the Bank, net of transaction costs and taxation	1,783		1,242	1,201		(58	)	4,168

Income statement—underlying loss before tax

Retail Ireland	(1,017	)	(1,467	)	(1,514	)
Bank of Ireland Life	26		70		69
Retail UK	(324	)	(558	)	(805	)
Corporate and Treasury	386		(973	)	(600	)
Group Centre	(561	)	(531	)	(116	)
Consolidation⁽¹⁾	(31	)	—		—

Underlying loss before tax	(1,521	)	(3,459	)	(2,966	)

Non-core items	1,331		2,509		1,153

Loss before tax	(190	)	(950	)	(1,813	)

Underlying is defined in pages 53 and 54. The individual divisional income statements have been presented on an underlying basis in accordance with IFRS 8—Operating Segments. Information on the divisions and their underlying performance is shown in note 2 to the Consolidated Financial Statements—Operating Segments (pages F-47 to F-55).

Retail Ireland incorporates the Group's Branch Network, Mortgage Business, Consumer Banking, Business Banking and Private Banking activities in the Republic of Ireland and is built on a broad distribution platform and a comprehensive suite of retail and business products and services.

The year ended 31 December 2011 was particularly difficult for the Group's Retail businesses in Ireland, which continued to be adversely impacted by the ongoing economic downturn. The current economic environment, together with lower disposable incomes, has resulted in subdued demand for lending and other financial services products. Intense competition for deposits and the low interest rate environment resulted in a further reduction in deposit margins. The impairment charge on loans and advances to customers remained elevated due to the economic downturn, high levels of unemployment, increased default arrears in the mortgage portfolio and low levels of transactions in both the residential and commercial property markets.

Retail Ireland: Income statement

Net interest income	849		1,010		879
Net other income	297		347		129

Operating income	1,146		1,357		1,008
Operating expenses	(861	)	(919	)	(694	)

Operating profit before impairment charges on financial assets and loss on sale of assets to NAMA	285		438		314

Impairment charges on loans and advances to customers	(1,297	)	(1,142	)	(1,245	)
Assets sold to NAMA:
—Impairment charges on assets sold to NAMA	(9	)	(100	)	(591	)
—Gain/(loss) on sale of assets to NAMA	1		(675	)	—
Share of results of associates and joint ventures (after tax)	3		12		8

Underlying loss before tax	(1,017	)	(1,467	)	(1,514	)

Loans and advances to customers (€bn)⁽²⁾	45		47		51
Customer deposits (€bn)	36		35		35

Retail Ireland reported an underlying loss before tax of €1,017 million for the year ended 31 December 2011 compared to an underlying loss before tax of €1,467 million for the year ended 31 December 2010 (which included charges of €775 million arising on assets that transferred to NAMA).

Net interest income of €849 million for the year ended 31 December 2011 was €161 million or 16% lower than net interest income of €1,010 million for the year ended 31 December 2010. This decrease is primarily a result of the higher cost of wholesale funding and the higher cost of deposits arising from intense competition, a reduction in average loan volumes following the transfer of loans to NAMA during 2010, scheduled loan repayments and subdued demand for new lending partly offset by improved lending margins.

Net other income of €297 million for the year ended 31 December 2011 was €50 million or 14% lower than net other income of €347 million for the year ended 31 December 2010. This decrease is primarily due to a decrease of €12 million in the value of international investment properties in the year ended 31 December 2011 compared to a gain of €26 million arising in the year ended 31 December 2010, a provision of €13 million relating to a court hearing in connection with a European property investment together with the impact arising from the sale of FCE Corporation in August 2011 partly offset by an increase in retail banking fees and commissions.

Operating expenses of €861 million for the year ended 31 December 2011 have decreased by €58 million or 6% compared to €919 million for the year ended 31 December 2010. This decrease is primarily driven by lower pension costs, lower staff numbers, continued tight management of other costs and the impact of the sale of FCE Corporation partly offset by investments in technology to support our customer propositions.

The share of results of associates and joint ventures (after tax), gave rise to a gain of €3 million for the year ended 31 December 2011 compared to a gain of €12 million for the year ended 31 December 2010, primarily reflecting the Group's share of the increase in the market value of an international investment property in 2010. The value of this investment property was broadly unchanged during 2011.

Impairment charges on loans and advances to customers of €1,297 million for the year ended 31 December 2011 is €155 million higher compared to the impairment charge of €1,142 million for the year ended 31 December 2010. The impairment charge on loans and advances to customers remained elevated due to the economic downturn, high levels of unemployment, increased default arrears in the mortgage portfolio and low levels of transactions in both the residential and commercial property markets.

Impairment charges on loans and advances to customers

Residential mortgages	444	341	30	%
—Owner occupied mortgages	182	176	3	%
—Buy to let mortgages	262	165	59	%
Non-property SME and corporate	281	291	(3	%)
Property and construction	520	420	24	%
—Investment	354	260	36	%
—Land and development	166	160	4	%
Consumer	52	90	(42	%)

Impairment charges on loans and advances to customers	1,297	1,142	14	%

mortgages; the Group estimated that €60 million related to the owner occupied segment and €40 million related to the Buy to let segment.

The impairment charge on Retail Ireland mortgages of €444 million for the year ended 31 December 2011 reflects increasing default arrears (90 days or more past due), in the owner occupied and particularly in the Buy to let segments. This increase is primarily attributed to the general economic downturn in Ireland and affordability issues including falling disposable incomes and high unemployment levels.

In addition, the rise in arrears since August 2011 appears to have been impacted by the implementation of the new code of conduct on mortgage arrears and the considerable public speculation about potential Government policy measures regarding customers in arrears.

While there has been some stabilisation in rents in 2011, overall rent levels are significantly down on peak (estimated to be down approximately 26% from peak⁽¹⁾) and Buy to let borrowers are increasingly impacted by rising repayments as interest only periods come to an end, which particularly impacted default arrears in the second half of the year.

The impairment charge on Non-property SME and corporate of €281 million for the year ended 31 December 2011 is €10 million lower compared to the impairment charge of €291 million for the year ended 31 December 2010.

The impairment charge on Property and construction of €520 million for the year ended 31 December 2011 is €100 million higher compared to the impairment charge of €420 million for the year ended 31 December 2010.

The impairment charge on the investment property element of the Property and construction portfolio has increased from €260 million at 31 December 2010 to €354 million at 31 December 2011. In particular, weaker consumer spending and sentiment is adversely affecting trading performance, yields and asset values across the retail and investment property sector. More generally, the increase in the level of impaired loans and associated impairment charges is due to lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods, together with a requirement for increased incentives to attract new tenants. Falling asset values in the Republic of Ireland have also adversely impacted the level of impairment charge in the year ended 31 December 2011.

The impairment charge for Land and Development and the proportion of the book that is impaired have increased in the year ended 31 December 2011 as compared with the year ended 31 December 2010, reflecting lower house prices, over supply of residential housing stock, and illiquid property markets in the Republic of Ireland.

The impairment charge of €52 million on Consumer loans for the year ended 31 December 2011 is €38 million lower compared to the impairment charge of €90 million for the year ended 31 December 2010. Consumer loans have reduced significantly reflecting accelerated repayments and subdued demand for new loans and other credit facilities. Default arrears and impairment charges were better than expectations.

The impairment charges on assets sold to NAMA of €9 million for the year ended 31 December 2011 compares to the impairment charge of €100 million for the year ended 31 December 2010.

In the year ended 31 December 2011 there was a gain on sale of assets to NAMA of €1 million.

Loans and advances to customers (after impairment provisions) of €45 billion at 31 December 2011 were €2 billion lower than the loans and advances to customers (after impairment provisions) of €47 billion at 31 December 2010. This decrease is primarily a result of increased impairment provisions, loan repayments and subdued demand for new lending, particularly from Property and construction and unsecured consumer customers. Loan balances with Residential mortgages and SME customers were broadly unchanged as at 31 December 2011 as compared with 31 December 2010.

Customer deposits of €36 billion at 31 December 2011 were €1 billion higher than customer deposits of €35 billion at 31 December 2010. Despite continuing intense competition in the Irish deposit market during 2011, deposit volumes increased supported by the launch of a number of successful personal and business deposit products and ongoing management of maturing deposits and new business opportunities.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Retail Ireland incurred an underlying loss before tax of €1,467 million for the year ended 31 December 2010 compared to an underlying loss before tax of €1,514 million for the nine month period ended 31 December 2009.

Net interest income of €1,010 million for the year ended 31 December 2010 was €131 million higher than the Net interest income of €879 million for the nine month period ended 31 December 2009. The increase was due to the longer reporting period, improved asset pricing partly offset by the higher cost of deposits arising from intense competition, the low interest rate environment and the higher cost of wholesale funding.

Net other income of €347 million for the year ended 31 December 2010 was €218 million higher than Net other income of €129 million for the nine month period ended 31 December 2009. This increase arose primarily as a result of the longer reporting period, changes in the market values of some international investment properties together with a provision of €74 million required in the nine month period ended 31 December 2009. In the nine month period ended 31 December 2009, the investment properties fell in value by €52 million while there was a partial recovery of €31 million in the value of certain of these investment properties in the year ended 31 December 2010.

Operating expenses of €919 million for the year ended 31 December 2010 increased by €225 million compared to €694 million for the nine month period ended 31 December 2009. This increase was due to the longer reporting period and is partly offset by reduced staff costs and continued tight management of all other costs.

Share of results of associates and joint ventures (after tax) of €12 million for the year ended 31 December 2010 compares to €8 million for the nine month period ended 31 December 2009 with the increase primarily attributable to the longer reporting period.

Impairment charges on loans and advances to customers of €1,142 million for the year ended 31 December 2010 was €103 million lower compared to the impairment charges of €1,245 million for the nine month period ended 31 December 2009. Impairment charges remained elevated due to the economic downturn, high levels of unemployment and low levels of transactions in both the residential and commercial property markets.

Impairment charges on loans and advances to customers

Residential mortgages	341	159	114	%
—Owner occupied mortgages	176	101	74	%
—Buy to let mortgages	165	58	184	%
Non-property SME and corporate	291	339	(15	%)
Property and construction	420	606	(31	%)
—Investment	260	151	72	%
—Land and development	160	455	(65	%)
Consumer	90	141	(36	%)

Impairment charges on loans and advances to customers	1,142	1,245	(8	%)

The impairment charge on Residential mortgages of €341 million for the year ended 31 December 2010 was €182 million higher compared to the impairment charge of €159 million for the nine month period ended 31 December 2009. The ongoing economic slowdown in Ireland including lower levels of employment reduced disposable income and falling house prices continued to adversely impact the level of mortgage arrears which increased significantly in 2010. In addition the buy to let element of the Irish residential mortgage book was impacted by lower demand for rental properties caused in part by net migration out of Ireland which, together with the existing levels of oversupply in the housing market put downward pressure on rental income. This led to an increase in impaired loans with a corresponding increase in impairment charges.

The impairment charge on Non-property SME and corporate loans was €291 million for the year ended 31 December 2010 compared to €339 million for the nine month period ended 31 December 2009. While the impairment charge on this portfolio reduced, the stressed economic conditions particularly in Ireland, continued poor consumer sentiment and the heightened level of business insolvencies negatively impacted trading conditions and caused general pressure on the SME sector.

The impairment charge on the Property and construction portfolio of €420 million for the year ended 31 December 2010 was €186 million lower compared to the impairment charge of €606 million for the nine month period ended 31 December 2009. The impairment charge in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market which was significantly impacted by falling property prices, a negative outlook for asset values, oversupply of residential housing stock in Ireland and generally weak economic conditions, particularly in Ireland. In addition, the uncertainties which existed in the latter half of 2009 as the NAMA process evolved led to a low level of transactions in the Irish commercial property sector due to investor uncertainty.

The impairment charge on the Consumer loan book of €90 million for the year ended 31 December 2010 was €51 million lower compared to the impairment charge of €141 million for the nine month period ended

31 December 2009 despite the longer reporting period as the default rates were better than expected. In addition the loan book reduced faster than expected reflecting debt repayment and a dearth of demand for new loans and other credit facilities.

The impairment charges on assets sold to NAMA of €100 million for the year ended 31 December 2010 was €491 million lower compared to the impairment charges of €591 million for the nine month period ended 31 December 2009. The impairment charges in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market which was significantly impacted by falling property prices, a negative outlook for asset values, an oversupply of residential housing stock in Ireland and the generally weak economic conditions. In addition, the uncertainties which existed in the latter half of 2009 as the NAMA process evolved led to a low level of transactions in the Irish commercial property sector due to a lack of demand from investors. In the year ended 31 December 2010, lower house prices, an oversupply of residential housing stock and illiquid property markets adversely impacted asset quality and led to an impairment charge of €100 million.

In the year ended 31 December 2010, Retail Ireland sold loans and associated derivatives to NAMA of €2.6 billion (before impairment provisions), resulting in a loss on sale of assets to NAMA of €675 million.

Bank of Ireland Life comprises the life assurer, New Ireland Assurance Company plc (which distributes protection, investment and pension products to the Irish market, through independent brokers and its direct sales force) and the business unit which distributes New Ireland's products through the Group's branch network.

Under the terms of the Group's EU restructuring plan, as set out in note 60 to the Consolidated Financial Statements, the Group has committed to dispose of its shareholding in New Ireland Assurance Company plc, but retains the ability to distribute protection, investment and pension products.

Operating profit of €73 million for the year ended 31 December 2011 was €2 million or 3% lower than operating profit of €75 million for the year ended 31 December 2010, primarily due to lower operating income, partly offset by lower operating expenses.

Operating income of €174 million for the year ended 31 December 2011 is €4 million or 2% lower than operating income of €178 million for the year ended 31 December 2010. primarily due to a poorer persistency experience in the current year and a change in the persistency assumptions to reflect this experience at 31 December 2011 partly offset by improved margins on new business.

Annual premium equivalent (APE) sales for the year ended 31 December 2011 were lower by 1% relative to the year ended 31 December 2010 (compared to the market, which decreased by 8% over the same period). Lower volumes in regular premium pensions were partly offset by higher single premium pension volumes and growth in protection business. Persistency levels continue below long term trends, reflecting affordability issues amongst customers and continued investment market volatility.

Operating expenses of €101 million for the year ended 31 December 2011 are €2 million or 2% lower than operating expenses of €103 million for the year ended 31 December 2010, reflecting tight management of costs and the benefit of a lower pension charge.

The underlying profit before tax for the year ended 31 December 2011 has been impacted by a negative investment variance and the impact of lower interest rates on economic assumptions. The performance of investment markets in 2011 was lower than the unit growth assumption, which has given rise to a negative investment variance of €28 million. This compares to a relative outperformance of investment markets in the year ended 31 December 2010, which gave rise to a positive investment variance of €9 million.

The impact of economic assumption changes and interest rate movements (including changes in the value of sovereign bonds), gave rise to a net charge of €19 million for the year ended 31 December 2011, compared to a net charge of €14 million for the year ended 31 December 2010. The value of Irish Government bonds reduced during the year ended 31 December 2010, but increased during the year ended 31 December 2011. Risk free rates (as referenced to euro swap rates) reduced over the same period. As a result the discount rate applied to future cash flows was reduced from 7.75% at 31 December 2010 to 7.0% at 31 December 2011 and the unit growth assumption was reduced from 5.75% at 31 December 2010 to 4.75% at 31 December 2011.

Bank of Ireland Life maintained a strong financial position throughout the year ended 31 December 2011 and its regulatory capital was two times the required minimum solvency margin at the year end.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Underlying profit before tax of €70 million for the year ended 31 December 2010 increased by €1 million compared to underlying profit before tax of €69 million for the nine month period ended 31 December 2009. The underlying profit for the nine month period ended 31 December 2009 included an investment variance gain of €23 million due to a strong performance in investment markets which was not repeated to the same extent in the year ended 31 December 2010.

Annual Premium Equivalent (APE) sales for the year ended 31 December 2010 were 2% ahead of the nine month period ended 31 December 2009 with modest growth in single premium business. This represents a strong sales performance relative to the market which decreased by 6% in the year ended 31 December 2010 due primarily to reduced consumer confidence and pressure on affordability. While policy persistency levels remained below long term trends, reflecting affordability issues amongst customers, due to actions taken during 2009 and 2010, persistency levels during the year ended 31 December 2010 steadily improved across most product lines and distribution channels.

Bank of Ireland Life continued its focus on cost management with operating expenses of €103 million for the year ended 31 December 2010. This represents an increase of €21 million as compared with the nine month period ended 31 December 2009, primarily due to the longer reporting period offset by some cost reductions.

The performance of investment markets, in 2010, in excess of the unit growth assumption gave rise to a positive investment variance of €9 million. This compares to a positive investment variance of €23 million in the nine month period ended 31 December 2009 due to the strong performance of investment markets in that period.

The impact of economic assumption changes including changes to the discount and other rate assumptions gave rise to a charge of €14 million for the year ended 31 December 2010, compared to a gain of €3 million for the nine month period ended 31 December 2009. The discount rate applied to future cashflows was decreased from 8.25% at 31 December 2009 to 7.75% at 31 December 2010. The unit growth assumption was decreased from 6.5% at 31 December 2009 to 5.75% at 31 December 2010.

The Retail UK Division incorporates the joint ventures with the UK Post Office, the UK Residential mortgage business, the Group's branch network in Northern Ireland and the Group's Business Banking business in Great Britain and Northern Ireland. On 1 November 2010, the Group transferred a substantial part of its UK banking business to a UK, wholly owned licensed banking subsidiary, Bank of Ireland (UK) plc (this has had no impact on segmental reporting).

Retail UK: Income statement

Net interest income	319		507		411
Net other income	103		54		61

Operating income	422		561		472
Operating expenses	(328	)	(319	)	(267	)

Operating profit before impairment charges on financial assets and loss on sale of assets to NAMA	94		242		205

Impairment charges on loans and advances to customers	(375	)	(383	)	(628	)
Assets sold to NAMA:
—Impairment charge on assets sold to NAMA	(23	)	(25	)	(320	)
—Loss on sale of assets to NAMA	(6	)	(346	)	—
Share of results of associates and joint ventures (after tax)	31		32		23

Underlying loss before tax	(279	)	(480	)	(720	)

Underlying loss before tax (€m equivalent)	(324	)	(558	)	(805	)

Loans and advances to customers (£bn)⁽²⁾	36		42		46
Customer deposits (£bn)	22		18		19

Retail UK reported an underlying loss before tax of £279 million for the year ended 31 December 2011 compared to an underlying loss before tax of £480 million for the year ended 31 December 2010, (which included charges of £371 million arising on assets that transferred to NAMA).

Net interest income of £319 million for the year ended 31 December 2011 is £188 million or 37% lower than the year ended 31 December 2010, primarily due to the higher cost of deposits and wholesale funding, lower average loan volumes (due to the transfer of assets to NAMA during 2010, loan repayments together with loan book disposals) and the impact of the increased liquid asset holdings in Bank of Ireland (UK) plc, which was partly offset by improved lending margins, particularly on Residential mortgages.

Net other income of £103 million for the year ended 31 December 2011 increased by £49 million compared to net other income of £54 million for the year ended 31 December 2010. While underlying banking fees and commissions for the year ended 31 December 2011 were broadly consistent with the year ended 31 December 2010, a number of one-off charges amounting to £20 million (including NAMA related charges) were incurred in the year ended 31 December 2010 of which £12 million reversed in 2011.

Operating expenses for the year ended 31 December 2011 of £328 million are £9 million or 3% higher than operating expenses of £319 million for the year ended 31 December 2010, primarily due to the costs of processing the higher deposit volumes, higher professional regulatory fees (including the introduction of a bank levy in the UK), partly offset by lower pension costs and continued tight management of other costs.

The share of the results of associates and joint ventures (after tax), which primarily relates to First Rate Exchange Services (FRES) was £31 million for the year ended 31 December 2011 which is broadly unchanged compared to £32 million during the year ended 31 December 2010.

Impairment charges on loans and advances to customers of £375 million for the year ended 31 December 2011 are £8 million lower than the impairment charges of £383 million for the year ended 31 December 2010, with the charge reducing in each of our Residential mortgage, Non-property SME and corporate and Consumer portfolios partly offset by an increase in our Property and construction portfolio charge.

Impairment charges on loans and advances to customers

Residential mortgages	22	54	(59	%)
—Standard mortgages	13	8	63	%
—Buy to let mortgages	8	39	(79	%)
—Self certified mortgages	1	7	(86	%)
Non-property SME and corporate	64	109	(41	%)
Property and construction	265	189	40	%
—Investment	160	104	54	%
—Land and development	105	85	24	%
Consumer	24	31	(23	%)

Impairment charges on loans and advances to customers	375	383	(2	%)

The impairment charge on Retail UK mortgages of £22 million for the year ended 31 December 2011 was £32 million lower compared with the year ended 31 December 2010. Default arrears (3+ payments past

due) and the associated impairment charge on Retail UK mortgages (particularly in the Buy to let and self certified segments) in the year ended 31 December 2011 were lower than the year ended 31 December 2010, in an environment where residential property prices performed better than expected.

The impairment charge on the Non property SME and corporate portfolio of £64 million for the year ended 31 December 2011 is £45 million lower compared to the impairment charge of £109 million for the year ended 31 December 2010. In the UK SME segment, rising inflation and concerns regarding the impact of fiscal austerity have combined to leave UK economic conditions subdued. The year on year reduction primarily reflects the impairment charges on a small number of large individual cases in the year ended 31 December 2010.

The impairment charge on the Property and construction portfolio of £265 million for the year ended 31 December 2011 is £76 million higher compared to the impairment charge of £189 million for the year ended 31 December 2010.

The impairment charge on the investment property element of the Property and construction portfolio increased from £104 million in the year ended 31 December 2010 to £160 million in the year ended 31 December 2011. In particular, weaker consumer spending and sentiment is adversely affecting trading performance, yields and asset values across the retail and investment property sector. More generally, the increase in the level of impaired loans and associated impairment charges is due to lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods, together with a requirement for increased incentives to attract new tenants. Falling asset values in Northern Ireland in particular have also adversely impacted the level of impairment charge in the year ended 31 December 2011.

The impairment charge on the land and development element of the Property and construction portfolio increased from £85 million to £105 million, reflecting lower house prices, over supply of residential housing stock, and illiquid property markets in Northern Ireland.

The impairment charge of £24 million on Consumer loans for the year ended 31 December 2011 is £7 million lower compared to the impairment charge of £31 million for the year ended 31 December 2010. Consumer loans have reduced significantly reflecting accelerated repayments and subdued demand for new loans and other credit facilities. Default arrears and impairment charges were better than expectations.

The impairment charges on assets sold to NAMA of £23 million for the year ended 31 December 2011 compares to the impairment charge of £25 million for the year ended 31 December 2010.

In the year ended 31 December 2011 there was a £6 million loss on sale of assets to NAMA compared to a loss of £346 million for the year ended 31 December 2010.

Loans and advances to customers (after impairment provisions) of £36 billion at 31 December 2011 were £6 billion lower than the loans and advances to customers of £42 billion (after impairment provision) at 31 December 2010. This decrease is primarily a result of the disposal of portfolios of Residential mortgage and investment property loans, loan repayments and increased impairment provisions.

Customer deposits of £22 billion at 31 December 2011 were £4 billion higher than customer deposits of £18 billion at 31 December 2010, primarily as a result of the growth in deposits originating through the joint venture with the UK Post Office.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Retail UK incurred an underlying loss before tax of £480 million for the year ended 31 December 2010 compared to an underlying loss before tax of £720 million for the nine month period ended 31 December 2009.

Net interest income of £507 million for the year ended 31 December 2010 was £96 million higher than the nine month period ended 31 December 2009 due primarily to the longer reporting period and improved asset pricing on the Residential mortgage loan book, partly offset by the increased cost of wholesale funding together with the impact on liability spreads of the continuing intense competition for deposits.

Net other income of £54 million for the year ended 31 December 2010 was £7 million lower as compared to Net other income of £61 million for the nine month period ended 31 December 2009 reflecting lower levels of new business activity, and a charge in the year ended 31 December 2010 arising from the impact of credit deterioration on the fair value of derivatives held for sale to NAMA, partly offset by the longer reporting period.

Operating expenses for the year ended 31 December 2010 of £319 million were £52 million higher than operating expenses of £267 million for the nine month period ended 31 December 2009 primarily as a result of the longer reporting period, partially offset by continued savings following the restructuring of both the Residential mortgage and Business Banking operations and continued tight management of costs.

The share of results of associates and joint ventures (after tax) increased from £23 million for the nine month period ended 31 December 2009 to £32 million for the year ended 31 December 2010. This increase is attributable to First Rate Exchange Services (FRES), a joint venture with the UK Post Office, which generated higher profits in the year ended 31 December 2010 compared to the nine month period ended 31 December 2009 due to higher commissions.

Impairment charge on loans and advances to customers of £383 million for the year ended 31 December 2010 compares to impairment charges of £628 million for the nine month period ended 31 December 2009.

Impairment charges on loans and advances to customers

Residential mortgages	54	64	(16	%)
—Standard mortgages	8	15	(47	%)
—Buy to let mortgages	39	34	15	%
—Self certified mortgages	7	15	(53	%)
Non-property SME and corporate	109	43	153	%
Property and construction	189	500	(62	%)
—Investment	104	75	39	%
—Land and development	85	425	(80	%)
Consumer	31	21	48	%

Impairment charges on loans and advances to customers	383	628	(39	%)

The impairment charge on Residential mortgages decreased by £10 million from £64 million for the nine month period ended 31 December 2009 to £54 million for the year ended 31 December 2010. Despite the longer reporting period and the marginal increase in the level of residential mortgage arrears, the impairment charge on this portfolio reduced reflecting more stable house prices and unemployment levels.

The impairment charge on the Non-property SME and corporate portfolio was £109 million for the year ended 31 December 2010 compared to £43 million for the nine month period ended 31 December 2009. The increase of £66 million in the impairment charge was primarily as a result of the longer reporting period and impairment charges on a small number of large individual cases in Business Banking. In Northern Ireland, the stressed economic conditions negatively impacted trading conditions and caused general pressure on the SME sector.

The impairment charge of £189 million on the Property and construction portfolio for the year ended 31 December 2010 reduced by £311 million compared to the impairment charge of £500 million for the nine month period ended 31 December 2009. The impairment charge in the nine month period ended 31 December 2009 reflected the continuing underlying economic conditions, reduced asset values and low levels of transactions and illiquidity in property markets.

The impairment charge of £31 million on the Consumer loan book for the year ended 31 December 2010 increased by £10 million compared to the impairment charge of £21 million for the nine month period ended 31 December 2009, primarily due to the longer reporting period.

The impairment charge on assets sold to NAMA of £25 million for the year ended 31 December 2010 compared to an impairment charge of £320 million for the nine month period ended 31 December 2009. The impairment charge on assets sold to NAMA in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market, which was significantly impacted by falling property prices, a negative outlook for asset values and generally weak economic conditions.

In the year ended 31 December 2010, Retail UK sold assets to NAMA of £1.7 billion (before impairment provisions), resulting in a loss on sale of assets to NAMA of £346 million.

The Corporate and Treasury Division comprises Corporate Banking, Global Markets and IBI Corporate Finance. The Group disposed of Bank of Ireland Asset Management (BIAM), Bank of Ireland Securities

Services (BoISS) and the Group's shareholding in Paul Capital Investments LLC during the year ended 31 December 2011.

Corporate and Treasury: Income statement

Net interest income	742		885		705
Net other income	44		43		83

Operating income	786		928		788
Operating expenses	(187	)	(287	)	(230	)

Operating profit before impairment charges on financial assets and loss on sale of assets to NAMA	599		641		558
Impairment charges on loans and advances to customers	(207	)	(269	)	(389	)
Impairment charge on available for sale (AFS) financial assets	(21	)	(98	)	(2	)
Assets sold to NAMA:
—Impairment charges on assets sold to NAMA	(9	)	(126	)	(768	)
—Gain/(loss) on sale of assets to NAMA	24		(1,121	)	—
Share of results of associates and joint ventures (after tax)	—		—		1

Underlying profit/(loss) before tax	386		(973	)	(600	)

Loans and advances to customers (€bn)⁽²⁾	14		20		25
Customer deposits (€bn)	8		9		29

Corporate and Treasury reported an underlying profit before tax of €386 million for the year ended 31 December 2011 compared with an underlying loss before tax of €973 million for the year ended 31 December 2010 (which included charges of €1,247 million arising on assets that transferred to NAMA).

The change in 'Net interest income' and 'Net other income' is impacted by IFRS income classifications between the two income categories (see page 59).

Net interest income (after IFRS income classifications) amounted to €640 million for the year ended 31 December 2011 and has decreased by €80 million or 11% compared to €720 million for the year ended 31 December 2010 due to lower net interest income arising from a reduction in the average level of loans

advanced to customers, the increased cost of wholesale funding and lower funds based fees partly offset by increased lending margins and the higher yield on the liquid asset portfolio.

Net other income (after IFRS income classifications) amounted to €146 million for the year ended 31 December 2011 and has decreased by €62 million or 30% compared to €208 million for the year ended 31 December 2010. This decrease is driven primarily by loss of income of €63 million from BIAM and BoISS following their disposal and charges incurred on the transfers from the available for sale reserve on asset disposals partly offset by higher fee income in Corporate Banking.

Operating expenses of €187 million for the year ended 31 December 2011 are lower by €100 million or 35% compared to operating expenses of €287 million for the year ended 31 December 2010 primarily due to lower costs of €28 million following the sale of BIAM and BoISS during 2011, the impact of lower staff numbers and other efficiency benefits of €23 million, the impact of lower pension costs of €14 million and continued tight management of all other costs, together with the impact of some one off cost recoveries during 2011.

Operating profit (before impairment charges on financial assets and loss on sale of assets to NAMA) of €599 million for the year ended 31 December 2011 has decreased by €42 million compared to an operating profit of €641 million for the year ended 31 December 2010.

Impairment charges on loans and advances to customers of €207 million for the year ended 31 December 2011 have decreased by €62 million or 23% compared to impairment charges of €269 million for the year ended 31 December 2010.

The impairment charge on Non-property SME and Corporate of €142 million for the year ended 31 December 2011 is €50 million lower compared to the impairment charge of €192 million for the year

ended 31 December 2010. Larger Irish corporate customers trading internationally have continued to experience more favourable economic conditions.

The impairment charge of €65 million on the Property and construction portfolio for the year ended 31 December 2011 has decreased by €12 million compared to the impairment charge of €77 million for the year ended 31 December 2011 but remains at an elevated level.

The impairment charges on assets sold to NAMA of €9 million for the year ended 31 December 2011 compares to the impairment charge of €126 million for the year ended 31 December 2010. In the year ended 31 December 2011 there was a gain on sale of assets to NAMA of €24 million.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Corporate and Treasury reported an underlying loss before tax of €973 million for the year ended 31 December 2010 compared with an underlying loss before tax of €600 million for the nine month period ended 31 December 2009.

The change in 'net interest income' and 'net other income' is impacted by IFRS income classifications between the two income categories (see page 59).

Net interest income after IFRS income classifications amounted to €720 million for the year ended 31 December 2010 and increased by €82 million compared to €638 million for the nine month period ended 31 December 2009 due primarily to the longer reporting period and increased asset pricing which

was partly offset by lower net interest income due to a 13% reduction in average earning assets together with the increased cost of wholesale funding.

Net other income after IFRS classifications amounted to €208 million for the year ended 31 December 2010 and increased by €58 million compared to €150 million for the nine month period ended 31 December 2009. This increase primarily reflects the longer reporting period, higher other income in the asset management businesses and in IBI Corporate Finance partly offset by reduced fees arising from the disposal of Iridian and Guggenheim together with the impact of credit deterioration on the fair value of derivative assets sold or held for sale to NAMA.

Operating expenses of €287 million for the year ended 31 December 2010 were €57 million higher compared to operating expenses of €230 million for the nine month period ended 31 December 2009, primarily due to the longer reporting period partly offset by lower staff costs and continued tight management of costs.

Operating profit (before impairment charges on financial assets and loss on sale of assets to NAMA) of €641 million for the year ended 31 December 2010 increased by €83 million compared to an operating profit of €558 million for the nine month period ended 31 December 2009.

An impairment charge on available for sale (AFS) financial assets of €98 million was incurred in the year ended 31 December 2010 compared to a €2 million charge in the nine month period ended 31 December 2009. This impairment charge of €98 million related to a holding of subordinated debt issued by Allied Irish Banks plc. The Group exchanged these bonds for cash in January 2011 without further loss to the Group.

The impairment charge on the Non-property SME and Corporate portfolio was €192 million for the year ended 31 December 2010. Despite the longer reporting period the impairment charge on this portfolio has reduced. Losses in Corporate Banking in the year ended 31 December 2010 were significantly lower than in the nine month period ended 31 December 2009. In particular, the leveraged acquisition finance portfolio which is very well spread geographically and sectorally benefitted from the global economic recovery and achieved some provision write-backs.

The impairment charge on the Property and construction portfolio was €77 million for the year ended 31 December 2010 compared to an impairment charge of €119 million for the nine month period ended 31 December 2009 due to a recovery in certain international investment property markets and a lower level of tenant defaults than expected.

An impairment charge on assets sold to NAMA of €126 million was incurred in the year ended 31 December 2010 compared to €768 million for the nine month period ended 31 December 2009. The impairment charge in the nine month period ended 31 December 2009 reflected the sharp deterioration in the property market which was significantly impacted by falling property prices, a negative outlook for asset values, an oversupply of residential housing stock in Ireland and generally weak economic conditions, particularly in Ireland. In addition, the uncertainties which existed in the latter half of 2009 as the NAMA process evolved led to a low level of transactions in the Irish commercial property sector due to a lack of demand from investors. In the year ended 31 December 2010, lower house prices, an oversupply of residential housing stock and illiquid residential and commercial property markets, particularly in Ireland, adversely impacted asset quality and led to an impairment charge of €126 million.

Corporate Banking operating profit before tax of €380 million for the year ended 31 December 2011 compares to an operating profit of €488 million for the year ended 31 December 2010 primarily due to lower level of average loans in advance to customers and the increased cost of wholesale funding partly offset by increased lending margins and higher upfront fees and lower costs.

Global Markets operating profit before tax before tax of €204 million for the year ended 31 December 2011 compares to an operating profit of €121 million for the year ended 31 December 2010. The movement is primarily due to higher income on the liquid asset portfolio, higher termination fees earned and lower costs.

Asset Management Services operating profit before tax of €10 million for the year ended 31 December 2011 compares to an operating profit before tax of €28 million for the year ended 31 December 2010 due to the sale of BIAM in January 2011 and BoISS in June 2011.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Corporate Banking operating profit (before impairment charges on financial assets and loss on sale to NAMA) was €488 million for the year ended 31 December 2010 compared to €410 million for the nine month period ended 31 December 2009. The increase of €78 million was due to the longer reporting period, increased asset pricing across most portfolios and a gain of €14 million arising on equity investments. These were partly offset by higher wholesale funding costs, reduced lending volumes as a result of the sale of €4.9 billion (before impairment provisions) of assets to NAMA and other customer deleveraging together with a charge of €12 million arising from the impact of credit deterioration on the fair value of derivatives held for sale to NAMA.

Despite the longer reporting period to 31 December 2010, Global Markets operating profit (before impairment charges on available for sale financial assets) was €121 million for the year ended 31 December 2010 compared to €128 million for the nine month period ended 31 December 2009.

The nine month period ended 31 December 2009 was positively impacted by gains arising as a result of good positioning in a falling interest rate environment.

Asset Management Services operating profit of €28 million for the year ended 31 December 2010 compares to €22 million for the nine month period ended 31 December 2009. The increase was due to the longer reporting period, higher assets under management in BIAM, increased fee income in BoISS together with lower costs, partly offset by lower fee income during the year ended 31 December 2010 as a result of the disposal of the US asset management businesses, Iridian and Guggenheim, in 2009.

Group Centre comprises capital management activities, Government guarantee fees and unallocated group support costs.

Group Centre: Income statement

Government guarantee fees:
—ELG	(449	)	(275	)	—
—CIFS	—		(68	)	(105	)

Government guarantee fees	(449	)	(343	)	(105	)
Other income	(7	)	33		74

Net operating income	(456	)	(310	)	(31	)
Operating expenses	(118	)	(104	)	(85	)

Operating loss before impairment charges on financial assets
and loss on sale of assets to NAMA	(574	)	(414	)	(116	)
Impairment charge on available for sale financial assets (AFS)	—		(70	)	—
Gains/(charges) arising on the sale of assets to NAMA	13		(47	)	—

Underlying loss before tax	(561	)	(531	)	(116	)

Group Centre reported an underlying loss before tax of €561 million for the year ended 31 December 2011 compared to an underlying loss before tax of €531 million for the year ended 31 December 2010.

Net operating income was a charge of €456 million for the year ended 31 December 2011 compared to a charge of €310 million for the year ended 31 December 2010. The increased charges of €146 million in the current year is driven primarily by:

Operating expenses of €118 million for the year ended 31 December 2011 compares to operating expenses of €104 million for the year ended 31 December 2010. The increase of €14 million is primarily driven by higher regulatory and compliance costs in the year ended 31 December 2011. The Group continues to maintain its tight focus on cost management and the implementation of certain new outsourcing contracts together with ongoing increases in the levels of consolidation, standardisation and simplification of the Group's operations.

The impairment charge on available for sale (AFS) financial assets of €70 million for the year ended 31 December 2010 reflected the charge arising on the Group's holding of NAMA subordinated bonds following the decision by NAMA not to pay the discretionary coupon due on 1 March 2011.

The gain arising on the sale of assets to NAMA of €13 million for the year ended 31 December 2011 reflects a reduction of the provision required in relation to the ongoing costs to the Group of servicing the assets sold to NAMA. The charge of €47 million for the year ended 31 December 2010 reflects the costs of servicing the assets sold to NAMA during the year ended 31 December 2010 together with the costs associated with the sale of those assets to NAMA.

Year ended 31 December 2010 compared to the nine month period ended 31 December 2009

Group Centre reported an underlying loss before tax of €531 million for the year ended 31 December 2010 compared to an underlying loss before tax of €116 million for the nine month period ended 31 December 2009.

Net interest income (excluding ELG guarantee fees) was €26 million for the year ended 31 December 2010 compared to €65 million for the nine month period ended 31 December 2009. This decrease was primarily due to lower earnings on capital in Group Centre.

Net other income (excluding CIFS fees) was €7 million for the year ended 31 December 2010 compared to €9 million for the nine month period ended 31 December 2009. This decrease was primarily due to higher insurance claims paid.

Operating expenses were €104 million for the year ended 31 December 2010 compared to €85 million for the nine month period ended 31 December 2009. The increase was due primarily to the longer reporting period partly offset by the tight management of costs.

The impairment charge on AFS reflects a charge of €70 million arising on the Group's holding of NAMA subordinated bonds following the decision by NAMA not to pay the discretionary coupon due on 1 March 2011.

The charges arising on the sale of assets to NAMA of €47 million includes a provision required under accounting standards in relation to the ongoing costs to the Group of servicing the assets sold to NAMA during the year ended 31 December 2010 together with the costs associated with the sale of those assets.

Year ended 31 December 2011

Retail Ireland	849		—	297		1,146		—		1,146		(861	)	285		(1,297	)	—		(9	)	1		—		3	—	(1,017	)
Bank of Ireland Life	5		916	(66	)	855		(728	)	127		(101	)	26		—		—		—		—		—		—	—	26
Retail UK	367		—	119		486		—		486		(380	)	106		(435	)	—		(26	)	(5	)	—		36	—	(324	)
Corporate and Treasury	742		—	44		786		—		786		(187	)	599		(207	)	(21	)	(9	)	24		—		—	—	386
Group Centre	(420	)	13	(27	)	(434	)	(22	)	(456	)	(118	)	(574	)	—		—		—		13		—		—	—	(561	)
Other reconciling items	(9	)	—	(22	)	(31	)	—		(31	)	—		(31	)	—		—		—		—		—		—	—	(31	)

Group—underlying⁽¹⁾	1,534		929	345		2,808		(750	)	2,058		(1,647	)	411		(1,939	)	(21	)	(44	)	33		—		39	—	(1,521	)
— Gain on liability management exercises	—		—	1,789		1,789		—		1,789		—		1,789		—		—		—		—		—		—	—	1,789
— Impact of changes in pension benefits	—		—	—		—		—		—		2		2		—		—		—		—		—		—	—	2
— Gains arising on the on movement in credit spreads on the Group's own debt and deposits accounted for at fair value through profit or loss	—		—	56		56		—		56		—		56		—		—		—		—		—		—	—	56
— Impact of 'coupon stopper' on subordinated debt	—		—	—		—		—		—		—		—		—		—		—		—		—		—	—	—
— Gross-up for policyholder tax in the Life business	—		—	10		10		—		10		—		10		—		—		—		—		—		—	—	10
— Investment return on treasury stock held for policyholders	—		—	2		2		—		2		—		2		—		—		—		—		—		—	—	2
—Gain on disposal of business activities	—		—	—		—		—		—		—		—		—		—		—		—		—		—	34	34
— Loss on deleveraging of financial assets	—		—	—		—		—		—		—		—		—		—		—		—		(565	)	—	—	(565	)
— Cost of restructuring programmes	—		—	—		—		—		—		3		3		—		—		—		—		—		—	—	3

Group total	1,534		929	2,202		4,665		(750	)	3,915		(1,642	)	2,273		(1,939	)	(21	)	(44	)	33		(565	)	39	34	(190	)

Year ended 31 December 2010

Retail Ireland	1,010		—	347		1,357		—		1,357		(919	)	438		(1,142	)	—		(100	)	(675	)	12	(1,467	)
Bank of Ireland Life	(2	)	949	476		1,423		(1,250	)	173		(103	)	70		—		—		—		—		—	70
Retail UK	592		—	62		654		—		654		(372	)	282		(448	)	—		(31	)	(398	)	37	(558	)
Corporate and Treasury	885		—	43		928		—		928		(287	)	641		(269	)	(98	)	(126	)	(1,121	)	—	(973	)
Group Centre	(249	)	20	(63	)	(292	)	(18	)	(310	)	(104	)	(414	)	—		(70	)	—		(47	)	—	(531	)

Group—underlying⁽¹⁾	2,236		969	865		4,070		(1,268	)	2,802		(1,785	)	1,017		(1,859	)	(168	)	(257	)	(2,241	)	49	(3,459	)
Non-core items:
— Gain on liability management exercises	3		—	1,410		1,413		—		1,413				1,413		—		—		—		—		—	1,413
— Impact of changes in pension benefits	—		—	—		—		—		—		733		733		—		—		—		—		—	733
— Gains arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss'	—		—	360		360		—		360		—		360		—		—		—		—		—	360
— Impact of 'coupon stopper' on certain subordinated debt	(35	)	—	(1	)	(36	)	—		(36	)	—		(36	)	—		—		—		—		—	(36	)
— Gross-up of policyholder tax in the Life business	—		—	22		22		—		22		—		22		—		—		—		—		—	22
— Investment return on treasury stock held for policyholders	—		—	20		20		—		20		—		20		—		—		—		—		—	20
— Cost of restructuring programmes	—		—	—		—		—		—		(18	)	(18	)	—		—		—		—		—	(18	)
— Gain on disposal of business activities	15		—	—		15		—		15		—		15		—		—		—		—		—	15

Group total	2,219		969	2,676		5,864		(1,268	)	4,596		(1,070	)	3,526		(1,859	)	(168	)	(257	)	(2,241	)	49	(950	)

9 months ended 31 December 2009

Retail Ireland	879		—	129		1,008		—		1,008		(694	)	314		(1,245	)	—		(591	)	8	—		(1,514	)
Bank of Ireland Life	(2	)	643	952		1,593		(1,442	)	151		(82	)	69		—		—		—		—	—		69
Retail UK	465		—	70		535		—		535		(304	)	231		(699	)	—		(363	)	26	—		(805	)
Corporate and Treasury	705		—	83		788		—		788		(230	)	558		(389	)	(2	)	(768	)	1	—		(600	)
Group Centre	65		22	(98	)	(11	)	(20	)	(31	)	(85	)	(116	)	—		—		—		—	—		(116	)

Group-underlying⁽¹⁾	2,112		665	1,136		3,913		(1,462	)	2,451		(1,395	)	1,056		(2,333	)	(2	)	(1,722	)	35	—		(2,966	)
Non Core Items:
— Gain on liability management exercises	—		—	1,037		1,037		—		1,037		—		1,037		—		—		—		—	—		1,037
— Charges arising on the movement in credit spreads in the Group's own debt and deposits accounted for at 'fair value through profit or loss'	—		—	(6	)	(6	)	—		(6	)	—		(6	)	—		—		—		—	—		(6	)
— Impact of 'coupon stopper' on certain subordinated debt	58		—	9		67		—		67		—		67		—		—		—		—	—		67
— Gross-up of policyholder tax in the Life Business	—		—	64		64		—		64		—		64		—		—		—		—	—		64
— Investment return on treasury stock held for policyholders in the Life Business	—		—	(6	)	(6	)	—		(6	)	—		(6	)	—		—		—		—	—		(6	)
— Loss on disposal of business activities	—		—	—		—		—		—		—		—		—		—		—		—	(3	)	(3	)

Group total	2,170		665	2,234		5,069		(1,462	)	3,607		(1,395	)	2,212		(2,333	)	(2	)	(1,722	)	35	(3	)	(1,813	)

The following tables show the average balances and interest rates of interest earning assets and interest bearing liabilities for the year ended 31 December 2011, the year ended 31 December 2010 and the nine months ended 31 December 2009. Rates for the nine month period have been annualised. The calculations of average balances are based on daily, weekly or monthly averages, depending on the reporting unit. The average balances used are considered to be representative of the operations of the Group. The explanation of the underlying business trends in the Group's net interest margin is explained on page 60.

	31 December 2011							31 December 2010							31 December 2009

	Average balance			Interest		Rate		Average balance			Interest		Rate		Average balance			Interest		Rate
	€m			€m		%		€m			€m		%		€m			€m		%
ASSETS
Loans and advances to banks⁽¹⁾
Domestic offices		4,699			28		0.6		5,589			43		0.8		5,619			39		0.9
Foreign offices		5,111			36		0.7		3,357			24		0.7		3,284			9		0.4
Loans and advances to customers⁽²⁾
Domestic offices		62,509			2,706		4.3		73,081			2,902		4.0		78,956			2,293		3.9
Foreign offices		51,073			1,239		2.4		57,935			1,626		2.8		59,440			1,349		3.0
Available for sale financial assets and NAMA Senior Bonds
Domestic offices		16,675			587		3.5		19,371			577		3.0		23,037			490		2.8
Foreign offices		2,324			22		0.9		790			7		0.9		919			8		1.2
Other financial assets at fair value through profit or loss
Domestic offices		14			—		—		77			—		—		53			—		—
Foreign offices		56			—		—		95			—		—		202			—		—

Total interest earning assets		142,461			4,618		3.2		160,295			5,179		3.2		171,510			4,188		3.3

Domestic offices		83,897			3,322		4.0		98,118			3,522		3.6		107,665			2,822		3.5
Foreign offices		58,564			1,296		2.2		62,177			1,657		2.7		63,845			1,366		2.9

		142,461			4,618		3.2		160,295			5,179		3.2		171,510			4,188		3.3
Allowance for impairment losses		(5,222	)		—		—		(5,900	)		—		—		(3,103	)		—		—
Non interest earning assets		21,399			—		—		22,975			—		—		20,398			—		—

Total assets		158,638			4,618		2.9		177,370			5,179		2.9		188,805			4,188		3.0

Percentage of assets applicable to foreign activities		37.8	%						36.9	%						36.0	%

	31 December 2011							31 December 2010							31 December 2009

	Average balance			Interest		Rate		Average balance			Interest		Rate		Average balance			Interest		Rate
	€m			€m		%		€m			€m		%		€m			€m		%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits from banks
Domestic offices		38,229			751		2.0		25,370			276		1.1		24,531			192		1.0
Foreign offices		288			14		4.9		325			10		3.1		1,803			6		0.4
Customer accounts
Domestic offices		30,852			606		2.0		41,570			708		1.7		42,297			372		1.2
Foreign offices		22,677			786		3.5		26,409			759		2.9		31,166			623		2.7
Debt securities in issue
Domestic offices		18,428			722		3.9		31,514			851		2.7		31,444			568		2.4
Foreign offices		2,986			34		1.2		5,673			44		0.8		9,116			86		1.3
Subordinated liabilities
Domestic offices		1,524			133		8.7		3,840			225		5.9		3,146			97		4.2
Foreign offices		618			38		6.1		868			87		10.0		3,373			65		2.6

Total interest bearing liabilities		115,602			3,084		2.7		135,569			2,960		2.2		146,876			2,009		1.8

Domestic offices		89,033			2,212		2.5		102,294			2,060		2.0		101,418			1,229		1.6
Foreign offices		26,569			872		3.3		33,275			900		2.7		45,458			780		2.3

		115,602			3,084		2.7		135,569			2,960		2.2		146,876			2,009		1.8
Current accounts		12,862			—		—		9,564			—		—		9,332			—		—
Other non interest bearing liabilities		21,153			—		—		25,003			—		—		24,855			—		—
Stockholders' equity		9,021			—		—		7,234			—		—		7,742			—		—

Total liabilities and stockholders' equity		158,638			3,084		1.9		177,370			2,960		1.7		188,805			2,009		1.4

Percentage of liabilities applicable to foreign activities 28.9%		20.6	%						16.9	%						22.6	%

Certain lines above have been adjusted to correct for inter jurisdictional funding items that arise through normal business activities, to give a more meaningful picture of the Group's domestic and foreign activities.

The balance sheets of the life assurance companies have been consolidated and are reflected under 'non interest earning assets' and 'other non interest bearing liabilities'.

The following table allocates changes in net interest income between volume and rate for the year ended 31 December 2011 compared to the the year ended 31 December 2010 and the year ended 31 December 2010 compared to the nine months ended 31 December 2009. Volume and rate variances have been calculated based on movements in average balances over the period and changes in average interest earning assets and average interest bearing liabilities. Changes due to a combination of volume and rate are allocated rateably to volume and rate.

	Year ended 31 December 2011									Year ended 31 December 2010

	Increase/(Decrease) due to change in
	Average Volume €m			Average Rate €m			Net Change €m			Average Volume €m			Average Rate €m			Net Change €m
INTEREST EARNING ASSETS
Loans to and advances to banks
Domestic offices		(6	)		(9	)		(15	)		—			4			4
Foreign offices		12			—			12			—			15			15
Loans and advances to customers
Domestic offices		(520	)		324			(196	)		(155	)		764			609
Foreign offices		(180	)		(207	)		(387	)		(33	)		310			277
Available for sale financial assets
Domestic offices		(33	)		43			10			(57	)		144			87
Foreign offices		14			1			15			(1	)		—			(1	)
Other financial assets at fair value through profit or loss
Domestic offices		—			—			—			—			—			—
Foreign offices		—			—			—			—			—			—
Other											—			—			—

Total interest income		(713	)		152			(561	)		(246	)		1,237			991

INTEREST BEARING LIABILITIES
Deposits from banks
Domestic offices		183			292			475			7			77			84
Foreign offices		(1	)		5			4			—			4			4
Customer accounts
Domestic offices		(251	)		149			(102	)		(6	)		342			336
Foreign offices		(59	)		86			27			(73	)		209			136
Debt securities in issue
Domestic offices		1,503			(1,632	)		(129	)		1			282			283
Foreign offices		(851	)		841			(10	)		(29	)		(13	)		(42	)
Subordinated liabilities
Domestic offices		(488	)		396			(92	)		25			103			128
Foreign offices		(21	)		(28	)		(49	)		(5	)		27			22
Other		—			—			—			—			—			—

Total interest expense		15			109			124			(80	)		1,031			951

Total change in net interest income		(728	)		43			(685	)		(166	)		206			40

The following sections provide information relating to the assets and liabilities of the Bank of Ireland Group.

Loans and advances to customers in the tables on pages 113 to 123 include loans and advances to customers and loans held for sale at 31 December 2011. During the year ended 31 December 2011, the Group completed the transfer of the remaining Eligible Bank Assets to NAMA, such that at 31 December 2011 the Group did not have any assets classified as held for sale to NAMA. The comparative tables for 31 December 2010 and 31 December 2009 include assets held for sale to NAMA.

For an analysis of the asset quality of the Group's loans and advances to customers, see pages 187 to 200.

The Bank of Ireland Group's loan portfolio comprises of loans to customers (including overdrafts) and installment credit and finance lease receivables.

The Group provides mortgage loans for house purchases as well as home improvement loans and secured personal loans to existing mortgage customers. The Group has a wide range of home mortgage loan products including amortising, interest only and endowment loans. Interest on mortgage loans is typically at a floating rate but the Group also makes some fixed rate loans.

The Group's residential mortgage portfolio at 31 December 2011 is widely diversified by individual borrower and amounts to 53% (31 December 2010: 50%) of loans and advances to customers (pre impairment provisions).

The Group loan book comprises exposure of 19% or €21 billion (31 December 2010: 21%/ €25 billion) to property and construction lending, and exposure of 12% or €13 billion (31 December 2010: 12%/ €14 billion) to business and other services.

With the exception of residential mortgages, property and construction and business and other services, the Group's exposure to credit risk from its lending activities in any individual sector or industry does not exceed 10% of loans and advances to customers.

The following tables set forth the Bank of Ireland Group's total loans and advances to customers at 31 December 2011, 2010 and 2009 and at 31 March 2009 and 2008 using data prepared in accordance with IFRS.

The Risk Management Report on pages 175 to 253 contains a description of the Group's loan loss provisioning methodology. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.



Ireland
Personal
— Residential mortgages	27,854		28,067		28,196		27,647		26,696
— Other lending	1,993		2,401		2,906		3,406		6,589
Property and construction	10,381		11,761		19,472		19,358		20,313
Business and other services	9,193		9,660		11,983		10,782		9,032
Manufacturing	3,160		3,806		4,511		6,049		5,727
Distribution	3,469		3,897		4,463		3,343		3,726
Transport	1,186		1,225		778		935		1,860
Financial	906		1,758		1,088		1,919		1,720
Agriculture	1,628		1,609		1,726		1,954		1,379
Energy	838		1,454		1,438		2,555		1,131

Total Ireland	60,608		65,638		76,561		77,948		78,173

United Kingdom & Other
Personal
— Residential mortgages	29,636		32,199		32,274		31,241		34,065
— Other lending	1,321		1,298		1,434		2,231		2,820
Property and construction	10,199		13,501		16,038		14,597		15,283
Business and other services	3,849		4,461		3,627		6,032		3,016
Manufacturing	1,134		1,581		1,744		1,740		1,362
Distribution	591		758		525		795		572
Transport	198		324		618		319		379
Financial	262		310		1,354		349		439
Agriculture	205		161		388		57		113
Energy	99		69		108		212		112

Total United Kingdom & Other	47,494		54,662		58,110		57,573		58,161

Gross loans and advances to customers	108,102		120,300		134,671		135,521		136,334
Allowance for loan losses	(6,365	)	(5,050	)	(5,775	)	(1,781	)	(596	)

Total loans and advances to customers	101,737		115,250		128,896		133,740		135,738

The following table sets forth the percentage of total loans to customers represented by each category of loan at 31 December 2011, 2010 and 2009 and at 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Ireland
Personal
— Residential mortgages	25.8	%	23.3	%	20.9	%	20.4	%	19.6	%
— Other lending	1.8	%	2.0	%	2.2	%	2.5	%	4.8	%
Property and construction	9.6	%	9.8	%	14.5	%	14.3	%	14.9	%
Business and other services	8.5	%	8.0	%	8.9	%	8.0	%	6.6	%
Manufacturing	2.9	%	3.2	%	3.3	%	4.5	%	4.2	%
Distribution	3.2	%	3.3	%	3.3	%	2.5	%	2.7	%
Transport	1.1	%	1.0	%	0.6	%	0.7	%	1.4	%
Financial	0.9	%	1.5	%	0.8	%	1.4	%	1.3	%
Agriculture	1.5	%	1.3	%	1.3	%	1.4	%	1.0	%
Energy	0.8	%	1.2	%	1.1	%	1.8	%	0.8	%

Total Ireland	56.1	%	54.6	%	56.9	%	57.5	%	57.3	%

United Kingdom & Other
Personal
— Residential mortgages	27.4	%	26.8	%	24.0	%	23.1	%	25.0	%
— Other lending	1.2	%	1.1	%	1.0	%	1.6	%	2.1	%
Property and construction	9.4	%	11.2	%	11.9	%	10.8	%	11.2	%
Business and other services	3.6	%	3.7	%	2.7	%	4.5	%	2.2	%
Manufacturing	1.1	%	1.3	%	1.3	%	1.2	%	1.0	%
Distribution	0.5	%	0.6	%	0.4	%	0.6	%	0.4	%
Transport	0.2	%	0.3	%	0.4	%	0.2	%	0.3	%
Financial	0.2	%	0.2	%	1.0	%	0.3	%	0.3	%
Agriculture	0.2	%	0.1	%	0.3	%	0.0	%	0.1	%
Energy	0.1	%	0.1	%	0.1	%	0.2	%	0.1	%

Total United Kingdom & Other	43.9	%	45.4	%	43.1	%	42.5	%	42.7	%

Group total loan portfolio	100	%	100.0	%	100.0	%	100.0	%	100.0	%

The following tables analyse loans by maturity and interest rate sensitivity. Overdrafts, which represent a significant proportion of the portfolio, are classified as repayable within one year. Approximately 5% of the Bank of Ireland Group's loan portfolio at 31 December 2011 was provided on a fixed rate basis. Fixed-rate loans are defined as those loans for which the interest rate is fixed for the full life of the loan. Variable-rate loans include some loans for which the interest rate is fixed for an initial period (e.g. some residential mortgages) but not for the full life of the loan. The interest rate exposure is managed by Global

Markets within agreed policy parameters. See Item 11 "Quantitative and Qualitative Disclosures about Market Risk".

The following table sets forth an analysis of loans by maturity within each classification as at 31 December 2011.



Ireland
Personal
— Residential mortgages	1,242	4,343	22,269	27,854
— Other lending	1,372	385	236	1,993
Property and construction	3,763	2,907	3,711	10,381
Business and other services	2,348	2,731	4,114	9,193
Manufacturing	757	1,735	668	3,160
Distribution	1,053	1,175	1,241	3,469
Transport	154	516	516	1,186
Financial	305	395	206	906
Agriculture	532	545	551	1,628
Energy	117	204	517	838

Total Ireland	11,643	14,936	34,029	60,608

United Kingdom & Other
Personal
— Residential mortgages	1,825	6,581	21,230	29,636
— Other lending	813	506	2	1,321
Property and construction	5,216	3,114	1,869	10,199
Business and other services	867	1,666	1,316	3,849
Manufacturing	307	696	131	1,134
Distribution	121	371	99	591
Transport	37	140	21	198
Financial	99	72	91	262
Agriculture	128	63	14	205
Energy	33	66	0	99

Total UK & Other	9,446	13,275	24,773	47,494

Group total loan portfolio	21,089	28,211	58,802	108,102

An analysis of the Group's impairment provisions at 31 December 2011 is set out on page F-93.

Impaired loans increased from €11,384 million at 31 December 2010 to €13,478 million at 31 December 2011, or from 946bps to 1,247bps of total loans.

Total balance sheet provisions against loans and advances to customers were €6,365 million at 31 December 2011 compared to €5,050 million at 31 December, 2010. Impairment provisions as a percentage of total loans were 589bps (31 December 2010: 420 bps), the ratio being 202bps (31 December 2010: 120bps) for the Group mortgage book and 1,029bps (31 December 2010: 720 bps) for non-mortgage lending.

Impairment provisions as a percentage of impaired loans (the 'Coverage Ratio') is 47% at 31 December 2011, which compares to 44% at 31 December 2010.

The following table presents information regarding the movement in the allowance for loan losses for the year ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and for each of the two years ended 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Allowance at beginning of period	5,049.8		5,775.0		1,781.0		596.1		428.1
Total allowance	5,049.8		5,775.0		1,781.0		596.1		428.1
Exchange and other adjustments	48.0		28.5		47.7		4.4		(29.1	)
Other Movements	(106.5	)	(2,141.4	)	33.4		(18.5	)	—
Recovery of amounts previously charged off:
Ireland	2.6		(3.2	)	0.9		3.4		10.1
United Kingdom	4.3		8.4		2.3		4.9		3.2

Total recovery of amounts previously charged off	6.9		5.2		3.2		8.3		13.3
Amounts charged off:
Ireland	(293.2	)	(566.1	)	(54.9	)	(197.4	)	(30.0	)
United Kingdom	(322.4	)	(167.8	)	(90.3	)	(47.3	)	(12.7	)

Total amounts charged off	(615.6	)	(733.9	)	(145.2	)	(244.7	)	(42.7	)
Provision for impairment losses charged to income:
Ireland	1,491.6		1,594.2		2,986.5		1,050.5		171.3
United Kingdom	490.9		522.2		1,068.4		384.9		55.2

	1,982.5		2,116.4		4,054.9		1,435.4		226.5
Impairment loss write back	—		—		—		—		—

Allowance at end of period	6,365.1		5,049.8		5,775.0		1,781.0		596.1

Total allowance	6,365.1		5,049.8		5,775.0		1,781.0		596.1

Total allowance is split as follows:
Loans and advances to customers	6,365.1		4,974.4		2,997.0		1,781.0		596.1
Loans held for sale to NAMA	—		75.4		2,778.0		—		—

Total allowance	6,365.1		5,049.8		5,775.0		1,781.0		596.1

The following table presents additional information regarding provisions and allowances for loan losses for the year ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and for each of the two years ended 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Allowance at end of year as a percentage of total loans to customers at end of year:
Ireland	7.78	5.41		5.61		1.69	0.64
United Kingdom	3.47	2.74		2.55		0.80	0.15

Total	5.89	4.20		4.29		1.31	0.44

Specific	4.96	3.52		3.42		0.90	0.32
IBNR	0.93	0.67		0.86		0.41	0.12

Total	5.89	4.20		4.29		1.31	0.44

Allowance at end of year as a percentage of impaired loans at end of year
Ireland	50.76	45.54		42.17		31.84	63.72
United Kingdom	39.38	41.80		46.76		39.15	32.65

Total	47.23	44.36		43.26		33.45	56.16

Average loans to customers⁽¹⁾ (€m)	113,582	131,016		138,396		140,905	134,269

Provisions charged to income as a percentage of average loans to customers:
Specific	1.57	1.86		3.34		0.75	0.14
IBNR	0.18	(0.24	)	0.57		0.27	0.03

Total	1.75	1.62		3.91		1.02	0.17

Net loans charged off as a percentage of average loans to customers	0.54	0.56		0.14	*	0.17	0.02

The following table provides information regarding loans charged off for the year ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and for each of the two years ended 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Ireland
Personal
— Residential mortgages	2.3	7.0	—	0.1	0.1
— Other lending	109.1	165.8	41.6	77.2	9.1
Property and construction	15.2	124.9	0.7	0.8	2.4
Business and Other Services	66.7	41.8	5.0	113.1	14.0
Manufacturing	50.0	140.3	0.4	2.8	2.4
Distribution	31.6	40.0	7.1	1.3	1.1
Transport	7.1	16.9	—	—	—
Financial	6.4	22.2	—	—	—
Agriculture	4.0	7.0	0.1	2.1	0.9
Energy	0.8	0.2	—	—	—

	293.2	566.1	54.9	197.4	30.0

United Kingdom
Personal
— Residential mortgages	46.5	36.7	29.4	9.6	2.9
— Other lending	37.4	36.9	34.5	8.8	6.9
Property and construction	151.3	74.8	—	14.3	1.0
Business and Other Services	52.7	7.6	19.6	8.5	1.1
Manufacturing	2.3	0.9	0.3	3.3	0.5
Distribution	25.4	0.2	6.5	2.7	0.2
Transport	0.5	0.5	—	—	—
Financial	4.9	9.3	—	—	—
Agriculture	1.4	0.9	—	0.1	0.1
Commercial mortgages	—	—	—	—	—

	322.4	167.8	90.3	47.3	12.7

Group total	615.6	733.9	145.2	244.7	42.7

The following table presents an analysis of the Group's recoveries of loans previously charged off (net of legal fees) for the year ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and for each of the two years ended 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Ireland
Personal
— Residential mortgages	(2.2	)	(1.1	)	—	—	—
— Other lending	6.1		0.6		0.2	2.0	4.7
Property and construction	(1.5	)	(1.6	)	—	—	—
Business and Other Services	0.2		(0.8	)	0.7	1.4	4.9
Manufacturing	—		—		—	—	—
Distribution	—		(0.1	)	—	—	0.1
Transport	—		—		—	—	—
Financial	—		—		—	—	—
Agriculture	—		(0.2	)	—	—	0.4

	2.6		(3.2	)	0.9	3.4	10.1

United Kingdom
Personal
— Residential mortgages	(0.2	)	2.2		0.3	4.0	2.2
— Other lending	4.2		3.8		1.6	—	1.0
Property and construction	—		—		—	0.9	—
Business and Other Services	0.3		2.4		0.4	—	—
Manufacturing	—		—		—	—	—
Distribution	—		—		—	—	—
Transport	—		—		—	—	—
Financial	—		—		—	—	—
Agriculture	—		—		—	—	—
Commercial mortgages	—		—		—	—	—

	4.3		8.4		2.3	4.9	3.2

Group total	6.9		5.2		3.2	8.3	13.3

The following table presents an analysis of allowances for loan losses at 31 December 2011, 2010, 2009 and at 31 March 2009 and 2008, using data prepared in accordance with IFRS.



Ireland
Personal
— Residential mortgages	606.5	377.0	133.2	49.3	0.0
— Other lending	194.5	223.3	271.7	195.0	136.0
Property and construction	1,884.1	1,395.5	2,207.5	371.0	46.0
Business and Other Services	615.1	491.3	406.7	174.0	125.0
Manufacturing	171.5	153.7	247.7	52.5	20.5
Distribution	344.9	265.7	163.9	30.0	20.4
Transport	58.4	48.0	—	—	—
Financial	6.4	10.2	—	—	—
Agriculture	58.7	42.8	29.8	14.0	10.6
Energy	23.4	7.5	10.3	10.7	0.2

	3,963.5	3,015.0	3,470.8	896.5	358.7

United Kingdom
Personal
— Residential mortgages	56.1	63.2	34.1	26.2	5.5
— Other lending	40.7	39.7	33.9	40.7	20.6
Property and construction	1,051.5	890.5	969.9	221.9	16.5
Business and Other Services	164.6	149.4	86.6	16.5	11.3
Manufacturing	63.7	40.1	1.8	1.5	2.2
Distribution	9.0	23.3	14.7	13.9	11.2
Transport	3.4	0.6	—	—	—
Financial	11.6	15.3	—	—	—
Agriculture	1.9	1.6	0.1	0.6	0.3
Commercial mortgages	—	—	—	—	—

	1,402.5	1,223.7	1,141.1	321.3	67.6

Total specific allowance	5,366.0	4,238.7	4,611.9	1,217.8	426.3

Total IBNR allowance	999.1	811.1	1,163.1	563.2	169.8

Total Group allowance	6,365.1	5,049.8	5,775.0	1,781.0	596.1

The following table presents an analysis of allowances for loan losses as a percentage of total loans at 31 December 2011, 2010 and 2009 and at 31 March 2009 and 2008 using data prepared in accordance with IFRS.



Ireland
Personal
— Residential mortgages	2.18	1.34	0.47	0.18	—
— Other lending	9.76	9.30	9.35	5.73	2.06
Energy	2.79	0.52	0.72	0.42	0.02
Business and other services	6.69	5.08	3.39	1.61	1.37
Manufacturing	5.43	4.04	5.49	0.87	0.35
Distribution	9.94	6.82	3.67	0.90	0.55
Transport	4.92	3.92	—	—	—
Financial	0.71	0.58	—	—	—
Agriculture	3.61	2.66	1.73	0.73	0.77
Property and construction	18.15	11.87	11.34	1.92	0.23

	6.54	4.59	4.53	1.15	0.46

United Kingdom
Personal
— Residential mortgages	0.19	0.20	0.11	0.08	0.02
— Other lending	3.08	3.06	2.37	1.82	0.73
Property and construction	10.31	6.60	6.05	1.52	0.18
Business and Other Services	4.28	3.35	2.39	0.27	—
Manufacturing	5.62	2.54	0.10	0.09	—
Distribution	1.52	3.08	2.80	1.75	0.11
Transport	1.72	0.18	—	—	1.98
Financial	4.43	4.95	—	—	—
Agriculture	0.93	1.01	0.04	1.05	0.27
Energy	—	—	—	0.05	—
Commercial mortgages	—	—	—	—	0.39

	2.95	2.24	1.96	0.56	0.12

Total specific allowance	4.96	3.52	3.42	0.90	0.31

Total IBNR allowance	0.93	0.67	0.87	0.41	0.12

Total Group allowance	5.89	4.20	4.29	1.31	0.44

The US Securities and Exchange Commission ("SEC") requires potential credit risk elements in lending to be analysed as (i) loans accounted for on a non-accrual basis; (ii) accruing loans which are contractually past due 90 days or more as to principal or interest payments; (iii) loans not included in (i) or (ii) which are "troubled debt restructurings" as defined in Statement of Financial Accounting Standards No. 15 "Accounting by Debtors and Creditors for Troubled Debt Restructurings", and (iv) potential problem loans not included in (i), (ii) or (iii).

These categories reflect US financial reporting practices which differ from those used by the Bank of Ireland Group. See Item 11 "Quantitative and Qualitative Disclosures about Market Risk—Loan Loss Provisioning".

The amount of loans set out below do not give effect to available security and are before the deduction of specific provisions, which would have been so reported had the Commission's classifications been employed. The category of non-accrual loans includes those loans on which interest continues to be accrued but against which specific provisions have been made.

The table below details the information using data prepared in accordance with IFRS for the year ended 31 December 2011 and 2010, the nine months ended 31 December 2009 and for each of the two years ended 31 March 2009 and 2008.



Loans accounted for on a non-accrual basis
Ireland⁽¹⁾	8,450	6,934	8,490	2,984	549
United Kingdom⁽¹⁾	3,204	2,719	2,446	838	133

Total	11,654	9,653	10,936	3,822	682

Accruing loans which are contractually past due 90 days or more as to principal or interest⁽²⁾
Ireland	838	862	1,692	1,159	255
United Kingdom	986	869	722	341	125

Total	1,824	1,731	2,414	1,500	380

Home Mortgage Loans—Accruing loans which are contractually past due 90 days or more as to principal or interest⁽³⁾
Ireland	1,361	760	699	430	198
United Kingdom	603	711	661	516	194

Total	1,964	1,471	1,360	946	392

Total risk elements in lending	15,442	12,855	14,710	6,268	1,454

Restructured loans not included above	722	115	189	71	—

The Bank of Ireland Group generally expects that loans, where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to

comply with loan repayment terms, would be included under its definition of non-accrual loans and would therefore have been reported in the above table.

It is not normal practice for banks in Ireland or the UK to take property onto their books in settlement of problem loans or to classify them as Other Real Estate Owned. Where formal insolvency procedures are entered into, the property charged to the Group is sold by the receiver, administrator or liquidator, with the proceeds received by the Group. Loans subject to insolvency proceedings are included within non-performing loans in the table above, to the extent that they are not written off. This treatment is also followed for loans in Ireland and the UK which would be classified as "In-Substance Foreclosure" under US reporting practices.

Cross border outstandings are those outstandings that create claims outside a reporting center's country unless loaned in and funded or hedged in the local currency of the borrower. They comprise loans, acceptances, interest bearing deposits with other banks, other interest bearing investments, leases and any other monetary assets, but exclude finance provided within the Bank of Ireland Group. The geographical and sectoral breakdown is based on the country and sector of the borrower or of the guarantor of ultimate risk.

Cross border outstandings exceeding 1% of total assets are set forth in the following table.

Cross border outstandings to borrowers in countries in which such outstandings amounted to between 0.75% and 1.0% of total assets in aggregate were €nil million at 31 December 2011, €nil at 31 December 2010 and €nil at 31 December 2009. In December 2011 there were no such cross border outstandings (December 2010: €nil; December 2009: €nil).

The following table shows the book value of Bank of Ireland Group's debt securities at 31 December 2011, 31 December 2010 and 31 December 2009.

The market value of Bank of Ireland Group's Irish Government securities (the book value of which exceeded 10% of stockholders' equity) at 31 December 2011 was €4.2 billion (31 December 2010: €3.1 billion, 31 December 2009: €1.0 billion).

The following table categorises the Group's available for sale debt securities by maturity and weighted average yield at 31 December 2011.

	At 31 December 2011

	Less than 1 year					More than 1 year less than 5 years					More than 5 year less than 10 years					After 10 years
	Market value €m		Weighted average percent yield %			Market value €m		Weighted average percent yield %			Market value €m		Weighted average percent yield %			Market value €m		Weighted average percent yield %
Irish Government		437		4.3	%		2,798		7.1	%		987		7.3	%		—		—
Other European Government		319		2.7	%		28		5.2	%		—		—			—		—
US Treasury & US Government agencies		1		0.2	%		—		—			—		—			—		—
Mortgage backed obligations		—		—			—		—			—		—			—		—
Collateralised mortgage obligations		133		1.6	%		173		2.3	%		45		2.5	%		34		3.1	%
Corporate bonds		853		3.0	%		3,085		3.7	%		853		4.5	%		120		4.4	%
Other		157		1.9	%		51		1.5	%		135		13.7	%		—		—

Total market value		1,900					6,135					2,020					154

Maturity is remaining contractual maturity except for mortgage backed securities where maturity has been calculated on an expected duration basis. The weighted average yield for each range of maturities is calculated by dividing the annual interest income prevailing at the balance sheet date by the book value of securities held at that date.

The figures included in the table above are net of impairment charges of €21 million in the year ended 31 December 2011 (year ended 31 December 2010: €168 million, nine months ended 31 December 2009: €2 million).

The Group places funds with other banks for a number of reasons, including liquidity management, the facilitation of international money transfers and the conduct of documentary credit business with correspondent banks.

Limits on the aggregate amount of placings that may be made with individual institutions are established in accordance with Group credit policy.

The following table analyses placings with banks, based on the branches from which the placing is made for the year ended 31 December 2011, the year ended 31 December 2010 and the nine months ended 31 December 2009. Placings with banks are included in Loans and Advances to Banks in the financial statements.

The following table analyses average deposits by customers based on the location of the branches in which the deposits are recorded for the year ended 31 December 2011, the year ended 31 December 2010 and the nine months ended 31 December 2009.



Branches in Ireland
Current accounts:
Interest bearing	0.3	1,107	0.1	2,203	0.2	864
Non-interest bearing	—	11,519	—	9,519	—	9,315
Deposit accounts:
Demand	0.5	9,306	0.6	17,799	0.3	18,253
Time	3.0	20,439	1.9	21,568	1.9	23,180

Total branches in Ireland		42,371		51,089		51,612

Branches outside Ireland
Current accounts:
Interest bearing	1.1	2,443	1.1	4,023	0.5	2,387
Non-interest bearing	—	1,343	—	45	—	17
Deposit accounts:
Demand	1.7	8,274	0.8	12,235	0.7	13,908
Time	3.0	11,960	3.8	10,151	4.9	14,871

Total branches outside Ireland		24,020		26,454		31,183

Total		66,391		77,543		82,795

Rates for the nine month period are annualised. The interest rates shown above exclude the cost of the ELG scheme which is included within interest expense in the consolidated income statement (see note 4 to the consolidated financial statements). The calculations of average balances are based on daily, weekly or monthly averages, depending on the reporting unit.

Current accounts are checking accounts raised through the Group's branch network and in Ireland are primarily non-interest bearing. Demand deposits bear interest at rates which vary from time to time. Such accounts are not subject to withdrawal by check or similar instrument and have no fixed maturity dates.

Time deposits are generally larger and bear higher rates of interest than demand deposits but have predetermined maturity dates.

The following table shows details of the Group's large time deposits and certificates of deposit (US$100,000 and over or the equivalent in other currencies) by time remaining until maturity.

Non-resident deposits held in domestic branches at 31 December 2011 accounted for approximately 2% of total deposits.

Please see Table 2 In "Selected Consolidated Financial Data" on page 10 for further details.

The following table shows details of short term borrowings of the Group for the year ended 31 December 2011, the year ended 31 December 2010 and the nine months ended 31 December 2009.



Debt securities in issue
End of year outstandings	19,124	28,693	43,144
Highest month-end balance	28,086	45,274	43,144
Average balance	21,414	37,187	40,560
Average rate of interest
At year end	4.2%	1.7%	1.6%
During year	3.2%	2.2%	1.5%
Deposits by banks
End of year outstandings	1,949	5,097	4,909
Highest month end balance	7,891	6,747	10,199
Average balance	5,416	4,299	8,354
Average rate of interest
At year end	1.6%	1.9%	0.7%
During year	2.9%	1.1%	0.8%
Repurchase agreements
End of year outstandings	29,585	35,978	12,994
Highest month end balance	36,869	35,978	27,144
Average balance	33,102	21,396	17,980
Average rate of interest
At year end	1.4%	1.3%	0.9%
During year	1.6%	1.0%	0.8%

The calculations of average balances are based on daily, weekly or monthly averages, depending on the reporting unit. The average balances used are considered to be representative of the operations of the Group.

Average interest rates during the year are computed by dividing total interest expense by the average amount borrowed. Average interest rates at year end are average rates for a single day and as such may reflect one-day market distortion, which may not be indicative of generally prevailing rates. The interest rates shown above exclude the cost of the ELG Scheme which is included within interest expense in the consolidated income statement (see note 4 to the Consolidated Financial Statements).

The strategic direction of the Group is provided by the Court of Directors (the "Court") which comprises executive and non-executive Directors. Management is delegated to certain officers and committees of the Court. The table below details the roles held by members of the Court of Directors, the years in which they were appointed a Director and, in the case of Executive Directors, the year of their appointment to their present position in square brackets. This information is correct as at 20 March 2012.

Name		Position held

Directors
Patrick Molloy	74	Governor	2009
Patrick O'Sullivan	62	Deputy Governor and Senior Independent Director	2009
Richie Boucher [2009]	53	Group Chief Executive	2006
Andrew Keating [2012]	41	Group Chief Financial Officer	2012
Jerome Kennedy	63	Non-Executive Director	2007
Tom Considine	67	Non-Executive Director	2009
Joe Walsh	68	Non-Executive Director	2009
Patrick Kennedy	42	Non-Executive Director	2010
Kent Atkinson	66	Non-Executive Director	2012
Pat Butler	51	Non-Executive Director	2011
Patrick Haren	61	Non-Executive Director	2012
Patrick Mulvihill	49	Non-Executive Director	2011
Executive Officers
Des Crowley	52	Chief Executive Officer, Retail (UK)
Denis Donovan	58	Acting Chief Executive, Corporate and Treasury and Head of Non Core
Julie Sharp	46	Head of Group HR
Helen Nolan	54	Group Secretary
Peter Morris	55	Chief Governance Risk Officer
Liam McLoughlin	48	Chief Executive Officer, Retail (Ireland)
Vincent Mulvey	51	Chief Credit and Market Risk Officer
Senan Murphy	43	Head of Group Manufacturing

Patrick was Group Chief Executive Officer of the Bank from 1991 to 1998. He subsequently served as a non-executive Director from 1998 to 2001. He has served as a non-executive Director on the Boards of CRH plc, Eircom plc, Waterford Wedgewood plc and Enterprise Ireland. He was Chairman of Enterprise Ireland and CRH plc.

Patrick has extensive experience of Bank of Ireland and the financial services industry having served as Group Chief Executive Officer of the Bank from 1991 to 1998. He gained experience in finance, risk management, multinational financial reporting and corporate strategic development through membership of the boards of CRH plc, Eircom plc and Waterford Wedgewood plc. He is a Fellow of the Institute of Bankers.

Term of Office: Appointed to the Court in June 2009 and Governor in July 2009 (2.5 years).

External Appointments include: Chairman of Blackrock Hospital Limited, Chairman of the Hugh Lane Gallery Trust and member of the Board of the Dublin Adult Learning Centre.

Committee Appointments include: Chairman of the Group Nomination and Governance Committee since July 2009 (2.5 years) and member of the Group Remuneration Committee since July 2009 (2.5 years).

From 2007 until 2009, Patrick was Vice Chairman of Zurich Financial Services where he had specific responsibility for its international businesses. He previously held roles at Zurich as Group Financial Officer and Chief Executive Officer, General Insurance and Banking, of its UKISA division. He is currently Chairman of Old Mutual plc. His prior experience includes positions as Chief Executive Officer, Zurich's UK general insurance business Eagle Star Insurance (London); Chief Operating Officer, Barclays DE Zoete Wedd Holdings (London); Managing Director, Financial Guaranty Insurance Company (part of GE Capital) (London & New York); Executive Director, Goldman Sachs International (London) and General Manager, Bank of America Futures (London).

Patrick has extensive international financial services experience gained over a period of more than thirty five years through his positions with Zurich, Old Mutual plc, Man Group plc, Goldman Sachs, Bank of America, Barclays and Eagle Star. As a Fellow of the Institute of Chartered Accountants in Ireland and a member of the International Accounting Standards Board Insurance Working Group on IFRS, he has particular insight into accounting standards and their application in the financial services industry.

External Appointments include: Chairman of Old Mutual plc, Senior Independent Director of Man Group plc and non-executive Director of COFRA Group in Switzerland. Chairman of UK Government Shareholder Executive.

Committee Appointments include: Member of the Group Audit Committee since August 2009 (2.5 years), Court Risk Committee since August 2009 (2.5 years) (retired in January 2012) and Group Nomination and Governance Committee since June 2011 (0.5 years).

Richie was appointed Group Chief Executive Officer in 2009. He joined the Group as Chief Executive, Corporate Banking in December 2003 from Royal Bank of Scotland. He was appointed Chief Executive, Retail Financial Services Ireland in January 2006. He is a past President of the Institute of Bankers in Ireland (2008) and of the Irish Banking Federation (2006).

Richie has over thirty years' experience in all aspects of financial services. He has held a number of key senior management roles within the Bank of Ireland, Royal Bank of Scotland and Ulster Bank through which he has developed extensive leadership, strategy development, financial, people, operational and risk management skills. He is a Fellow of the Institute of Bankers.

Term of Office: Appointed to the Court in October 2006 (5.5 years) and appointed Chief Executive Officer in February 2009 (3 years).

Andrew joined the Group in 2004, prior to which he held a number of senior finance roles, including Chief Accountant, with Ulster Bank, having qualified as a Chartered Accountant with Arthur Andersen in Dublin and Brisbane. Prior to his appointment as Group Chief Financial Officer, Andrew held a number of executive finance roles including Director of Group Finance and Director of Group Finance Services.

Andrew is an experienced finance professional having worked for fourteen years in senior finance and leadership roles in Bank of Ireland and Ulster Bank. He has an expert knowledge of financial reporting and related regulatory and governance requirements. He is a Fellow of the Institute of Chartered Accountants in Ireland.

Jerome spent twenty four years (1980 - 2004) as a Partner in KPMG providing audit and advisory services to a range of Irish companies and Irish subsidiaries of multinational groups. He was Managing Partner of KPMG Ireland and a Board member of KPMG Europe from 1995 to 2004.

Jerome brings to the Board extensive experience of financial reporting, related regulatory issues and the provision of business advisory services. He has significant strategic and leadership experience as a former Managing Partner and as a Board member of KPMG Europe and KPMG Worldwide. He is an experienced non-executive Director and serves on the boards of Total Produce plc and the Caulfield McCarthy Group. He is a Fellow of the Institute of Chartered Accountants in Ireland.

External Appointments include: Non-executive Director of Total Produce plc where he chairs the Audit Committee. Chairman of the Caulfield McCarthy Group Retail. Member of the Irish Board of the UCD Michael Smurfit Graduate Business School.

Committee Appointments include: Chairman of the Group Audit Committee since August 2009 and member since September 2007 (4.5 years) and member of the Group Remuneration Committee since September 2010 (1.5 years) (retired in January 2012) and Court Risk Committee since July 2009 (2.5 years).

Tom is a former Secretary General of the Department of Finance and a former member of the Advisory Committee of the National Treasury Management Agency. He was also formerly a board member of the Central Bank and Financial Services Authority of Ireland and former member of the Council of the Economic & Social Research Institute.

Tom was nominated as a director of the Bank by the Minister for Finance under the terms of the Credit Institutions (Financial Support) Scheme, 2008 and consequently was not required to stand for election or regular re-election by stockholders. While, at the time of nomination, a description of the skills and expertise brought to the Board by this appointment was not provided by the Government, his experience was apparent from the roles he had held and the Court notes the value and benefit gained from Tom's membership of the Court and its Committees through his judgement and quality of contribution.

Tom has extensive experience in the public service, including at the most senior level in the Department of Finance and representing Ireland at European Union level. He has experience in finance at a strategic level, financial regulation, fiscal policy and risk management. As a former Secretary General of the Department of Finance and board member of the Central Bank and Financial Services Authority, he has a broad experience of the wider macroeconomic environment and related policy issues. He is a Fellow of the Association of Chartered Certified Accountants.

External Appointments include: President of the Institute of Public Administration.

Committee Appointments include: Chairman of the Court Risk Committee since July 2009 (2.5 years) and a member of the Group Audit Committee since January 2009 (3 years).

Joe served as Minister for Agriculture from 1992 to 1994 and from 1997 to 2004, having previously served as Minister for Food from 1987. He retired from the Cabinet in September 2004.

Joe was nominated as a director of the Bank by the Minister for Finance under the terms of the of the Credit Institutions (Financial Support) Scheme, 2008 and was not required to stand for election or regular re-election by stockholders. While, at the time of nomination, a description of the skills and expertise brought to the Board by this appointment was not provided by the Government, his experience was apparent from the roles he had held and the Court notes the value and benefit gained from Joe's membership of the Court and its Committees through his judgement and quality of contribution.

Joe has significant public service experience at local and European level having served as both Minister for Agriculture and Minister for Food and having chaired the E.U. Council of Agriculture Ministers. These leadership roles provided experience at a strategic level and a deep understanding of the wider macro-economic, political and regulatory environment.

External Appointments include: Chairman of Cork Racecourse (Mallow) Limited, Horse Sport Ireland, Irish Hunger Task Force and a Director of SouthWestern Business Process Services Limited.

Committee Appointments include: Member of the Group Nomination and Governance Committee since January 2009 (3 years). Member of Group Remuneration Committee since January 2009 (3 years) and Chairman since December 2011.

Patrick is Chief Executive of Paddy Power plc having been appointed in 2006. He has served as an Executive Director of Paddy Power plc since 2005 and a non-executive Director since 2004, during which time he served as Chairman of the Audit Committee. He has been a member of the Risk Committee of Paddy Power plc since 2006. Prior to joining Paddy Power, Patrick worked at Greencore Group plc for seven years, where he was Group Chief Financial Officer and also held a number of senior strategic and corporate development roles. Patrick also worked with KPMG Corporate Finance in Ireland and the Netherlands and as a strategy consultant with McKinsey & Company in London, Dublin and Amsterdam.

As an experienced Chief Executive Officer and Finance Director, Patrick brings to the Board a background in international business, management, finance, corporate transactions, strategic development and risk management through his involvement in Paddy Power plc, Elan Corporation plc (where he is Chairman of the Leadership, Development and Compensation Committee), Greencore Group plc and McKinsey & Company. He is a Fellow of the Institute of Chartered Accountants in Ireland.

External Appointments include: Chief Executive of Paddy Power plc since 2006. Non-executive Director of Elan Corporation plc.

Committee Appointments include: Member of the Group Remuneration Committee since January 2011 (1 year) and Court Risk Committee since January 2011 (1 year).

Kent was Group Finance Director of Lloyds TSB Group between 1994 and 2002. Prior to that he held a number of senior executive appointments in Retail Banking with Lloyds, including Regional Executive Director for their South East region and worked for twenty two years in South America and the Middle East with the Group.

Kent has significant experience as a non-executive Director across a range of international companies serving currently as a member of the Boards of UK Asset Resolution Limited (which includes Bradford & Bingley plc and Northern Rock (Asset Management) plc), Coca-Cola Hellenic Bottling Company S.A. and Gemalto N.V. and formerly as a member of the boards of Standard Life plc, Telent plc (previously Marconi Corporation plc), Cookson Group plc and Millicom International Cellular S.A.. Through these entities he has also gained significant governance, risk management and financial oversight experience having acted in the capacity of Senior Independent Director with three of those companies, a member of all seven Audit Committees and Chair of five and been a member of two Remuneration Committees, three Risk Committees, one Nominations Committee and one Strategy and M&A Committee.

External Appointments include: Member of the Board of UK Asset Resolution Limited (which includes Bradford & Bingley plc and Northern Rock (Asset Management) plc), where he is the Senior Independent Director, Chair of the Audit Committee and a Member of the Risk Committee. Member of the board of Coca-Cola Hellenic Bottling Company S.A. where he is the Senior Independent Director and Chair of the Audit Committee. Member of the Board of Gemalto N.V. where he is a member of the Audit Committee and a member of the Strategy and M&A Committee.

Committee Appointments include: Member of the Group Audit Committee since January 2012 and the Court Risk Committee since January 2012.

Pat is a partner of the Resolution Group, a financial services investment firm. Prior to this he spent twenty five years with McKinsey & Co., where he was a senior director and led the firm's UK Financial Services Practice and its EMEA Retail Banking Practice. At McKinsey, he worked with banks, insurance companies and asset managers in the UK, US, Australia, South Africa, Middle East and several European countries—as well as a range of companies outside financial services—on issues of strategy, operations and organisation.

Pat brings to the Board extensive strategic experience in a broad range of industries with an international profile, and an in-depth strategic and operational knowledge of the European and International Banking sector in particular. He is a Fellow of the Institute of Chartered Accountants in Ireland.

Committee Appointments include: Member of the Group Nomination and Governance Committee since December 2011 and Court Risk Committee since December 2011.

Patrick is a former Chief Executive Officer of the Viridian Group, having joined Northern Ireland Electricity (NIE), in 1992 as Chief Executive Officer. He previously worked with the ESB, including as Director, New Business Investment, ESB and also served as a board member of Invest Northern Ireland for a number of years.

An experienced Chief Executive Officer, Patrick has gained extensive strategic, corporate development and transactional experience, having led the privatisation of NIE by IPO in 1993 and growing the business under the new holding company Viridian through 2000 to 2007, positioning the company as the market leader in independent electricity generation and supply in competitive markets in Ireland, North and South.

Committee Appointments include: Member of the Group Audit Committee since January 2012 and Group Remuneration Committee since January 2012.

Patrick spent much of his career at Goldman Sachs, retiring in 2006, most recently as Global Head of Operations covering all aspects of Capital Markets Operations, Asset Management Operations and Payment Operations. He previously held the roles of Co-Controller, Co-Head of Global Controller's Department, covering financial/management reporting, regulatory reporting, product accounting and payment services. He also was a member of the firm's Risk, Finance and Credit Policy Committees.

Patrick has over twenty years experience of international financial services, having spent much of his career at Goldman Sachs where he held a number of senior management roles based in London and New York. As a result, he has an in depth knowledge of financial and management reporting, regulatory compliance, operational, risk and credit matters within a significant financial institution with an international focus. Patrick is a Fellow of the Institute of Chartered Accountants in Ireland.

External Appointments include: Non-executive Director of Goldman Sachs Bank (Europe) plc.

Committee Appointments include: Member of the Group Audit Committee since December 2011 and Court Risk Committee since December 2011.

Jerome Kennedy (Chairman)
Kent Atkinson
Tom Considine
Patrick Haren
Patrick Mulvihill
Patrick O'Sullivan

Tom Considine (Chairman)
Kent Atkinson
Pat Butler
Jerome Kennedy
Patrick Kennedy
Patrick Mulvihill

Vincent Mulvey (Chairman)
Richie Boucher
Des Crowley
Denis Donovan
Andrew Keating
Liam McLoughlin
Peter Morris
Declan Murray
Helen Nolan
Mick Sweeney

Richie Boucher (Chairman)
Des Crowley
Denis Donovan
Andrew Keating
Liam McLoughlin
Peter Morris
Vincent Mulvey
Helen Nolan
Julie Sharp
Senan Murphy

With the exception of those Directors appointed by the Minister for Finance, all Directors appointed between Annual General Courts are submitted to stockholders for election at the first Annual General Court following their co-option. In line with emerging corporate governance practice all Directors who sought re-election have done so on an annual basis. The normal retirement age for Executive Directors is 60.

The Group Remuneration Committee holds delegated responsibility for the oversight of Group-wide remuneration policy with specific reference to the Governor, Directors and senior management across the Group, and those employees whose activities have a material impact on the Group's risk profile. The remuneration of non-executive Directors is determined and approved by the Court. Neither the Governor nor any Director participates in decisions relating to their own remuneration.

During 2011 the Remuneration Committee received independent remuneration advice from a number of external advisers on a range of issues relating to remuneration.

A key item of focus for the Group Remuneration Committee in 2011 was the embedding of the European Banking Authority Remuneration Guidelines (the Guidelines) into the performance and reward structures across the Group.

The Guidelines came into effect from 1 January 2011 and also passed into law in January 2011. The Group supports the over-arching aim of these guidelines, namely to ensure that remuneration structures are consistent with and promote effective risk management. The Group's Risk Strategy and Risk Appetite as set out on page 175 forms an integral element of remuneration structures, practices and frameworks. The Risk Strategy and Risk Appetite has been cascaded, as appropriate, throughout the Group.

During 2010 and in anticipation of the new Guidelines, changes were made to remuneration-related governance including the formal incorporation of more explicit links between the Remuneration Committee and the Risk Committee as well as the attendance of the Chief Credit and Market Risk Officer at Remuneration Committee meetings, as required, to provide independent input, from a risk perspective, into key remuneration decisions.

During 2011, the Group continued to embed the Guidelines into the performance and reward structures across the Group with the key areas of focus as follows:

This included a review of the Group's performance and reward structures and their alignment with risk. This work was supported by external advisers. The following key changes were made as a result of this review:

In accordance with the Guidelines, the Group has completed a rigorous process to identify those employees deemed to be persons whose professional activities on behalf of the Group are deemed to have a material impact on the Group's risk profile (Code Staff).

In accordance with the requirements set out in the EU Capital Requirements Directive (CRD III), in 2011 the Group complied with its requirements to provide additional disclosures relating to information on Code Staff, the link between pay and performance, design and structure of remuneration and performance management, and remuneration expenditure for Code Staff. This disclosure was made as part of the Group's 2010 Pillar 3 disclosure in June 2011 which is available on the Group's website.

The Group is currently operating under a number of remuneration restrictions which cover all Directors, Senior Executives, Employees and Service Providers across the Group. These restrictions were contained within the 'Subscription Agreement' with the Irish Government (March 2009) and subsequently in a number of commitments and undertakings which the Group gave to the Minister for Finance in respect of remuneration practices. These latter commitments and undertakings were a condition of the Transaction Agreement with the Irish Government (July 2011) which was part of the 2011 Recapitalisation of the Bank.

The Group is in compliance with the remuneration restrictions contained within both of these documents.

The Remuneration Strategy aims to support the Group's objectives of long term sustainability and success, sound and responsible risk management and good corporate governance. The application of this strategy is done in consideration of and in alignment with the Group's Risk Strategy and Risk Appetite.

A robust performance management system and process, incorporating performance planning and review, remains critical and is a key pillar of the Group's EBA compliance.

The performance management system allows the Group to align individual, business unit and divisional performance to the Group's strategic objectives through an ongoing dialogue between managers and their direct team members ensuring a strong alignment to risk.

As noted earlier, in 2011 the Group's performance management system was strengthened to include a greater alignment with the Risk Strategy and Risk Appetite. This included the development of mandatory risk goals for all managers and executives and the inclusion of minimum performance weightings for particular key results areas for implementation in 2012.

The Balanced Scorecard approach incorporated within the Group's performance and planning process is consistent with the Guidelines. It ensures that:

The Balanced Scorecard currently contains four Key Result Areas (KRAs), each with a minimum weighting of 10%, that apply to all executive roles in the Group:

KRA 1 Risk (previously Credit, Regulatory and Operational Risk)
KRA 2 Customer
KRA 3 Financial/Revenue/Cost/Efficiency
KRA 4 Leadership and People Development

The KRAs are agreed between the executive and his/her line manager at the beginning of the performance cycle. A formal interim review is conducted with regular informal reviews taking place at other times during the performance cycle. A formal end of year review occurs at the end of the performance cycle.

Goals set within these KRAs are linked to overall Divisional and Group Strategy, support the achievement of business unit objectives and are aligned to the Group's Risk Strategy and Risk Appetite.

The total remuneration package of each executive Director is reviewed by the Group Remuneration Committee on an annual basis.

For the year ended 31 December 2011, the remuneration packages for Executive Directors were governed by the Group's commitments under both the Subscription Agreement (March 2009), and the various commitments and undertakings given to the Minister for Finance as a condition of the Transaction Agreement with the Irish Government (July 2011).

The key elements of the remuneration package in respect of the year ended 31 December 2011 were as follows (further detail is available in note 61 to the Consolidated Financial Statements):

The Finance Act 2006 introduced a substantial tax charge on pension assets that exceeded certain limits. Having reviewed market responses to this development and having taken actuarial advice, in May 2006, the Remuneration Committee agreed that certain staff be offered an option (a) to continue with unchanged pension funding arrangements or (b) to elect for a revised arrangement whereby their prospective pension fund would be limited to the value of the standard pension cap (or their personal fund threshold, if applicable) together with a taxable, non pensionable, cash allowance in lieu of the pension benefit foregone under their existing contracts. Des Crowley, Denis Donovan and John O'Donovan received taxable cash allowances under this revised arrangement in lieu of pension benefit foregone during 2011.

Other potential elements of the remuneration package for Executive Directors are as follows:

The Group operates a number of pension plans in Ireland and overseas. The plans are funded and are primarily of the defined benefit type and the assets of the plans are held in separate trustee administered funds. Payments to these defined benefit funds are determined on an actuarial basis, designed to build up reserves during the working life of employees to pay the employees, or their dependants, a pension after retirement. A formal actuarial valuation is undertaken at least triennially to determine the payments to each of these defined benefit funds. At each valuation the funds' actuaries assess whether the liabilities of each fund, based on current salary levels, are fully funded on a discontinuance basis.

The total pension cost including curtailment gains for the Group in respect of the year ended 31 December 2011 was a credit of €84 million of which a credit of €66 million related to the main scheme.

With the exception of the transactions with the NPRFC as noted below, no transaction material to the Group has been entered into in the last three fiscal years to which the Group or any of its subsidiaries was a party in which any member of key management personnel, any significant shareholder of the Group or any close family members had a direct or indirect material interest, and to the knowledge of the Group, no such transactions are presently proposed. Further details of Related Party Transactions with key management personnel are outlined in note 55 to the consolidated financial statements. For information about material transactions with the NPRFC see notes 49, 50 and 56 to the Consolidated Financial Statements. The NPRFC holds approximately 15.13% as at 20 March 2012 of the outstanding units of ordinary stock.

The aggregate amount of indebtedness of key management personnel (17 persons) and their connected persons, on normal commercial/staff terms, to the Bank of Ireland Group amounted to €8 million at 31 December 2011. The interest rates payable thereon and other terms were at prevailing market rates and terms and reflect ordinary commercial/staff transactions and do not involve more than the normal risk of collectability or present other unfavourable features. The aggregate amount of indebtedness of key management personnel of the Bank included in the above figure, on terms similar to those on which loans are made to members of staff generally, which are at interest rates more favourable than prevailing market rates, was €0.825 million at 31 December 2011. These staff loans were made in accordance with the US Sarbanes Oxley Act and the rules thereunder, which permits these loans if the loans are made on the same basis as, and on terms no more favourable than, loans made available to employees generally. For further information refer to note 55 to the Consolidated Financial Statements.

The Court of Directors (the Court) is accountable to stockholders for the overall direction and control of the Group. It is committed to high standards of governance designed to protect the interests of stockholders and all other stakeholders while promoting the highest standards of integrity, transparency and accountability.

The Court's role is to provide leadership of the Group within the boundaries of Risk Appetite and a framework of prudent and effective controls which enable risk to be identified, assessed, measured and controlled. The Court sets the Group's strategic aims, ensuring that the necessary financial and human resources are in place for the Group to meet its objectives and review management performance.

The Court's oversight of risk and control is facilitated through delegation of certain responsibilities to Committees of the Court, the principal Committees being the Group Audit Committee (GAC), the Court Risk Committee (CRC), the Nomination & Governance Committee and the Group Remuneration Committee. Details of these Committees are set out on pages 145 to 152 and 133 to 134.

A key objective of the Group's governance framework is to ensure compliance with applicable legal and regulatory requirements. With effect from 1 January 2011, the Group is subject to the Central Bank of Ireland's Corporate Governance Code for Credit Institutions and Insurance Undertakings (the Irish Code which is available on www.centralbank.ie). The Governor and Company of the Bank of Ireland (the Bank) is subject to the additional requirements of Appendix 1 of the Irish Code for major institutions. The Directors believe that the Group complied with the Irish Code and the UK Corporate Governance Code (the UK Code, formerly the Combined Code published by the Financial Reporting Council in the UK), throughout 2011, otherwise than as set out below, and this report describes how the Bank applies the main and supporting principles of the UK Code. Specifically, the Group has complied with the provisions of the UK Code throughout the year ended 31 December 2011, except in the case of Tom Considine's membership of the GAC and Joe Walsh's membership of the Group Remuneration Committee—See comments on independence on page 144. This report also covers the disclosure requirements set out in the Irish Corporate Governance Annex to the Listing Rules of the Irish Stock Exchange, which supplement the requirements of the UK Code with additional corporate governance provisions, and apply to the Bank from January 2011.

On 1 December 2011, new fitness and probity standards (the Standards), issued by the Central Bank of Ireland, became effective for persons performing a prescribed 'controlled function' or a 'preapproval controlled function' in a Regulated Financial Service Provider (RFSP). The Standards, which apply on a phased basis from 1 December 2011, apply to persons performing any prescribed function in a RFSP and are based on requirements of competence, capability, honesty, integrity and financial prudence. The Group is in the process of implementing the requirements of the new Standards by the required dates.

At the end of 2010, the Group engaged a suitably qualified and independent firm to conduct an independent review of the Group's corporate governance against industry best practices. Arising from the recommendations of that review, it was agreed that an external evaluation of the performance of the Court should be conducted. Following its review of the Court's performance, the External Advisor presented its findings to the Central Bank of Ireland and the Group in December 2011, concluding that 'Board performance exceeded benchmarks on 45 dimensions out of 50, including critical areas such as knowledge, challenge and dissent'. The External Advisor also identified certain areas for possible improvement which the Court is in the process of addressing on the basis of their materiality and impact. Such an external review is now mandatory under the Irish Code at least once every three years.

The Group believes it has robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks to which it is or might be exposed, adequate internal control mechanisms, including sound administrative and accounting procedures, IT systems and controls. The system of governance is subject to regular internal review.

At close of business on 31 December 2011, the Court comprised nine Directors: the Governor, who was independent on appointment, one executive Director and seven non-executive Directors, five of whom are independent non-executive Directors. On 20 January 2012, two independent non-executive Directors (see below) were appointed to the Court and on 1 February 2012, one executive Director was appointed to the Court, bringing its current membership to twelve Directors, seven of whom are independent non-executive Directors.

In the interests of facilitating board renewal and a restructuring of the Court in 2011, three independent non-executive Directors (Paul Haran, Dennis Holt and Heather-Ann McSharry) did not offer themselves for re-election and retired from the Court at the conclusion of the Annual General Court in June 2011 (AGC). Reflecting the smaller size of the Court and the balance between executive and non-executive Directors (having regard to the UK Code requirement that at least half the board should comprise non-executive Directors), it was considered appropriate to reduce the complement of Executive Directors. Consequently, two Executive Directors (Des Crowley and Denis Donovan) did not offer themselves for re-election to the Court at the AGC. All of the other Directors who stood for election or re-election were elected or re-elected at the AGC. Patrick O'Sullivan succeeded Dennis Holt as Senior Independent Director and Deputy Governor, effective upon the retirement of Dennis Holt from the Court at the end of the AGC.

On 23 December 2011, Patrick Mulvihill and Pat Butler were appointed to the Court as non-executive Directors. John O'Donovan and Rose Hynes retired from the Court with effect from 31 December 2011. On 20 January 2012, Patrick Haren and Kent Atkinson were appointed to the Court as non-executive Directors. Andrew Keating was appointed Group Chief Financial Officer and an executive Director of the Court on 1 February 2012. Jerome Kennedy has indicated his intention to retire as a non-executive Director at the conclusion of the Annual General Court in 2012.

The composition of the Court is reviewed by the Nomination and Governance Committee and the Court to ensure that there is an appropriate mix of skills and experience. In doing so, the Court aims to appoint non-executive Directors who have the skills and experience needed for a comprehensive understanding of the Group's activities and the risks associated with them. While there is an ongoing process of planned Court renewal and refreshment, the Court regards its current size and composition as within a range which is sufficient to provide the broad range of skills and experience necessary to govern the business effectively, while enabling full and constructive participation by all Directors; it also ensures that the principal Court Committees are appropriately resourced. The Group ensures that individual Directors of the Court have sufficient time to dedicate to their duties, having regard to the limits on the number of directorships held by any individual Director as set out in the Irish Code. Under the terms of the Irish Code, the number of directorships of credit institutions and insurance undertakings held by a director shall not exceed three where one of the directorships held is in a major institution, and is limited to five directorships of non-financial institutions. Confirmation of directorships was sought from each Director in 2011 as part of the Bank's assessment of Directors under Fitness and Probity. This review indicated that, except in the case of one Director, the Directors were within the limits set out in the Irish Code. In the one case, where a total of six directorships were held, one of which was a directorship of a financial institution (i.e. of Bank of Ireland), the Central Bank of Ireland was notified and acknowledged that no further action was required.

The Court held thirteen scheduled and twenty-six unscheduled meetings during the year ended 31 December 2011. Agendas and papers are circulated prior to each meeting to provide the Directors with relevant information to enable them to discharge fully their duties. The Group Secretary provides dedicated support for Directors on any matter relevant to the business on which they require advice separately from or additional to that available in the normal Court process.

Biographical details, including each Director's background and experience, are set out on pages 128 to 133.

Attendance at scheduled and unscheduled meetings of the Court and its Committees during the year ended 31 December, 2011

	Court Scheduled				Court Unscheduled				Group Audit Committee Scheduled				Group Audit Committee Unscheduled				Group Nomination & Governance Committee Scheduled				Group Nomination & Governance Committee Unscheduled				Group Remuneration Committee Scheduled				Group Remuneration Committee Unscheduled				Court Risk Committee Scheduled				Court Risk Committee Unscheduled

Name	A		B		A		B		A		B		A		B		A		B		A		B		A		B		A		B		A		B		A		B
Richie Boucher		13		13		26		26		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Pat Butler (Appointed 23 December 2011)		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Tom Considine		13		13		26		26		8		8		4		4		—		—		—		—		—		—		—		—		7		7		2		2
Des Crowley*		7		7		12		11		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Denis Donovan*		7		7		12		12		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Paul Haran*		7		7		12		11		4		4		2		1		—		—		—		—		—		—		—		—		—		—		—		—
Dennis Holt*		7		6		12		11		—		—		—		—		2		1		2		2		—		—		—		—		—		—		—		—
Rose Hynes**		13		12		26		26		—		—		—		—		5		5		5		5		4		4		9		9		7		7		2		2
Jerome Kennedy		13		13		26		25		8		8		4		4		—		—		—		—		4		4		9		8		7		7		2		2
Patrick Kennedy (Appointed to Remuneration Committee and Risk Committee 13 January 2011)		13		13		26		26		—		—		—		—		—		—		—		—		4		4		8		8		7		7		2		2
Patrick Mulvihill (Appointed 23 December 2011)		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Patrick Molloy		13		13		26		26		—		—		—		—		5		5		5		5		4		4		9		9		—		—		—		—
Heather Ann McSharry*		7		7		12		12		4		4		2		1		2		2		2		2		—		—		—		—		3		3		—		—
John O'Donovan**		13		13		26		26		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Patrick O'Sullivan		13		11		26		22		8		6		4		4		3		3		3		3		—		—		—		—		7		7		2		2
Joe Walsh		13		13		26		25		—		—		—		—		5		5		5		5		4		3		9		8		—		—		—		—

Column A: Indicates the number of meetings held during the period the Director was a member of the Court and/or the Committee and was eligible to attend.

The Court has the following schedule of matters specifically reserved for its decision, which is reviewed and updated regularly:

The Court is responsible for approving high-level policy and strategic direction in relation to the nature and scale of risk that the Group is prepared to assume to achieve its strategic objectives. The Court ensures that an appropriate system of internal control is maintained and reviews its effectiveness. Specifically, the Court:

The Court receives regular updates on the Group's risk environment and exposure to the Group's 10 risk types through a Court Risk Report reviewed quarterly (and monthly for Liquidity, Credit and Capital).

The Court is also responsible for endorsing the appointment of individuals who may have a material impact on the risk profile of the Group and monitoring on an ongoing basis their appropriateness for the role. The removal from office of the head of a 'control function', as defined in the Irish Code, is also subject to Court approval.

At its meetings in 2011, the Court considered and determined the implementation of Group Strategy in the context of Government support for the Group. The following are amongst matters which received significant Court focus during 2011:

The Court received updates on the Group's principal businesses on the execution of their business strategy and considered reports from each of the principal Court Committees.

Details of the number of scheduled meetings of the Court and its Committees and attendance by individual Directors are set out on page 142. The terms of reference of the Committees are reviewed annually by the relevant Committees and by the Court and are available on the Group's website (www.bankofireland.com) or by request to the Group Secretary. The Chairman and the non-executive Directors meet without the Executive Directors present, at least once annually, to appraise management's performance.

The Bank has in place Directors' and Officers' liability insurance in respect of legal actions against its Directors; however this insurance cover does not extend to fraudulent or dishonest behaviour.

The respective roles of the Governor, who is Chairman of the Court, and the Group Chief Executive, which are separate, are set out in writing and have been agreed by the Court. The Governor oversees the operation and effectiveness of the Court. He also ensures that there is effective communication with stockholders and promotes compliance with the highest standards of corporate governance. The Governor commits a substantial amount of time to the Group and his role has priority over any other business commitment.

The Group Chief Executive is responsible for execution of agreed strategy, holds delegated authority from the Court for the day to day management of the business and has ultimate executive responsibility for the Group's operations, compliance and performance. The Group Chief Executive's contract must be reviewed at least every five years and was last reviewed in 2010.

The Court has considered the principles relating to independence contained in the Irish Code and the UK Code. The Court has determined that each current nonexecutive Director, with the exception of Tom Considine and Joe Walsh, is independent within the meaning of the Irish Code and the UK Code. Tom Considine and Joe Walsh were nominated by the Minister for Finance under the terms of the Credit Institutions (Financial Support) Scheme, 2008 and are not required to stand for election or regular re-election by stockholders. They are not, therefore, considered independent by reference to the terms of the Irish Code and the UK Code. The Court values and benefits from their judgement and the quality of their contribution to the deliberations of the Court and its Committees. Each of the Governor, Deputy Governor and all of the non-executive Directors bring independent challenge and judgement to the deliberations of the Court through their character, objectivity and integrity and all are considered independent of management in accordance with the criteria set out in the NYSE Corporate Governance Standards.

The Credit Institutions (Stabilisation) Act 2010 (the Stabilisation Act) has given the Minister for Finance, for a period of two years, extensive powers regarding the affairs, assets and liabilities of certain covered financial institutions in Ireland, including the Bank. In particular, Section 48 of the Stabilisation Act imposes a duty on the Directors of the Bank to align the activities of the Bank and the duties and responsibilities of the Directors, officers and employees of the Bank, with the public interest and the other purposes of the Stabilisation Act (as set out in Section 4 of the Stabilisation Act). This duty is owed by the Directors to the Minister, on behalf of the State, and takes priority over any other duty of the Directors.

The Group Nomination and Governance Committee is chaired by the Governor and its composition is fully compliant with the Irish Code and the UK Code. Biographical details, including each member's background and experience, are set out on pages 128 to 133. The Committee is responsible for leading the process for succession to the position of Group Chief Executive and positions on the Court and overseeing the selection process for key subsidiary Board non-executive appointments and renewals. The Committee, with the support of the Group Secretary, monitors developments in corporate governance, assesses the implications of such developments for the Group and advises the Court accordingly. It is also charged with overseeing the Group's Corporate Responsibility Programme.

In addition to reviewing the size and composition of the Court, the Committee is also responsible for reviewing the balance on the Court and its principal Committees and recommending the appointment of any new Directors to the Court. The Committee regularly reviews succession plans for the Court in the context of the Group's strategy and the skills, knowledge and experience of current Directors and makes appropriate recommendations to the Court. The Court is responsible for the appointment of Directors (with the exception of the two Government nominated Directors). Prior to the appointment of a Director, the Committee approves a job specification, assesses the time commitment involved and identifies the skills and experience required for the role. The recruitment process for non-executive Directors is supported by an experienced third party professional search firm which develops an appropriate pool of candidates and provides independent assessments of the candidates. The Group then works with that firm to shortlist candidates, conduct interviews/meetings, (including meetings with members of the Committee) and complete comprehensive due diligence, including satisfying itself as to the candidates' independence and to assess and document its consideration of possible conflicts of interests. A recommendation is then made to the Court. Appointments will not proceed where conflicts emerge which are significant to the overall work of the Board. The processes described above were followed in the selection and appointment of Patrick Mulvihill, Pat Butler, Patrick Haren and Kent Atkinson to the Court.

Further to the Central Bank Reform Act 2010 (the Reform Act), the Bank must, following assessment, conclude that each Director or candidate Director has the requisite standard of fitness, probity and financial soundness to perform his or her function as Director, with reference to the Fitness and Probity Standards issued by the Central Bank of Ireland pursuant to the Reform Act.

The Court benefits from the diverse range of skills, knowledge and experience acquired by the non-executive Directors as Directors of other companies, both national and international, or as leaders in the public and private sectors. The effectiveness of the Court depends on ensuring the right balance of Directors with banking or financial services experience and broader commercial experience. Collectively, the Court possesses skills and experience in a wide range of areas relevant to banking and business, including the following: financial services (including retail, corporate and insurance), finance and accountancy, risk management, economics, investor relations, corporate finance, mergers and acquisitions, strategy development, human resources, marketing and customer relations. Directors also receive ongoing training and briefings by way of ongoing professional development (see 'Induction and Professional

Development' below). Directors bring their individual knowledge, skills and experience to bear in discussions on the major challenges facing the Group.

All newly appointed Directors are provided with a comprehensive letter of appointment detailing their responsibilities as Directors, the terms of their appointments and the expected time commitment for the role. A copy of the standard terms and conditions of appointment of non-executive Directors can be inspected during normal business hours by contacting the Group Secretary.

Directors are required to devote adequate time to the business of the Group, which includes attendance at regular meetings and briefings, preparation time for meetings and visits to business units. In addition, non-executive Directors are normally required to sit on at least one Committee of the Court, which involves the commitment of additional time. Certain non-executive Directors, such as the Deputy Governor and Committee Chairmen, are required to allocate additional time in fulfilling those roles.

On appointment, all non-executive Directors receive comprehensive briefing documents designed to familiarise them with the Group's operations, management and governance structures; these include the functioning of the Court and the role of the key committees. In addition, new non executive Directors undertake an induction programme, including visits to or presentations by Group businesses and briefings with senior management. On an ongoing basis, briefings appropriate to the business of the Group are provided to all non-executive Directors.

In order to ensure that the Directors continue to further their understanding of the issues facing the Group, Directors are provided with training sessions and briefings on technical matters. During the year ended 31 December 2011, Directors participated in a number of training modules including the following: Regulatory and Economic Capital Models; Capital Markets and Strategy; Liquidity Management; Risk Aligned Performance Management and the Internal Capital Adequacy Assessment Process (ICAAP). A skills profile assessment has been conducted to ensure that the nonexecutive Directors have the relevant skills and experience to carry out their duties and that the Court as a whole has the full range of skills and experience required to discharge its responsibilities.

The Directors have access to the advice and services of the Group Secretary, who is responsible for advising the Court on all governance issues and for ensuring that the Directors are provided with relevant information on a timely basis to enable them to consider issues for decision and to discharge their oversight responsibilities. The Directors also have access to the advice of the Group Legal Adviser and to independent professional advice, at the Group's expense, if and when required. Committees of the Court have similar access and are provided with sufficient resources to undertake their duties.

Directors are aware that, should they have any material concern about the overall corporate governance of the Group, it should be reported without delay to the Court and, should their concerns not be satisfactorily addressed within five business days, the Directors should report the concern to the Central Bank of Ireland.

Directors are also offered the option of attending suitable external events or conferences designed to provide an overview of current issues of relevance to Directors.

In 2011, the performance evaluation process for individual Directors involved one-to-one meetings between the Governor and each Director, supported by the completion of questionnaire templates, the objective of which was to establish whether each individual contributed effectively and demonstrated commitment to the role. In 2011, the Group engaged a suitably qualified and independent firm to conduct an independent external review of the effectiveness of the Court and its Committees. Refer to page 140 for

further information on the conclusion of this review. Following that review, the Court concluded that, as a body, it is effective in discharging its responsibilities.

As part of the overall performance evaluation process, the appraisal of the Governor's performance was conducted by the Senior Independent Director by means of one-to-one discussions with Directors, supported by questionnaires. The Senior Independent Director presented the results of these assessments for discussion with the Directors, without the Governor being present. He then met the Governor to present him with the Court's conclusions on his effectiveness. The Senior Independent Director also meets individual Directors on such other occasions as are deemed appropriate.

Non-Executive Directors are normally appointed for an initial three year term, with an expectation of a further term of three years, assuming satisfactory performance. A non-executive Director is not normally expected to serve any longer than two terms. All Directors, except those nominated to the Court by the Minister for Finance, are subject to re-election by stockholders. In line with emerging corporate governance practice, since the Annual General Court in 2009, all Directors who have sought re-election (other than Tom Considine and Joe Walsh, who were nominated to the Court by the Minister for Finance) have done so on an annual basis. In the case of Tom Considine and Joe Walsh, the requirement to stand for election and regular re-election is dispensed with for as long as the National Pension Reserve Fund Commission's investment in the Bank remains in place.

The Court plans for its own renewal with the assistance of the Nomination and Governance Committee. Refer to the section above headed 'Appointments to the Court and role of Nomination and Governance Committee.'

In respect of Executive Directors, no service contract exists between the Bank and any Director which provides for a notice period from the Group of greater than one year. None of the non-executive Directors has a contract of service with the Group.

The Remuneration of Directors and Officers, incorporating the responsibilities of the Group Remuneration Committee, is set out on pages 135 to 138.

A statement confirming that remuneration consultants appointed by the Group Remuneration Committee have no other remuneration consultancy connections with the Group is available on the Group's website (www.bankofireland.com) or by request to the Group Secretary. The Group's historic long term incentive schemes have been approved by stockholders.

The Companies Acts, IAS 24 and a condition imposed on the Bank's licence by the Central Bank of Ireland in August 2009 require the disclosure in the Annual Report of information on transactions between the Bank and its Directors and their connected persons. The amount of outstanding loans to Directors (and relevant loans to connected persons) is set out on pages F-149 to F-156.

A condition imposed on the Bank's licence by the Central Bank of Ireland in May 2010 requires the Bank to maintain a register of loans to Directors and relevant loans to their connected persons, which is updated quarterly and is available for inspection by shareholders on request for a period of one week following quarterly updates. The Group's process for ensuring compliance with the Central Bank of Ireland's Code of Practice on Lending to Related Parties has been in place since 1 January 2011. This includes the establishment of a Related Party Lending Committee of the Court, which is authorised to review and approve lending to Related Parties as defined in this Code.

The Statement of Directors Responsibility and the going concern statements are set out on pages F-2 and F-13.

The Directors acknowledge their overall responsibility for the Group's systems of internal control and for reviewing their effectiveness. Such systems are designed to control, rather than eliminate, the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss. Such losses could arise because of the nature of the Group's business in undertaking a wide range of financial services that inherently involves varying degrees of risk.

The Court has obligations as a non-US registrant under US securities laws and regulations, including the requirement to comply, where applicable, with the Sarbanes-Oxley Act of 2002 (SOx). The Group has put in place a comprehensive framework to document and test its internal control structures and procedures in line with the requirements of Section 404 of SOx, which requires, among other things, certification by management regarding the effectiveness of internal controls over financial reporting. The Group's overall control systems include:

The Group operates a comprehensive internal control framework over financial reporting with documented procedures and guidelines to support the preparation of the consolidated financial statements.

These controls, which are embedded within the operations of the Group, are reviewed by Group Internal Audit. In these reviews, emphasis is focussed on areas of greater risk as identified by risk analysis.

The Directors confirm that the Court, through its Committees, has reviewed the effectiveness of the Group's systems of internal control for the year ended 31 December 2011. This review involved consideration of the reports of the internal audit and the risk management functions, (including operational risk, regulatory risk and compliance) and establishing that appropriate action is being taken by management to address issues highlighted. In addition, any reports of the external auditors which contain details of any significant internal control matters that they have identified are reviewed by the GAC, if they arise. After each meeting of the GAC, its Chairman reports to the Court on all significant issues considered by the Committee and the minutes of meetings are circulated to all members of the Court.

Following the year ended 31 December 2011, the Court reviewed the GAC's conclusions in relation to the Group's systems of internal control and the appropriateness of the structures in place to manage and monitor them. This process involved a confirmation that a system of internal control in accordance with the Financial Reporting Council Revised Guidance on Internal Control was in place throughout the year and up to the date of the signing of these financial statements. It also involved an assessment of the ongoing process for the identification, evaluation and management of individual risks and of the roles of the various Committees and Group risk management functions and the extent to which various significant challenges facing the Group are understood and are being addressed.

The Group has a Speak Up policy in place for all staff, which is in accordance with international best practice for whistle blowing arrangements and is compliant with the Sarbanes-Oxley Act. The policy encourages staff to raise concerns openly and locally. Where this is not possible or the problem has not been resolved effectively at that level, there are clear alternative senior contacts within the Group to whom the concern may be addressed. Confidential advice is available from Public Concern at Work, an independent, not-for profit organisation, through a free phone number and a dedicated email address. In the case of concerns regarding financial reporting, fraudulent accounting or irregularities in audit work,

these can be passed directly to the Chairman of the GAC, whose contact details are available from Public Concern at Work. The Chairman of the GAC is a non-executive Director.

At 31 December 2011, the GAC comprised four non-executive Directors. On their appointment to the Court on 20 January 2012, two independent non-executive Directors, Kent Atkinson and Patrick Haren, joined the GAC, bringing its current membership to six. The Court has determined that the Committee members' collective skills and recent and relevant financial experience enable them to discharge their responsibilities. Biographical details, including each member's background and experience, are set out on pages 128 to 133. In close liaison with the CRC, which advises the Court in establishing the Group's Risk Appetite and setting standards for the Group's risk control framework, the GAC reviews the appropriateness and completeness of the system of internal control, reviews the manner and framework in which management ensures and monitors the adequacy of the nature, extent and effectiveness of internal control systems, including accounting control systems, and thereby maintains an effective system of internal control.

It reviews the procedures and processes by which non-audit services are provided by the external auditors in order to ensure, among other things, that auditor objectivity and independence are not compromised. In this regard, a key procedural control requires that any engagement of the external auditors to provide non-audit services must be preapproved by the GAC, which also receives reports on the performance of such services.

The GAC met twelve times in 2011, of which four meetings were unscheduled. Matters which received particular focus during the year included: the Group's Capital Raise and associated documentation, including review of working capital statements and consideration of the related assurance and verification processes; consideration of technical accounting and judgemental matters, including detailed reviews of the going concern assessment and of current and forecast impairment provisions.

The GAC also reviewed the Group Internal Audit reports and findings, the Interim Report for the six months ended 30 June 2011, updates on SOx and reports from Group Regulatory Compliance and Operational Risk. In addition, the GAC reviewed the external auditor's audit plan, audit findings, the external auditor's independence letter and the external audit fee approval.

At 31 December 2011, the CRC comprised seven non-executive Directors. On 31 December 2011, Rose Hynes retired from the Court and the CRC. On 20 January 2012, Patrick O'Sullivan retired from the CRC and Kent Atkinson was appointed to the CRC, bringing its current membership to six. Biographical details, including each member's background and experience, are set out on pages 128 to 133. The CRC monitors risk governance and assists the Court in discharging its responsibilities in ensuring that risks are properly identified, reported, and assessed; it also ensures that risks are properly controlled and that strategy is

informed by and aligned with the Group's Risk Appetite. To ensure co-ordination with the work of the GAC, the Chairman of GAC is a member of the CRC and the Chairman of the CRC is a member of the GAC. Membership is reviewed annually by the Group Nomination and Governance Committee.

The Court Risk Report covers material Risk Types to which the Group has exposure. The Court Risk Report is presented quarterly to Group Risk Policy Committee (GRPC), the CRC and the Court of Directors. In addition, monthly updates on credit, liquidity and capital risks are submitted to the GRPC and the Court of Directors. The Group's material risk types and Group risk reporting are outlined on pages 178 and 180, respectively.

The primary responsibility of the CRC is to assist the Court in discharging its responsibilities for overseeing risk management in the Group. To that end, the CRC develops views on the key risks facing the Group, including determining if they are appropriately identified, measured, reported, assessed and controlled. In discharging these responsibilities, the CRC reviews the recommendations of the GRPC to the Court on key risk documents including the Risk Appetite Statement, the Group Risk Framework and key documents on liquidity, credit, capital, ICAAP, and funding.

On an annual basis, the CRC reviews the Group's Risk Management Framework which is approved by the Court. The Group's Risk Management Framework defines risk management processes for material risk types on the basis of, among other things, a comprehensive risk identification and assessment process. Where this exercise highlights risks or areas not effectively covered by existing risk management and governance processes, appropriate changes are proposed to the Court. The CRC also discusses results of the Group's stress testing programme. These results are used to inform Risk Appetite as well as capital targets and buffers as part of the Group's ICAAP. The Group's Stress Testing Process is described on pages 179 to 180.

The CRC met nine times in 2011, of which two meetings were unscheduled. It devoted significant focus to reviewing the quality of risk reporting and enhancements to the Quarterly Court Risk Report. It reviewed updates in respect of the Group's Risk Strategy and Appetite and the Risk Appetite Statement was revised in 2011 to reflect the impacts of PCAR/PLAR and recapitalisation of the Bank on risk profile. The CRC considered management's assessment of risk in the Group, including management's view on likelihood of occurrence and the mitigants available. It considered the review and challenge process, through which the Court satisfied itself in respect to the assessment of identified risk measures that do not lend themselves to being measured against readily identifiable risk metrics. The CRC received and considered updates on the implementation of measures designed to improve risk governance within the Group. It considered the effectiveness of the GRPC and reviewed the minutes of GRPC meetings in 2011.

The Group Deleveraging Committee (GDC) is a Court-appointed Committee, which was established in June 2011, to monitor and oversee the delivery of the Group's deleveraging commitments under the Group's business plan, the Central Bank of Ireland's 2011 PCAR/PLAR process and the EU/IMF Programme of Financial Support for Ireland. The GDC is chaired by a non-executive Director and comprises a number of the Group's executives and senior managers. The GDC met five times in 2011. Representatives of the Department of Finance and Central Bank of Ireland have enhanced observer status at the GDC.

Group Risk Policy Committee (GRPC)—Within the parameters of Court approved high level policies, frameworks and principles, the GRPC approves risk policies and actions and makes recommendations to the Court on risk issues where the Court has reserved authority. In addition the GRPC ensures that risks are properly identified and assessed; that risks are properly controlled and managed; and that strategy is informed by and aligned with the Group's Risk Appetite. Group Investment Committee (GIC)—The GIC

is responsible for evaluating all material investment/divestment/capital expenditure proposals, determining those within its authority and recommending those outside its authority to the Court for its approval. It is also responsible for monitoring the implementation of such proposals and ensuring satisfactory delivery of expected benefits.

As a non-US company listed on the NYSE, the Bank is exempt from most of the provisions of Section 303A of the NYSE corporate governance standards (NYSE Rules), which domestic U.S. companies must follow. However, the Bank is required to provide an Annual Written Affirmation to the NYSE confirming compliance with applicable NYSE Rules and is also required to disclose any significant differences between its corporate governance practices and the requirements of the NYSE Rules applicable to US companies. As a company formed by Charter in Ireland, listed on the Irish and London Stock Exchanges and with an ADR listing on the NYSE, the Group's corporate governance practices reflect Irish law (including the provisions of the Credit Institutions (Stabilisation) Act, 2010—see page 15), the Listing Rules of the Irish Stock Exchange and the UK Listing Authority, the Irish Code and the UK Code.

For the year ended 31 December 2011 the Group employed 13,671 staff on an average full-time equivalent basis (see note 12 to the Consolidated Financial Statements). The decrease in staff over the previous year's figure (14,284) is due to deleveraging activities, the sales of Bank of Ireland Asset Management (BIAM), Bank of Ireland Securities Services (BoISS) and Foreign Currency Exchange Corporation (FCE

Corporation), and the impact of alignment of Group functions and normal staffing level fluctuations. The Group employed 14,755 staff on average in the nine months ended 31 December 2009.

Under the terms of the senior Executive Stock Option Scheme approved by the stockholders, options may be granted, at the discretion of the Directors, enabling senior executives to subscribe for specified numbers of units of Ordinary Stock.

As at 20 March 2012, options were outstanding over 3,113,513 units of stock representing 0.01% of the total ordinary stock then in issue.

As at 20 March 2012, Executive Directors and Executive Officers as a group held options under the above scheme over a total of 514,500 units, representing 0.0017% of the total ordinary stock in issue.

Additional information on Employee Share Schemes, Long Term Incentive Plan and Executive Stock Option Schemes is shown on pages 169 to 170.

In addition to their interests in ordinary stock through their holding of stock options and the conditional awards of stock they have received under the LTPSP and LTIP, as set out in note 48 to the Consolidated Financial Statements, the interests of the Directors and Group Secretary in office at 20 March 2012, and of their spouses and minor children, in the stocks issued by the Group are set out below:

		Units of €0.05 Ordinary Stock as at 20 March 2012

DIRECTORS
Patrick J Molloy			2,794,170
Richie Boucher			380,957
Andrew Keating			56,014
Jerome Kennedy			92,713
Tom Considine			57,500
Joe Walsh			123,427
Patrick O'Sullivan			115,000
Patrick Kennedy			254,642
Kent Atkinson			2,000
Pat Butler			1,000
Patrick Haren			1,000
Patrick Mulvihill			5,000
SECRETARY
Helen Nolan			80,043

As at 20 March 2012, Directors and Executive Officers of the Bank as a group beneficially held 0.027% (8,140,527 units) of the Group's issued ordinary stock.

All of the employee stock issue and stock option schemes are subject to a range of flow rate controls approved by the stockholders and which conform to institutional investor guidelines.

Substantial interests in the Bank's issued ordinary stock to the latest practicable date for each of the three financial periods to 31 December 2011 is shown below:

As at 20 March 2012, the Bank had received notification of the following substantial interests in its issued ordinary stock:

As at 16 June 2011, the Bank had received notification of the following substantial interests in its issued ordinary stock:

As at 8 June 2010, the Bank had received notification of the following substantial interests in its issued ordinary stock:

Refer to note 55 to the Consolidated Financial Statements. Also see "Interest of Management in Certain Transactions" and "Indebtedness of Directors and Executive Officers" and "Directors Loans" on pages 139 and 147.

At 31 December 2011, 1,232,425 units of Ordinary Stock were held by 487 stockholders with registered addresses in the United States and 23,102,368 ADSs were held by 243 registered holders with addresses in the United States. The combined shareholdings of these holders comprise approximately 3.1% of the total number of units of Ordinary Stock in issue at 31 December 2011 (being 30,132,505,842 units). These figures do not include either the number of units of ordinary stock held by stockholders with registered addresses outside the United States in which United States residents have an interest or the number of such US residents.

The table below provides a summary of dividends per unit of ordinary stock paid in respect of the past five financial periods.

On 13 November 2008, in light of the deteriorating economic conditions and the determination to preserve capital, the Group announced its decision to cancel dividend payments on Ordinary Stock for the financial year ending 31 March 2009 and stated that it did not expect to resume paying dividends on Ordinary Stock until more favourable economic and financial conditions returned. This remains the Group's policy and the Group stated in the 2011 Annual Report that it did not propose to issue any dividend in respect of the year ending 31 December 2011.

In addition, under the approved 2011 EU Restructuring Plan, the Group has committed not to pay dividends on Ordinary Stock until the earlier of (i) 31 December 2015; or (ii) such time as the 2009 Preference Stock is redeemed or no longer owned by the State, through the NPRFC or otherwise.

Following the expiry on 31 January 2011 of the prohibition by the EU Commission on discretionary dividend and coupon payments on the Group's capital instruments, coupon payments on such instruments recommenced on 1 February 2011. On 21 February 2011, the Group paid dividends on its euro and sterling preference stock of €3.7 million and the dividend of €214.5 million with respect to the 2009 Preference Stock held by the NPRFC. On 22 August 2011, the Group paid dividends due of €3.4 million on its euro and sterling Preference Stock.

Save as disclosed in the paragraphs below, there have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Group is aware) which may have, or have had in the recent past, significant effects on the financial position or profitability of the Group taken as a whole.

In May 2007, the Bank, through Bank of Ireland Private Banking, entered into an agreement with Procom Desarollos Urbanos, SA and Cecosa Hipermercados S.L.U (the "Plaintiff") to purchase the entire issued share capital of Procom Desarrollo Comercial de Zaragoza, SA, which is a Spanish incorporated company involved in the development of a shopping centre and retail park in Zaragoza, Spain. The agreement contained a number of pre-conditions. The Bank contends that one of the pre-conditions was not satisfied and accordingly did not proceed to purchase Procom Desarrollo Comercial de Zaragoza, SA. In February 2009, the Plaintiff initiated legal proceedings against Bank of Ireland Private Banking and the Bank for specific performance or, failing this, damages in relation to the terminated agreement claiming €142 million in damages. On 10 February 2010, the Madrid Court of First Instance ruled in favour of Plaintiff and awarded damages of €90.87 million. This was appealed by both parties. The Court of Appeal awarded the Plaintiff additional damages in the amount of €12 million in December 2011. An appeal has been lodged by the Bank with the Supreme Court in Madrid. The Plaintiff has not appealed. The Supreme Court will initially, within twelve months, determine if the appeal merits consideration. If admitted, the final Supreme Court judgment is likely to take a further two to three years.

On 19 January 2010, the Minister for Finance announced a framework for an investigation into the factors which contributed to the Irish banking crisis within the context of the international economic and financial environment at that time.

As part of the first stage of the investigation into the banking system, the Government commissioned two preliminary investigatory reports. A report on the functions of the Central Bank over the period from the establishment of the Financial Regulator (now the Central Bank) in May 2003 to the end of September 2008 was prepared by the Governor of the Central Bank. A second report, dealing with an investigation into the specific factors within the Irish banking sector which exacerbated the impact of the international financial crisis for Ireland, was prepared by independent experts appointed by the Minister for Finance. The preliminary report by the independent experts involved an inquiry into the conduct, management and corporate governance of individual financial institutions, including the Group.

Both preliminary reports were published on 31 May 2010 and their findings formed the basis for the terms of reference of a formal statutory investigation (the "Statutory Commission of Investigation") which was established by the Government on 21 September 2010 pursuant to the Commissions of Investigation Act, 2004. The Statutory Commission of Investigation examined the performance of individual banks and bank directors, the performance of regulatory authorities, the response of Government and Government agencies and the structure of the banking system in Ireland generally. The Statutory Commission of Investigation presented its report to the Minister for Finance on 22 March 2011 and it was forwarded to the Attorney General. The report was published on 19 April 2011. Further inquiry may result from the findings of the Statutory Commission of Investigation, including the possibility of public hearings. The Group may be exposed to criminal sanctions and/or fines in connection with a range of offences under the Commissions of Investigation Act 2004, which offences include the making of statements material in the investigation concerned knowing them to be false or not believing them to be true, the failure to comply with directions of the Statutory Commission of Investigation and intentionally obstructing its work (which

offences could result in the Group, or an officer of the Group, being subject to a fine of up to €300,000 on conviction on indictment).

The Department of Finance conducted a review of the bonus payments to staff made by the Group since the commencement of the State Guarantee Schemes in September 2008.

Certain of the Group's historic incentive arrangements and/or retention arrangements with certain individual employees or groups of employees have been reviewed by the Department of Finance and a report detailing the findings of this review was published on 3 March 2011.

The report concluded that the Group did not properly disclose to the Department of Finance details of its historic incentive arrangements for the purposes of a response to a question raised in the Dáil on the payment of performance bonuses by banks since the commencement of the State Guarantee Schemes. A specific misunderstanding arose in relation to the scope of the question raised and in response to the question, the Group responded stating that performance bonuses were no longer paid by the Group. The Group has now accepted that it provided incorrect information for the purposes of the answer to the Dáil question.

While there was no intention on the part of the Group to mislead in relation to the original Dáil question, the end result was that errors were made and the Group has acknowledged this in its response to the findings of the review.

The Group has given assurances that it has now provided the Department of Finance with accurate information in relation to bonus payments to employees. The Group has made a payment of €2 million to the State to recognise the difficulties caused by the way in which the Group dealt with the request for information and with the subsequent review. An internal Group investigation to identify the actions necessary to ensure there is no re-occurrence of these issues has taken place and the recommendations arising from this review are being implemented. Definitions of different types of non salary payments and the purposes of each have now been clarified with the Department of Finance.

If the Group decides not to, or is precluded from, making payments under historically contracted incentive arrangements, and/or recruitment arrangements and/or retention arrangements with certain individual employees or groups of employees, the Group could face legal actions from employees and/ or could lose the commitment from, or services of, key employees which could impact on the reputation of the Group and the Group's business, financial condition and prospects.

Litigation in relation to the Debt for Equity Offers and application of the Stabilisation Act.

As described below, two groups of holders of Eligible Debt Securities commenced legal proceedings against the Bank regarding the Debt for Equity Offers launched in June 2011.

In June 2011, a firm of solicitors acting for a holder of the 13.375% Unsecured Perpetual Subordinated Bonds (ISIN: GB 0000510312) (the "13.375% Bonds") brought proceedings on behalf of its client that the Proposed Resolution in relation to the 13.375% Bonds would be invalid and sought declarations to this effect and an injunction by way of final relief restraining the Bank from tabling the proposed resolution or exercising the call option in relation to the 13.375% Bonds. The matter was later resolved to the parties mutual satisfaction.

A group of parties claiming to hold approximately US$750 million of Lower Tier 2 Eligible Debt Securities commenced legal proceedings in England on 17 June 2011 against the Bank and The Law Debenture Trust Corporation p.l.c. to obtain declarations including that the Proposed Resolutions in relation to these Eligible Debt Securities would be invalid and that a subordinated liabilities order under the Stabilisation Act in relation to these Eligible Debt Securities would not be enforceable under English law. The legal

proceedings also sought an injunction by way of final relief restraining the Bank from accepting offers to participate in the Debt for Equity Offers, taking any further steps in relation to the Debt for Equity Offers and acting on the outcome of the Debt for Equity Offers including tabling the Proposed Resolutions and exercising the call option. On 7 September 2011, the claimants in the proceedings (who by that date claimed to hold approximately US$359 million of Lower Tier 2 Eligible Debt Securities) amended the proceedings so as to seek only declarations in relation to a subordinated liabilities order made under the Stabilisation Act in relation to these Eligible Debt Securities, including that such an order would not be enforceable under English law. On 2 December 2011, the Minister for Finance publicly announced that he was no longer considering the use of the powers available to him under the Stabilisation Act at that time. The Bank continues to vigorously defend these proceedings.

On 28 June 2011, the Bank terminated a Debt for Equity offer in respect of the 13.375% Bonds in light of the continued difficulties holders of the 13.375% bonds experienced in participating in the offer. On 24 August 2011, the Bank launched a new voluntary cash offer in respect of the 13.375% Bonds. On 22 September 2011, the Bank announced that £29,096,400 in aggregate nominal amount of the 13.275% Bonds were tendered pursuant to the offer.

As at 20 March 2012 the authorised capital stock of the Bank was made up of €6,967,000,000, US$225,000,000 and Stg£125,000,000 divided as follows:

As at 20 March 2012 there were 30,132,505,842 units of ordinary stock of €0.05 each issued and outstanding. As at 20 March 2012 1,837,041,304 units of non-cumulative 2009 Preference Stock of €0.01 each were in issue. 1,876,090 units of non-cumulative preference stock of Stg£1.00 each and 3,026,598 units of non-cumulative preference stock of €1.27 each were in issue and 90,682,081,918 units of deferred stock of €0.01 each were in issue. See note 49 to the Consolidated Financial Statements for details of the rights issue which concluded on 26 July 2011.

For further information on the renominalisation of the ordinary stock refer to note 48 to the Consolidated Financial Statements.

The principal trading markets for the ordinary stock are the Irish Stock Exchange and the London Stock Exchange.

The Group's American Depository Shares (ADSs) are listed on the New York Stock Exchange. The Group implemented a ratio change with respect to its American Depositary Receipt (ADR) programme effective 14 October 2011, where the ratio changed from one (1) ADS representing four (4) units of ordinary stock (1:4), to one (1) ADS representing forty (40) units of ordinary stock (1:40). Following this change, each ADS represents the right to receive forty units of ordinary stock and evidenced by American Depository Receipts (ADRs). Depository Receipts are negotiable securities that are used to represent, among other things, a non-US company's publicly traded ordinary share capital.

ADRs are traded and dividends distributed in US dollars just like any US security, alleviating certain obstacles associated with investing directly in the home markets of non-US companies. The Bank of New York Mellon is the Depository Bank for the Bank of Ireland's ADR programme.

The following table sets forth, for the periods indicated, the reported highest and lowest closing price for one unit of Ordinary Stock on the Irish Stock Exchange, as derived from the Daily Official List of the Irish Stock Exchange quoted in euro and the highest and lowest sales prices for the ADSs as reported on the New York Stock Exchange Composite tape.

At 20 March 2012, 54 companies were quoted on the Irish Stock Exchange. These companies had a combined market capitalisation of more than €200.4 billion at that date. The 10 companies with the largest market capitalisations accounted for over 88.92% of the Exchange's total market capitalisation.

	Ordinary Stock				ADSs*

	High		Low		High		Low
	€		€		$		$
Financial Year Ended
31 March 2008		16.85		8.61		910.00		545.10
31 March 2009		10.00		0.13		634.70		6.60
Nine months ended 31 December 2009		3.42		0.58		201.80		27.80
31 December 2010		1.91		0.26		105.70		13.80
31 December 2011*		0.40		0.07		6.88		0.80
Nine months ended 31 December, 2009
First quarter		2.23		0.58		129.80		27.80
Second quarter		3.42		1.24		201.80		68.50
Third quarter		3.25		1.18		200.60		65.80
Financial year ended 31 December, 2010
First quarter		1.71		0.98		100.30		52.30
Second quarter		1.91		0.67		105.70		32.90
Third quarter		0.87		0.54		48.60		29.50
Fourth quarter		0.68		0.26		39.00		13.80
Financial year ended 31 December, 2011
First quarter		0.40		0.22		26.30		12.50
Second quarter		0.34		0.12		25.20		10.50
Third quarter		0.12		0.07		15.40		8.70
Fourth quarter		0.11		0.07		6.88		0.80
Month ended
September 2011		0.09		0.07		1.21		0.97
October 2011		0.11		0.07		6.88		0.80
November 2011		0.09		0.08		5.36		4.00
December 2011		0.09		0.08		5.02		4.00
January 2012		0.12		0.08		6.27		4.34
February 2012		0.14		0.12		7.88		6.73

Fluctuations in the exchange rate between the euro and the dollar will affect the dollar equivalent of the price of the ordinary stock on the Irish Stock Exchange and as a result may affect the market price of the ADSs on the New York Stock Exchange. See "Exchange Rates" on page 5.

The Governor and Company of the Bank of Ireland (the "Bank") is registered in Ireland with the Companies Office under No. C-1. The corporation was established pursuant to a Charter granted by King George III on foot of an Act of the Irish Parliament passed in 1781/82. The Charter was granted in 1783.

The corporation's objects and purposes were set out originally in the Charter and have been amended by legislation (in 1872 and 1929) and by resolutions passed by the stockholders meeting in General Court in 1972 and 1995. The principal objects of the corporation are to carry on the business of banking and to undertake all types of financial services.

On 31 March 2009, the Bank raised €3.5 billion through the issue of non-cumulative Preference Stock of €0.01 each (the 2009 Preference Stock) in the capital of the Bank and warrants (the Warrants) to the National Pension Reserve Fund Commission (NPRFC). Details of the rights attaching to the 2009 Preference Stock are set out in point 5(d) below.

In 2010 the Bank completed a capital raise (the 2010 capital raise) which included a number of elements: (i) an institutional placing (ii) an NPRFC placing (iii) a rights issue and (iv) debt for equity offers following which the NPRFC increased its holding of Ordinary Stock, but had its Warrants cancelled and its holding of 2009 Preference Stock reduced. This resulted in the NPRFC holding 36% of the Bank's enlarged capital stock (with the NPRFC subscribing fully for its rights in relation to the NPRFC Coupon Ordinary Stock and the Ordinary Stock issued pursuant to the NPRFC Placing), and the full take up of its Rights in respect of the units of its other Existing Stock (i.e. the Ordinary Stock held pursuant to its other investment activities in addition to the NPRFC Coupon Ordinary Stock) with no right to purchase additional Ordinary Stock pursuant to the Warrants. The 2010 Capital Raise resulted in the NPRFC's holding of 2009 Preference Stock falling from the 3,500 million units held at 26 April 2010 to 1,837,041,304 units.

The 2010 Capital Raise resulted in Ordinary Stockholders' proportionate holding in the Bank being diluted. This was because the issue of the Placing Stock, the Ordinary Stock issued under the NPRFC Placing and the Ordinary Stock issued pursuant to the Debt for Equity Offers were not offered to Existing Stockholders. The degree of dilution increased depending on a number of variables, the main ones being whether or not Stockholders take up their Rights to subscribe for Ordinary Stock under the Rights Issue and the level of participation by noteholders in the Debt for Equity Offers.

The Group's 2011 Capital Raise was completed in December 2011 and included a number of elements: (i) debt for equity offers (including a cash offer) and the compulsory acquisition of eligible debt securities; (ii) further burden sharing with remaining subordinated bondholders; (iii) a potential State Placing; (iv) a Rights Issue; and (v) the issue of a Contingent Capital note.

In the year ended 31 December 2011, the Debt for Equity offers including certain Canadian Dollar 2015 notes, the completion of the Kildare and Brunel securitisation liability management exercise and the repurchase of a number of Capital securities generated Core tier 1 capital of €2,451 million.

While the NPRFC was originally granted an option to make a direct placing of up to 795 million units of ordinary stock at €0.10, it was announced on 8 July 2011 that the NPRFC would not be proceeding with this option.

On 8 July 2011 the Group announced a Rights Issue, underwritten by the NPRFC, of 19.1 billion units of ordinary stock at a price of €0.10 per unit to generate gross proceeds of €1.9 billion.

Total fees and other costs of €146 million were payable in connection with the Debt for Equity offers (including the Debt for cash offers) and the underwritten Rights Issue.

Significant Investment in Bank of Ireland—Reduction in Government stockholding

On 25 July 2011, the Irish Government announced its agreement to sell up to 10.5 billion units of ordinary stock at €0.10 per unit to a group of significant institutional investors and fund managers. These investors are Fairfax Financial Holdings, WL Ross, Capital Research, Fidelity Investments and Kennedy Wilson. The Bank has been advised that each of these investors will manage their individual stockholdings independently.

Following the completion of the 2011 Capital Raise and the significant investment in Bank of Ireland, the State's stockholding in the Bank reduced to 15.1% of the Bank's fully diluted ordinary stock while the combined stockholding of the new group of significant institutional investors and fund managers was 34.9%.

In July 2011 the Group issued a Contingent Capital note to the State with a nominal amount of €1 billion and a maturity of five years. This Contingent Capital note is classified as a subordinated liability and it qualifies as Tier 2 capital. A placing fee of €15 million was payable to the State.

The members of the Bank in General Court may at any time and from time to time by resolution enlarge the capital stock of the Bank by such amount as they think proper. The requirement for the approval in writing by the Minister for Finance before any such resolution (a control resolution) can be tabled at an Annual General Court is set out in point 10 – Limitation on a Change of Control. The tabling of any resolution at a General Court of the Bank to alter the capital structure of the Group requires the prior approval in writing of the Minister for Finance. Whenever the capital stock of the Bank is so enlarged, the Directors may, subject to various provisions of the Bye-Laws, issue stock to such amount not exceeding the amount of such enlargement as they think proper. All ordinary stock so issued shall rank in equal priority with existing ordinary stock.

Subject to provisions of the Companies Acts, to any rights conferred on any class of stock in the Bank and to the Bye-Laws, the Bank may purchase any of its stock of any class (including any redeemable stock) and may cancel any stock so purchased. The Bank may hold such stock as treasury stock, in accordance with Section 209 of the Companies Act, 1990 (the treasury stock) with the ability to re-issue any such treasury stock on such terms and conditions and in such manner as the Directors may from time to time determine. The Bank shall not make market purchases of its own stock unless such purchases shall have been

authorised by a special resolution passed by the members of the Bank at a General Court (a Section 215 Resolution).

Any Director interested in a contract must declare his/her interest at a meeting of the Directors at which the question of entering into such contract first arises. The Bye-Laws also require that a Director may not vote in respect of any proposal in which he or any person connected with him has a material interest of making this determination. Interests in stock, shares, debentures or other securities of the Group are disregarded for the purpose. A Director cannot be counted in a quorum of the Court of Directors or of the meeting of a committee in relation to any resolution on which he is debarred from voting. The prohibition on voting in respect of contracts in which Directors are interested is disapplied in respect of proposals:

The remuneration of Directors is fixed from time to time by the stockholders in General Court. Such remuneration is divided among them as the Directors determine. Such remuneration shall be independent of any remuneration to which a Director may be entitled in respect of any other office or appointment within the Group. In the absence of an independent quorum, the Directors are not competent to vote compensation to themselves or any members of their body. The Governor and Deputy Governor, elected from time to time by the Directors, are office holders and are remunerated on terms established by the Directors.

Directors may exercise all the borrowing powers of the Group and may give security in connection therewith. These borrowing powers may be amended or restricted only by the stockholders in General Court.

There is no age limit requirement in the Bye-Laws that specifies when a Director must retire. However the Directors have adopted as a guideline that the normal retirement age for non-executive directors is age 68 unless the Court determines otherwise in exceptional circumstances.

All Directors (with the exception of Directors appointed by the Government ("Government Appointees") must hold at least 1,000 units of Ordinary Stock.

In accordance with Central Bank of Ireland's Corporate Governance Code for Credit Institutions and Insurance Undertakings and the UK Corporate Governance Code (formerly the Combined Code published by the Financial Reporting Council in the UK adopted by the Irish Stock Exchange and the London Stock Exchange) all Directors retire by rotation every three years and, if eligible, may offer themselves for re-election subject to satisfactory performance evaluation. The appointment, removal and retirement of Government Appointees is subject to different arrangements that are set out in Bye-Law 100 of the Bye-Laws.

On 1 December 2011, new fitness and probity standards (the "Standards"), issued by the Central Bank of Ireland, became effective for persons performing a prescribed 'controlled function' or a 'pre-approval controlled function' in a Regulated Financial Service Provider (RFSP). The Standards, which apply on a phased basis from 1 December 2011, apply to persons performing any prescribed function in a RFSP and are based on requirements of competence, capability, honesty, integrity and financial prudence.

As part of the 2011 Capital Raise the Bank's ordinary stock and deferred stock was renominalised at the Extraordinary General Court held on 11 July 2011. This resulted in the nominal value of each unit of ordinary stock being reduced from €0.10 per unit to €0.05 per unit and the nominal value of each unit of deferred stock being reduced from €0.54 per unit to €0.01 per unit. Each existing unit of deferred stock of €0.54 at the date of renominalisation was subdivided into 54 units of €0.01 each, and each existing unit of ordinary stock at the date of renominalisation was subdivided and converted into one unit of ordinary stock of €0.05 and five units of deferred stock of €0.01. The purpose of the issue of the deferred stock was to ensure that the reduction in the nominal value of the ordinary stock did not result in a reduction in the capital of the Bank. Each ordinary Stockholder's proportionate interest in the issued ordinary stock of the Bank remained unchanged as a result of the renominalisation.

Aside from the change in nominal value, the rights attaching to €0.05 ordinary stock (including voting rights and dividend rights and rights on a return of capital) are substantively identical to those of the previous €0.10 ordinary stock.

The renominalised deferred stock has no voting or dividend rights and, on a return of capital on a winding up of the Bank, will have the right to receive the amount paid up thereon only after stockholders have received, in aggregate, any amounts paid up thereon plus €10 million per unit of €0.05 ordinary stock, the purpose of which is to ensure that the units of deferred stock have no economic value.

The deferred stock is not transferrable at any time, other than with the prior written consent of the Directors. At the appropriate time, the Bank may redeem or repurchase the deferred stock, make an application to the High Court of Ireland for the deferred stock to be cancelled, or acquire, cancel or seek the surrender of the deferred stock (in each case for no consideration) using other lawful means as the Directors may determine

Under Irish law, and under the Bye-Laws of the Group, dividends are payable on the ordinary stock of the Bank only out of profits available for distribution. Holders of the ordinary stock of the Bank are entitled to receive such dividends as may be declared by the stockholders General Court, provided that the dividend cannot exceed the amount recommended by the Directors. The Bank may pay stockholders such interim dividends as appear to the Directors to be justified by the profits of the Bank. Any dividend which has remained unclaimed for 12 years from the date of its declaration may be forfeited and cease to remain owing by the Bank. No dividend on the ordinary stock may be declared unless the dividend on the dollar Preference Stock, the sterling Preference Stock, the euro Preference Stock (including the 2009 Preference Stock) and the 2005 Preference Stock most recently payable prior to the relevant General Court shall have been paid in cash.

Under the revised 2011 EU Restructuring Plan, the Bank has committed not to pay dividends on its Ordinary Stock until the earlier of (i) 31 December 2015; or (ii) the date by which the 2009 Preference Stock is redeemed or is no longer owned by the State.

Voting at any General Court is by a show of hands unless a poll is properly demanded. On a show of hands, every stockholder who is present in person or by proxy has one vote regardless of the number of units of stock held by him. On a poll, every stockholder who is present in person or by proxy has one vote for every unit of ordinary stock of €0.05 each except for the voting rights of the Minister for Finance which are more restricted. A poll may be demanded by the chairman of the meeting or by at least nine members of the Group present in person or by proxy and entitled to vote on a poll. The necessary quorum for a General Court is 10 persons present in person or by proxy and entitled to vote.

All business is considered to be special business if it is transacted at an Extraordinary General Court as is all business transacted at an Annual General Court other than the declaration of a dividend, the consideration of the accounts, the balance sheet and reports of the Directors and Auditors, the election of Directors in the place of those retiring, the re-appointment of the retiring Auditors, and the determination of the remuneration of the Auditors, all of which is deemed ordinary business. Special business is dealt with by way of an ordinary resolution, save where a special resolution is expressly required by the Bye Laws or the Companies Acts 1963-2009 in so far as they apply to the Bank from time to time, in which case such special business shall be dealt with by way of special resolution. Ordinary business is dealt with by way of an ordinary resolution which requires a simple majority of the votes cast by the members voting in person or by proxy at a General Court. A special resolution must be passed by not less than three fourths of the votes cast by such members as being entitled so to do, vote in person or, where proxies are allowed, by proxy at a General Court at which not less than 21 days' notice specifying the intention to propose a resolution as a special resolution has been duly given. Where an equal number of votes has been cast on any resolution the chairman of the meeting is entitled to a second or casting vote.

In the event of any surplus arising on the occasion of the liquidation of the Bank the Ordinary Stockholders would be entitled to a share in that surplus pro rata to their holdings of Ordinary Stock.

At 20 March 2012, there were in issue 1,876,090 units of non-cumulative sterling preference stock and 3,026,598 units of non-cumulative euro preference stock and no units of non-cumulative dollar preference stock. The holders of non-cumulative sterling and euro preference stock are entitled to a fixed annual dividend at the discretion of the Bank in accordance with the terms and conditions relating to the issue of the preference stock. Any dividend which has remained unclaimed for 12 years from the date of its declaration may be forfeited and cease to remain owing by the Bank.

The non-cumulative sterling preference stock and the non-cumulative euro preference stock rank pari passu inter se and the right to a fixed dividend is in priority to the dividend rights of ordinary stock in the capital of the Bank. On a winding up or other return of capital by the Bank, the non-cumulative sterling preference stockholders and the non-cumulative euro preference stockholders are entitled to receive, out of the surplus assets available for distribution to the Bank's members, an amount equal to the amount paid up on their preference stock including any preference dividend outstanding at the date of the commencement of the winding-up or other return of capital, otherwise the preference stockholders are not entitled to any further or other right of participation in the assets of the Bank.

Bye-Law 7 enables the Directors to issue and allot new preference stock (2005 Preference Stock) which can either be redeemable or nonredeemable, and can be denominated in US dollars, in euro or in sterling. Any preference stock issued under Bye-Law 7 will rank equivalently to the existing euro and sterling preference stock as regards entitlements to dividends. Bye-Law 7 permits the substitution of all of the outstanding preferred securities in the event of the occurrence of a trigger event. A trigger event will occur when the capital adequacy requirements of the Central Bank have been, or are expected to be breached. As at 31 December 2011, there were no units of 2005 Preference Stock in issue.

The 2009 Preference Stock, comprising units of non-cumulative preference stock of €0.01 each in the capital of the Bank, ranks pari passu with the Ordinary Stock of the Bank on a repayment of capital on a winding-up of the Bank, and ranks ahead of the Ordinary stock as regards the payment of dividends. The 2009 Preference Stock ranks pari passu as regards dividends with other stock or securities which constitute Core Tier 1 capital of the Bank (other than Ordinary Stock and other than dividends to Minority Interests). The 2009 Preference Stock entitles the holder to receive a non-cumulative dividend at a fixed rate of 10.25% (previously 8% per annum prior to 19 May 2010) per annum, payable annually at the discretion of the Bank. If the dividend on the 2009 Preference Stock is not paid in any year the Bank is precluded from paying a dividend on the Ordinary Stock until the payment of the dividend on the 2009 Preference Stock has resumed in cash. The Bank will also be precluded from paying any dividend on any ordinary stock where the payment of such dividend would reduce the distributable reserves of the Bank to such an extent that the Bank would be unable to pay the next dividend due for payment on the 2009 preference stock.

If a cash dividend is not paid by the Bank, the Bank shall issue units of Ordinary Stock to the NPRFC. The number of units of ordinary stock that the Bank would be required to issue to the NPRFC (in the event of non-payment of a dividend) will be calculated by dividing the amount of the unpaid dividend by the Thirty Day Average Price. If units of ordinary stock are issued in the event of non-payment of dividends, these units will be settled on a day determined by the Bank, in its sole discretion, provided that this must occur no later than the day on which the Bank subsequently redeems or repurchases or pays a dividend on the 2009 preference stock or any class of capital stock. The issue of units of ordinary stock in the event of non-payment of dividends will result in the dilution of existing ordinary stockholders' proportionate ownership and voting interests in the Bank.

The 2009 preference stock may be repurchased at the option of the Bank, in whole or in part, at a price per unit equal to the issue price of €1.00 per unit of the 2009 preference stock within the first five years from the date of issue and thereafter at a price per unit of €1.25, provided in either case that the consent of the Central Bank to the repurchase of the 2009 preference stock is obtained. The 2009 preference stock will not be capable of being repurchased if it would breach or cause a breach of Irish banking capital adequacy requirements from time to time applicable to the Bank. The 2009 preference stock may be repurchased from profits available for distribution or from the proceeds of any issue of stock or securities that constitute Core Tier 1 capital. The 2009 preference stock is transferable in minimum lots of 50,000 units. If transferred to a person who is not a Government Body, the 2009 preference stock will cease to carry any voting rights or the right to appoint Directors to the Court referred to below.

As the holder of the units of 2009 Preference Stock the NPRFC currently has the right to directly appoint 25 per cent. of the directors of the Bank (such 25 per cent. to include any directors nominated by the Minister for Finance pursuant to the Government Guarantee Scheme), where the total number of directors is 15 or less, or four directors where the total number of directors is 16, 17 or 18. The 2009 Preference Stock held by the NPRFC carries the right to "top-up" the NPRFC's total voting rights of 25% of the total voting rights on any resolution proposed at a General Court in relation to the appointment or

removal of a Director of the Bank or any control resolutions (whereby or in consequence of which control of the Group may be acquired) where the NPRFC's ordinary voting rights through it's holding of ordinary stock falls below this level. This entitlement applies to the NPRFC for so long as it holds any units of 2009 Preference Stock. For as long as the NPRFC or an acceptable Government Entity holds the 2009 Preference Stock the tabling of any resolution at a General Court of the Bank to alter the capital structure of the Bank requires the prior approval in writing of the Minister for Finance.

In the event that the ordinary stock to be issued in the event of non-payment of cash dividends on the 2009 preference stock is not settled on the dividend payment date to which it relates, the NPRFC shall be entitled to exercise the voting rights of the as yet unissued ordinary stock from the dividend payment date (although such voting rights will have no effect on the Bank's unfettered discretion in respect of (i) the payment of dividends on the 2009 preference stock or any other securities of the Bank ranking pari passu with, or junior to, the 2009 preference stock or the issuance of ordinary stock in the event of non-payment of dividends on the 2009 preference stock; or (ii) the redemption or repurchase of the new preference stock or any other securities of the Bank ranking pari passu with, or junior to, the 2009 preference stock).

The rights attached to the ordinary stock of the Bank may be varied or abrogated, either while the Bank is a going concern or during or in contemplation of a winding-up, with the sanction of a resolution passed at a class meeting of the holders of the ordinary stock. Similarly, the rights, privileges, limitations or restrictions attached to the preference stock may be varied, altered or abrogated, either while the Bank is a going concern or during or in contemplation of a winding-up, with the written consent of the holders of not less than 75% of such class of stock or with the sanction of a resolution passed at a class meeting at which the holders of 75% in nominal value of those in attendance vote in favour of the resolution.

Annual General Courts and a Court called for the passing of a special resolution must be called by 21 days notice in writing at the least. General Courts (other than General Courts called for the passing of a special resolution) can be called by 14 days notice in writing where the Bank offers the facility for Stockholders to vote by electronic means and where a special resolution reducing the period of notice to 14 days has been passed at the immediately preceding Annual General Court or at an Extraordinary General Court held since the immediately preceding Annual General Court. The notice must specify the place and date of the meeting and, in the case of special business, must give the general nature of that business. Attendance at General Courts is limited to members of the Bank and validly appointed proxies.

Neither the Charter nor the Bye-Laws impose restrictions on the right of non-resident or foreign shareholders to own securities in the Group. See, however, "Exchange Control and Other Limitations Affecting Security Holders" on page 170 for restrictions imposed in the context of EU and UN sanctions.

Bye-Laws 17 to 22 deal with the mechanisms that enable the Directors to make calls upon members in respect of any moneys unpaid on their stock. All of the issued ordinary and preference stock is fully paid up.

The voting rights of the 2009 Preference Stockholder concerning a change in control of The Bank are referred to at point 5(d) above.

Under Irish company law where a person acquires an interest in shares in a public limited company (and the Bank is considered to be a public limited company for these purposes) or ceases to be interested in such shares, he has an obligation to notify the company of the interests he has, or had, in its shares. As recently modified by the Transparency Regulations of 2007 (implementing the EU Transparency Directive), shareholders must now notify both the Financial Regulator and the company if the percentage of voting rights held by the shareholder exceeds, or falls below, a threshold of 3% and each 1% thereafter up to 100% as a result of an acquisition or disposal of voting rights in shares.

Under the Bye-Laws of the Group any member may be requested to declare by statutory declaration whether he is beneficially entitled to ordinary stock of which he is the registered owner and, if not, to disclose the person or persons for whom he holds such ordinary stock in trust. Such a declaration must be made within 14 days after the date of service of the notice. Failure to respond to the notice in the prescribed period entitles the Directors to serve a disenfranchisement notice on such member with the consequence that the member may not attend or vote, either personally or by proxy, at any General Court of the Bank or exercise any other rights conferred by membership in respect of his holding ordinary stock (the "Default Stock"). In addition, where the default stock amounts to more than 5% of the ordinary stock then in issue of the Bank (or such other percentage as may be determined under the provisions of Section 70 of the Companies Acts 1990) then the disenfranchement notice can state that any dividend (or part thereof) shall be retained by the Bank without liability to pay interest thereon when such money is finally paid to the memberand that no transfer of the default stock will be registered by, or on behalf of, the Bank. A disenfranchisement notice may continue in effect for as long as the default in respect of which it was issued continues.

12. Employee Share Schemes, Long Term Incentive Plan and Executive Stock Option Schemes

Stockholders of the Bank have from time to time approved (and renewed) executive stock option schemes and more broadly based employee profit participation plans.

The Group Sharesave Scheme (1999), established under similar enabling legislation in both Ireland and the UK, enables participating employees, who enter into a savings related contract, to be granted an option to acquire units of ordinary stock on completion of that contract at a price related to the market price which prevailed at the time of the granting of the option. Eligible employees, whose remuneration is subject to Irish or UK income tax, may be awarded options over stock the exercise price of which may be set at a discount of up to 25% of the prevailing stock market price (20% in the UK). Participants must take out an approved savings contract and may contribute from €12 to €320 per month. The last offer under the Group's Sharesave Scheme was in 2007. No new options have been created since this offer.

The Long Term Incentive Plan (2004) is restricted to senior executive officers and focuses on the Group's Total Shareholder Return (TSR) relative to a group of leading European financial services businesses. The TSR takes into account both the Group's stock price performance and dividend payments to stockholders. The performance conditions for awards in 2006, 2007 and 2008 were not met and subsequently, all options lapsed. There have been no further awards under the Group Long Term Incentive Plan since 2008.

The Group Executive Stock Option Scheme (2004) focuses on underlying earnings per share ("underlying EPS") growth. Under the scheme, executives may be granted options to purchase stock up to one time's salary each year. The performance conditions for awards in 2006, 2007 and 2008 were not met and subsequently, all options lapsed. There have been no further awards under the Group Executive Stock Option Scheme since 2008.

The Group Staff Stock Issue Scheme (2006) was established under profit sharing legislation and approved by the Revenue Commissioners in Ireland. All Irish resident employees (including executive directors of the Bank and of participating companies) are eligible to participate in the scheme. As presently

implemented the scheme allows the Group to make an award of free stock up to a maximum of 6% of the salary of eligible employees in any one year, up to a ceiling of €12,700. Subject to being held in trust for a period of three years, the stock is passed to the employee tax free and is thereby a very tax efficient mechanism for creating employee stock ownership. The amount of stock allocated by the directors reflects the Group's performance but cannot exceed 5% of the consolidated profits of the Group in any year. The Stock Incentive Plan (2003) approved by the Inland Revenue of the UK, makes similar provisions for employees of the Group or any participating company resident in the UK. There have been no awards under the Group Staff Stock Issue Scheme since 2008.

All of the above stock issue and stock option schemes are subject to a range of flow rate controls approved by the stockholders.

For further information on the stock option schemes refer to note 48 in the notes to the Consolidated Financial Statements.

Irish company law permits companies to purchase and maintain insurance against directors' and officers' liability. The Bye-Laws of the Group enable the Group to purchase such liability insurance and make it clear that directors are entitled to vote and be counted in the quorum in respect of any resolution concerning the purchase of such insurance.

See note 56 to the Consolidated Financial Statements for details of material transactions with the State.

See note 48 to the Consolidated Financial Statements for details on Capital Stock.

There are no restrictions under the Bye-Laws of the Group, presently in force, that limit the right of non-resident or foreign owners, as such, to hold securities of the Group freely or, when entitled, to vote such securities freely. There are currently no Irish foreign exchange controls or laws restricting the import or export of capital, although the Council of the European Union does have the power, under Articles 63 to 66 of the Treaty on the Functioning of the European Union, to impose restrictions on capital movements to and from third countries. There are currently no restrictions under Irish law affecting the remittance of dividends, interest or other payments to non-resident holders of securities of the Group, except in respect of entities and/or individuals detailed in relevant European Union and United Nations sanctions listings received from the Financial Regulator from time to time. The Group also complies with applicable requirements arising in respect of non-cooperative countries and territories ("NCCT"), pursuant to the NCCT initiative of the Financial Action Task Force.

The following summary of certain consequences to US holders (as defined below), or as in the case of Irish taxation, to eligible US holders (also as defined below) of the purchase, ownership and disposition of ADSs or ordinary stock deals only with US holders that hold ADSs or units of ordinary stock as capital assets for Irish and US Federal income tax purposes and does not deal with special classes of holders, such as dealers in securities, traders in securities that elect to use a mark to market method of accounting for their securities holdings, tax-exempt organisations, life insurance companies, persons liable for alternative minimum tax, persons that actually or constructively own 10% or more of the voting stock of the Bank, persons that hold units of ordinary stock or ADSs as part of a straddle or a hedging or conversion

transaction, persons that purchase or sell units of ordinary stock or ADSs as part of a wash sale for tax purposes or US holders or eligible US holders whose functional currency is not the US dollar. While the summary discussion relates to material matters relevant to the tax laws of the United States and Ireland, all holders should consult their own tax advisors as to the Irish, US or any other tax consequences of the purchase, ownership and disposition of ordinary stock or ADSs including the effect of any foreign, state or local tax laws as they apply to their particular circumstances. This summary is based (i) on the income tax treaty between Ireland and the United States (the "Tax Treaty"), tax laws, regulations, administrative rulings and court decisions of Ireland and the United States, all as currently in effect and all subject to change at any time, perhaps with retroactive effect, and (ii) in part, on representations of the Depositary, and assumes that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

If a partnership holds the ordinary stock or ADSs, the US federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner in a partnership holding ordinary stock or ADSs should consult its tax advisor with regard to the US federal income tax treatment of an investment in the ordinary stock or ADSs.

For purposes of this discussion, a "US holder" is a beneficial owner of ADSs or ordinary stock that is, for US federal income tax purposes, (i) a citizen or resident of the US, (ii) a US domestic corporation or an entity taxable as a corporation, (iii) an estate whose income is subject to US federal income tax regardless of its source, (iv) a trust if a US court can exercise primary supervision over the trust's administration and one or more US persons are authorised to control all substantial decisions of the trust.

For purposes of this discussion, an "eligible US holder" is a US holder that is (i) not a resident of Ireland for purposes of Irish taxes, (ii) not engaged in a trade or business in Ireland through a permanent establishment and (iii) otherwise eligible for benefits under the Tax Treaty with respect to income and gain from ordinary stock or ADSs.

For purposes of the Tax Treaty and the US Internal Revenue Code of 1986, as amended (the "Code"), US holders will be treated as the beneficial owners of the ordinary stock underlying the ADSs represented by the ADRs.

Dividends: Dividends paid by an Irish resident company do not carry a tax credit and are generally subject to Dividend Withholding Tax ("DWT") at the standard rate of income tax, currently 20%. This could include dividends paid by the Group with respect to ordinary stock or ADSs. There are a number of exemptions available from DWT including: (i) for ordinary stock, where the recipient is an eligible US holder who completes a relevant declaration and submits the same to the Bank's Registration Department prior to the due date of payment of the relevant dividend; and (ii) in relation to dividends paid with respect to ADSs as evidenced by an ADR, where the beneficial holder's address on the register of depositary receipts is located in the US and is held by the Bank of New York or other 'qualifying intermediary' as defined in section 172E Irish Taxes Consolidation Act 1997 (or see list at http://www.revenue.ie/en/tax/dwt/authorised-qualifying-intermediaries.html) or by any intervening 'specified intermediary' as defined in section 172F Irish Taxes Consolidation Act 1997.

An eligible US holder that receives a dividend which has been subjected to DWT may, in certain circumstances, claim repayment of the DWT by making an application to the Irish Tax Authorities in accordance with provisions of Irish law. Under the provisions of Irish law an eligible US holder, who is not under the control (direct or indirect) of a person or persons who are Irish resident, is exempt from Irish tax on dividends paid by the Group. Where entitlement to a full repayment under these provisions cannot be established, the procedures outlined in the immediately following paragraphs will apply.

The Tax Treaty limits the Irish tax liability of an eligible US holder (that is unable to claim repayment of the full DWT under provisions of Irish law) in respect of a dividend paid by the Bank to 15% of the gross amount. Consequently such holders may claim repayment from the Irish Tax Authorities, in accordance with the Tax Treaty, of the amount of DWT in excess of 15% of the sum of the cash dividend and the related DWT.

Gain on Disposition: A gain realised on the disposition of ADSs or ordinary stock by a US holder who is not resident or ordinarily resident in Ireland for Irish tax purposes is not subject to Irish Capital Gains Tax unless such ADSs or units of ordinary stock are held in connection with a trade or business carried on by such holder in Ireland through a branch or agency.

Irish Stamp Duty: Section 90 of the Irish Stamp Duties Consolidation Act 1999 exempts from Irish stamp duty transfers of ADRs where the ADRs (or the underlying securities they represent) are dealt in and quoted on a recognised stock exchange in the US. The ordinary stock that is listed and traded on the New York Stock Exchange in the form of ADSs, evidenced by ADRs, falls within this exemption. Irish stamp duty will be charged at a rate of 1% rounded down to the nearest euro of the consideration on any conveyance or transfer on the sale of the ordinary stock or the value of that stock if higher. If less than one euro, stamp duty is rounded up to one euro.

Stamp duty (which would be applicable at the rate of 1% rounded down to the nearest euro of the price paid or, if higher, the value of the ordinary stock) may apply to conversions of ordinary stock into ADSs and of ADSs to ordinary stock. This would include a deposit of ordinary stock with the depository in exchange for ADSs and withdrawals of ordinary stock if the deposit withdrawal is done as a conveyance on sale or in contemplation of sale.

Dividends: Under the Code and subject to the PFIC rules discussed below, the gross amount of any dividend (including any related applicable DWT) paid by the Bank to a US holder out of its current or accumulated earnings and profits (as determined for US Federal income tax purposes) is subject to US Federal income taxation. Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the ADSs or ordinary stock and thereafter as capital gain. However, because the Bank does not compute its current or accumulated earnings and profits in accordance with US federal income tax principles, the entire amount of any distribution may be treated as a taxable dividend.

Dividends paid to a non-corporate US holder in taxable years beginning before 1 January 2013 that constitute qualified dividend income will be taxable to the holder at a maximum federal tax rate of 15% provided that the ADSs or ordinary stock are held for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and the holder meets other holding period requirements. The Bank expects that dividends paid by it will generally be qualified dividend income; however, whether any particular payment represents qualified dividend income will depend on the facts and circumstances existing at the time the dividend is paid (including, for example, whether and how the Bank qualifies for benefits under the Tax Treaty). The dividend will not be eligible for the dividends-received deduction generally allowed to corporations. The amount of any dividend distribution that a US holder must include in income will be the US dollar value of the euro payment (determined at the spot US dollar/euro exchange rate) on the date of actual or constructive receipt by the US holder, in the case of ordinary stock, or by the Depositary in the case of ADSs, regardless of whether the payment is converted into dollars. Gain or loss, if any resulting from currency exchange fluctuations during the periods from the date a US holder includes the dividend payment in income to the date such US holder converts the payment into US dollars, generally will be ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income, and generally will be income or loss from sources within the United States for foreign tax credit limitation purposes.

Subject to certain limitations, any Irish tax (including DWT) withheld and paid over to Ireland will be creditable or deductible against the US holder's US Federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% federal tax rate that is applicable to qualified dividend income. To the extent a refund of the tax withheld is available to a US holder under Irish law or the Tax Treaty, the amount of tax withheld that is refundable will not be eligible for credit against a US holder's US Federal income tax liability.

Dividends paid by the Bank with respect to ADSs or ordinary stock will be income from sources outside the United States and will, depending on a US holder's circumstances, generally be 'passive' income or 'general' income for purposes of computing the foreign tax credit available to a US holder. US holders should consult their own tax advisors concerning the implications of the US foreign tax credit rules in light of their particular circumstances.

Gain on Disposition: Subject to the PFIC rules discussed below, upon the sale, exchange or other disposition of ADSs or ordinary stock, a US holder will recognise gain or loss, if any, equal to the difference between the US dollar amount realised upon the sale, exchange, or other disposition and the US holder's tax basis in the ADSs or ordinary stock. Capital gain of a non-corporate US holder is generally taxed at preferential rates where the US holder has a holding period greater than one year. The deductibility of capital losses is subject to limitations. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

PFIC Rules: The Bank believes that ADSs and ordinary stock should not be treated as stock of a Passive Foreign Investment Company ("PFIC") for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If, contrary to the Bank's belief, the Bank were to be treated as a PFIC, gain realised on the sale or other disposition of a US holder's ADSs or ordinary stock would in general not be treated as a capital gain. Instead, a US holder would be treated as if it had realised such gain and certain "excess distributions" ratably over its holding period for the ADSs or ordinary stock and would be taxed at the highest tax rate in effect for each such year to which the gain or distribution was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, a US holder's ADSs or ordinary stock will be treated as stock in a PFIC if the Bank were a PFIC at any time during such US holder's holding period in its ADSs or ordinary stock. Dividends received by a US holder from the Bank will not be eligible for the special tax rates applicable to qualified dividend income if the Bank is treated as a PFIC with respect to such US holder either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC's public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room and its copy charges. Documents filed with the SEC on or after 4 November 2002 are available on the website maintained by the SEC (www.sec.gov).

Communication with stockholders is given high priority. The Group seeks to provide through its Annual Report a balanced, clear assessment of the Group's performance and prospects. It also uses its website (www.bankofireland.com) to provide investors with the full text of the Annual Report and Interim Statement, the Form 20-F (which is filed annually with the US Securities and Exchange Commission) and copies of presentations to analysts and investors as they are made, so that information is available to all stockholders. Annual and interim results presentations are webcast live so that all stockholders can receive the same information at the same time.

Additionally, the Investor Relations section on the Group's website is updated with all Stock Exchange releases as they are made by the Group. The Group has an active and well developed Investor Relations programme, which involves regular meetings by the Group Chief Executive, the Chief Financial Officer and other members of his senior executive team and the Head of Group Investor Relations with the Group's principal institutional stockholders and with financial analysts and brokers. The Directors are kept informed on investor issues through regular reports from Group Investor Relations on the outcome of these meetings. All meetings with stockholders are conducted in such a way as to ensure that price sensitive information is not divulged. In addition, all Directors are encouraged and facilitated to hear the views of investors and analysts at first hand through their participation in conference calls following major announcements. The Court concluded that the objective of keeping Directors fully informed on stockholder views was achieved in the year ended 31 December 2011.

The Governor and/or the Senior Independent Director are available to stockholders if they have concerns that cannot be resolved through the normal channels.

The Group's policy is to make constructive use of the Annual General Court and all stockholders are encouraged to participate. Stockholders are given the opportunity to ask questions at the Annual General Court. Separate resolutions are proposed on each substantially separate issue and voting is conducted by way of poll. The outcome of every general meeting of the Group, including details of votes cast for, against and abstaining, on each resolution, including proxies, are posted on the Group's website as soon as possible afterwards and released to the Irish, London and New York Stock Exchanges. It is usual for all Directors to attend all General Courts to meet stockholders and for the Chairs of the Group Audit, Nomination and Governance and Remuneration Committees to be available to answer relevant questions. In addition a 'Help Desk' facility is available at all General Courts to assist stockholders to resolve any specific queries that they may have.

The Group follows an integrated approach to risk management to ensure that all material classes of risk are taken into account and that its risk management and capital management strategies are aligned with its overall business strategy. This integrated approach is set out in the Group Risk Framework, which is approved by the Court of Directors (the Court). It describes the Group's formal governance process around risk and the approach to risk identification, assessment, analysis and reporting.

Given the unprecedented deterioration in economic conditions and the resulting strain on the Group's asset quality, capital and funding metrics, the Group is following a strategy designed to reduce its overall risk profile through strengthening its capital ratios, deleveraging its balance sheet and reducing its reliance on wholesale funding.

The Group's risk identity is to be the leading Irish retail, commercial and corporate bank committed to long-term relationships with its customers. The Group's franchise is in Ireland with income and risk diversification achieved through a meaningful presence in the UK and selected international activities where the Group has proven competencies. The Group will operate within prudent Court-approved risk parameters to have and maintain a robust, stand alone financial position.

Risk appetite defines the amount and nature of risk the Group is prepared to accept in pursuit of its business objectives. It is defined in qualitative terms as well as quantitatively through a series of high level limits covering areas such as credit risk, market risk, liquidity and funding risk, pension risk, and capital measures. These high level limits are cascaded into more granular limits and targets across portfolios and business units. Risk appetite guides the Group in its risk taking and related business activities, having regard to the maintenance of financial stability, solvency and the protection of the Group's core franchises and growth platforms. The Group has defined measures to track its profile against the most significant risks that it assumes. Each of these measures has a defined target level or limit, as appropriate, and actual performance is tracked against these target levels or limits.

The formulation and implementation of risk appetite in the Group was reviewed during 2010 and a new Risk Appetite Framework and Statement was approved by the Court. The statement includes specific credit limits on sectoral and single name exposures among other qualitative and quantitative risk parameters and it also provides for the implementation of a hierarchy of sectoral credit limits. The Risk Appetite Statement was revised to reflect the impacts of PCAR/PLAR 2011 and the subsequent capital raising on the Group's risk profile. The Court approved the revised statement in May 2011.

The Group's risk strategy is shaped by Risk Appetite as approved by the Court and its objective is to reduce overall risk profile.

The organisational structure for risk management is designed to facilitate reporting and escalation of risk concerns from business units and risk functions to the GRPC, the CRC and the Court, and the communication of approved risk management policies and decisions from the Court and the GRPC to business units. Please refer to the Corporate Governance Statement on page 139 for further details.

The Group's approach to the organisation of risk management is based on three lines of defence:

First line of defence: Primary responsibility and accountability for risk management lies with line management in individual businesses. Every business unit is responsible for the identification and management of risk at business unit level including the implementation of appropriate controls and reporting to the Group in respect of all major risk events.

Second line of defence: Central risk management functions are responsible for establishing a risk control framework, formulating risk policy and strategy, providing independent oversight, analysis and reporting of key risks. The Group has two central risk management functions—Credit & Market Risk and Group Governance Risk:

Third line of defence: Group Internal Audit (GIA), which has a direct reporting line to the Chairman of the Group Audit Committee (GAC), is responsible for providing control assurance to the Court, the GAC, senior management and other stakeholders such as regulatory authorities and the external auditors. GIA also includes Group Credit Review (GCR) and its reviews cover lending units in each division and incorporates an examination of adherence to credit policies and procedures across the various portfolios. GCR also addresses the timeliness of the annual review process and the quality of credit assessment in each portfolio.

Risks facing the Group are identified and assessed annually through the Group's Risk Identification Process.

Material risks are included in the Group Risk Framework, ownership assigned, appropriate policies and/or processes put in place and a formalised measurement and management process defined and implemented.

The Group has identified ten key risk types that it believes could have a material impact on its earnings, capital adequacy and on its ability to trade in the future:

Credit risk is the risk of loss arising from a counterparty being unable to meet its contractual obligations to the Group in respect of loans or other financial transactions. This risk includes concentration risk and country risk.

Liquidity risk is the risk that the Group will experience difficulty in financing its assets and/or meeting its contractual payment obligations as they fall due, or will only be able to do so at substantially above the prevailing market cost of funds.

Business and strategic risk is the volatility of the Group's projected outcomes (including income, net worth or reputation), associated with damage to the franchise or operational economics of the business and reflected in the income or net worth of the Group. Typically business risk occurs in a one year timeframe and relates to volatilities in earnings caused by changes in the competitive environment, new market entrants and/or the introduction of new products and inflexibility in the cost base. Strategic risk generally relates to a longer timeframe and pertains to volatilities in earnings arising from a failure to develop or execute an appropriate strategy.

Regulatory risk is the risk or volatility of earnings arising from a breach of regulatory and compliance guidelines and requirements. Regulatory risk arises from a failure to comply with the laws, regulations or codes applicable to the financial services industry in the jurisdictions in which the Group operates.

Market risk is the risk of loss arising from movements in interest rates, foreign exchange rates or other market prices. Market risk arises from the structure of the balance sheet, the Group's business mix and discretionary risk taking.

Operational risk is the risk of loss arising from inadequate or failed internal processes, people related events and systems or from external events. It includes legal and contractual risk which is the risk of loss due to litigation arising from errors, omissions and acts by the Group in the conduct of its business. Operational risk also includes tax compliance risk, which is the risk of loss due to non-compliance with tax legislation and the Group's tax policy.

Pension risk is the risk that the assets of the Group's defined benefit pension schemes fail to generate returns that are sufficient to meet the schemes' liabilities.

Life insurance risk is the volatility in the amount and timing of claims caused by unexpected changes in mortality, morbidity, persistency and longevity.

Model risk is the risk of loss resulting from the Group's suite of models (credit, market and operational) inaccurately measuring the risk of the Group's exposures, resulting in the Group mispricing deals, holding insufficient capital (economic and/or regulatory) and being subject to financial, regulatory and/or market censure.

Reputation risk is the risk arising from an adverse perception of the Group's image on the part of customers, suppliers, counterparties, stockholders, investors or regulatory authorities.

In addition to, and separate from, the Group's Risk Identification Process, the top five risks facing the Group are identified on a half yearly basis whereby members of the Group Executive Committee (GEC) and the GRPC identify and rank the top five risks facing the Group for consideration by the CRC and the Court. The following criteria are used to identify and assess the top five risks:

Risk management systems are in place to facilitate measurement, monitoring and analysis of risk. These systems are in line with good practice and ensure compliance with regulatory requirements. In addition to the assessment of individual risks on a case-by-case basis, the Group also measures its exposure to risk at an aggregate level using, among other techniques, economic capital estimates and stress testing.

The Group uses Economic Capital (Ecap) along with regulatory capital as a metric by which risk is assessed, risk based budgets and strategic plans are formulated and an internal risk based capital framework is applied. Ecap is used internally for capital planning as well as for the calculation of risk adjusted returns. The common measure of return on risk used by the Group is Risk Adjusted Return on Economic Capital (RAROC).

The Group conducts solvency stress tests in order to assess the impacts of adverse scenarios on the Group's impairment charges on financial assets, deleveraging losses, earnings, capital adequacy, liquidity and financial prospects.

The results of solvency stress tests are used to assess the Group's resilience to adverse scenarios and to aid the identification of potential areas of vulnerability. The tests are applied to the existing risk exposures of the Group and also consider changing business volumes as envisaged in the Group's business plans and strategies. Macroeconomic scenarios of different levels of severity are combined with assumptions on

volume changes and margin development. Impacts are measured in terms of potential impairment charges on financial assets, earnings, capital adequacy, liquidity and financial prospects.

The Group also performs other stress tests to measure exposure to liquidity risk and market risk and for the management and limit setting of individual risks.

Material risks identified under the Group's Risk Identification Process are assessed and their status is reported quarterly by the CCMRO in the Court Risk Report which is reviewed by the GRPC, the CRC and the Court. The content of the report includes an analysis of and commentary on all material risk types as set out on page 178. It also addresses governance and control issues and compliance with risk appetite.

Regular updates on emerging risks, risk surveys and relevant international economic or monetary reports are also considered. In addition, the GRPC and the Court (and the CRC where applicable) consider more frequent formal updates on the key areas of credit and liquidity risk and capital management. The reports also provide data on the external economic environment and management's view of the implications of this environment on the Group's risk profile.

The Court Risk Report forms the top of a reporting hierarchy with more detailed risk information being considered by divisional level management.

The CRC and the Court also receive risk information through their review of the GRPC minutes and through investigations carried out into specific risk matters.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Credit Risk is the risk of loss resulting from a counterparty being unable to meet its contractual obligations to the Group in respect of loans or other financial transactions.

The manner in which the Group's exposure to credit risk arises, its policies and processes for managing it and the methods used to measure and monitor it are set out below.

Credit risk arises from loans and advances to customers. It also arises from the financial transactions the Group enters into with financial institutions, sovereigns and state institutions. It is a result of both drawn exposures and exposures the Group has committed to extend. While the Group could potentially suffer loss to an amount equivalent to its undrawn commitments, the Group does not expect to incur losses to that extent as most consumer related commitments can be cancelled by the Group and non-consumer related commitments are entered into subject to the customer continuing to achieve specific credit standards.

The Group is also exposed to credit risk from its derivatives, available for sale financial assets, other financial assets and from its reinsurance activities in Bank of Ireland Life.

The Group manages credit related commitments that are not reflected as loans and advances on the balance sheet on the same basis as loans for credit approval and management. These include:

Further information on the Group's exposures is set out in note 47 to the Consolidated Financial Statements.

Credit risk exposure arising from derivative instruments is managed as part of the overall lending limits with customers and financial institutions.

Credit risk exposure on derivative transactions is calculated using the current value of the contract (on a mark to market basis) and an estimate of the maximum cost of rewriting the contract in the event of counterparty default. The credit process also limits gross derivative positions.

The Group has executed standard internationally recognised documents such as International Swaps and Derivative Association (ISDA) agreements and Credit Support Annexes (CSAs) with its principal interbank derivative counterparties. The purpose of a CSA is to limit the potential cost of replacing derivative contracts at market prices in the event of default by the counterparty. A very high proportion of the Group's interbank derivatives book is covered by CSAs and is hence collateralised, primarily through cash.

The Group is exposed to country risk. Exposures are managed in line with approved policy and country maximum exposure limits. Further information is set out on page 201.

Settlement risk arises in any situation where a payment in cash, securities or equities is made in expectation of a corresponding receipt in cash, securities or equities. Appropriate policies exist and settlement limits are monitored.

Credit concentration risk is the risk of loss due to exposures to a single entity or group of entities engaged in similar activities and having similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Undue concentrations could lead to increased volatility in the Group's impairment charges on financial assets, earnings, capital requirements and financial prospects. Management of risk concentrations is an integral part of the Group's approach to risk management. Target levels and, where appropriate, limits are defined by the Court for each credit category. In addition, monetary risk limits are set by the GRPC or its appointed committees and, where necessary, approved by the Court. These target levels and, where appropriate, limits, are informed by the Group's Risk Appetite Statement. Single name concentrations are also subject to limits. As the Group reduces the overall size of its balance sheet, concentration risk may increase in relative terms and geographical and sectoral diversification may reduce. In 2011, regulatory sectoral limits in relation to 'real estate, land and development activities' were breached on several occasions. These breaches were reported to and acknowledged by the Central Bank and the Central Bank is aware of the likely future path of the Group's regulatory sectoral concentrations.

The core values and principles governing the provision of credit are contained in the Statement of Group Credit Policy which is approved by the Court. Individual business unit credit policies define in greater detail the credit approach appropriate to the units concerned. These policies take account of the Group's Risk Appetite Statement, applicable sectoral credit limits, the lessons learned from the Group's recent loss history, the markets in which the business units operate and the products which they provide. In a number of cases business unit policies are supplemented by sectoral credit policies. Each staff member involved in developing banking relationships and/or in assessing or managing credit has a responsibility to ensure compliance with these policies. Procedures for the approval and monitoring of exceptions to policy are included within the policy documents.

The Group's credit risk management systems operate through a hierarchy of lending authorities which are related to internal loan ratings. All exposures above certain levels require approval by the Group Credit Committee (GCC) and exposures in excess of the Group's single name limits require Court approval. Other exposures are approved according to a system of tiered individual authorities which reflect credit competence, proven judgment and experience. Material lending proposals are referred to credit units for independent assessment/approval or formulation of a recommendation and subsequent adjudication by the applicable approval authority.

It is the Group's policy to ensure that adequate up to date credit management information is available to support the credit management of individual account relationships and the overall loan portfolio.

Credit risk at a Group, divisional and significant operating unit/product type level is reported on a monthly basis to senior management. This monthly reporting includes information and detailed commentary on loan book growth, quality of the loan book (credit grade and probability of default (PD) profiles and risk weighted assets) and loan impairment provisions including individual large impaired exposures. Changes in sectoral and single name concentrations are tracked on a quarterly basis highlighting changes to risk concentration in the Group's loan book. A report on any exceptions to credit policy is presented to and reviewed by the GRPC on a monthly basis. The Group allocates significant resources to ensure ongoing monitoring and compliance with approved risk limits.

The Portfolio Review Committee (PRC) considers and recommends to the GRPC, on a quarterly basis, a credit concentration report which tracks changes in sectoral and single name concentrations measured under agreed parameters. Credit risk including compliance with key credit risk limits is reported monthly in the Court Risk Report. Statistics on any credit policy exception are also included on a quarterly basis. This report is presented to and discussed by the GRPC, the CRC and the Court.

In addition other reports are submitted to senior management and the Court as required.

Group Credit Review (GCR), is an independent function within Group Internal Audit. Its reviews cover lending units in each division and incorporate an examination of adherence to credit policies and procedures across the various portfolios. GCR also addresses the timeliness of the annual review process and the quality of credit assessment in each portfolio.

The Group's Risk Appetite Statement, credit concentration policy and regulatory guidelines set out the maximum exposure limits to a customer or a group of connected customers. The policy and regulatory guidelines cover both bank and non-bank counterparties.

Individual non-bank credit exposures are limited to 10% of Tier 1 capital. The Group's Risk Appetite Statement specifies a range of exposure limits for credit concentration risk. The Group also monitors single customer exposure against regulatory guidelines.

At 31 December 2011, the Group's top 50 non-Bank exposures (including off balance sheet exposures) amounted to €7.4 billion (31 December 2010: €11.8 billion).

An assessment of the borrower's ability to service and repay the proposed level of debt (principal repayment source) is undertaken for credit requests and is a key element in the Group's approach to mitigating risk. In addition, the Group mitigates credit risk through the adoption of both proactive preventative measures (e.g. controls and limits) and the development and implementation of strategies to assess and reduce the impact of particular risks, should these materialise including hedging, securitisation and the taking of collateral (which acts as a secondary repayment source).

The Group imposes risk control limits and guide points to mitigate significant concentration risk. These limits and guide points are informed by the Group's Risk Appetite Statement which is approved annually by the Court.

The GRPC approves country maximum exposure limits based on the Group's country risk rating models which are supported by external ratings.

Maximum exposure limits for lending to banks are also approved by the GRPC for each rating category based on credit risk modelling techniques combined with expert judgement.

The objective of risk mitigation/transfer is to limit the risk impact to acceptable (quantitative and qualitative) levels. Where the risk review process indicates the possible emergence of undue risk concentrations, appropriate risk transfer and mitigation options are explored and recommended to the Portfolio Review Committee (PRC). The Group currently makes very limited use of credit derivatives for credit risk mitigation purposes.

Credit risk mitigation includes the requirement to obtain collateral, depending on the nature of the product and local market practice, as set out in the Group's policies and procedures. The nature and level of collateral required depends on a number of factors including, but not limited to, the amount of the exposure, the type of facility made available, the term of the facility, the amount of the borrower's own cash input and an evaluation of the level of risk or probability of default. The Group takes collateral as a secondary source, which can be called upon if the borrower is unable or unwilling to service and repay debt as originally assessed.

Various types of collateral are accepted, including property, securities, cash, guarantees and insurance, grouped broadly as follows:

The Group's requirements around completion, valuation and management requirements for collateral are set out in appropriate Group or business unit policies and procedures. The extent to which collateral and other credit enhancements mitigate credit risk in respect of the Group's mortgage portfolio is set out on page 252.

The Group's approach to the management of credit risk is focussed on a detailed credit analysis at origination followed by early intervention and active management of accounts where creditworthiness has deteriorated.

The Credit & Market Risk function has responsibility for the management of credit and market risk and overall risk reporting to the Group Executive Committee, the CRC and the Court on (a) developments in these risks and (b) ensuring all risk exposures comply with specific risk limits. It is led by the CCMRO who reports directly to the Group Chief Executive.

The function provides strong independent oversight and management of the Group's credit risk strategy, credit risk management information and credit risk underwriting as well as strategic oversight and management of certain challenged portfolios.

A range of initiatives were put in place to deal with the effects of the continued deterioration in the credit environment and decline in asset quality in recent years including enhanced collections and recoveries processes, expansion of specialist work-out teams to ensure early intervention in vulnerable cases, intensive review cycles for 'at risk' exposures and the management of excess positions, support from central teams in managing 'at risk' and 'challenged' portfolios at a business unit level, modified and tighter lending criteria for specific sectors, a reduction in certain individual bank exposures and the revised Risk Appetite Framework and Statement.

The segregation of certain challenged portfolios and the realignment of resources to manage these assets allows the remaining portfolio managers to focus on the loan book classified as 'acceptable quality' or better and to work closely with those customers.

A range of forbearance strategies are used for customers in arrears or facing potential arrears, in order to arrange, where viable or possible, sustainable mortgage repayment solutions.

The Bank of Ireland Group has fully adopted the requirements of the Central Bank of Ireland Code of Conduct on Mortgage Arrears (CCMA) which, among other things, requires mortgage lenders to establish a Mortgage Arrears Resolution Process (MARP) for defined owner occupied mortgages. The MARP sets out the framework for case by case consideration and implementation of a range of forbearance measures for qualifying borrowers. In addition, the Group has set out a clearly defined Mortgage Arrears Resolution Strategy incorporating both owner occupied and Buy to let mortgages. The forbearance process adopted by the Group seeks to minimise loss arising from non repayment of customer mortgages while ensuring that customers are treated fairly and with respect throughout the arrears management and resolution process.

Implementation of forbearance solutions occur on either a temporary or permanent basis to facilitate sustainable repayment plans and are subject to individual case assessment.

Formal temporary forbearance solutions include setting short term revised repayments or short term suspension of repayments, eg. interest only, reduced repayment (greater than interest only) and term extensions (including servicing interest).

Additional potential forbearance options, contained within the recommendations of the Government Inter-Departmental Mortgage Arrears Working Group and in line with our Mortgage Arrears Resolution Strategy, are under consideration.

All credit transactions are assessed at origination for credit quality and the borrower is assigned a credit grade based on a predefined credit rating scale. The risk, and consequently the credit grade, is reassessed periodically as part of the transaction review process. The use of internal credit rating models and scoring tools, which measure the degree of risk inherent in lending to specific counterparties, is central to the

credit risk assessment and ongoing management processes within the Group. Details of these internal credit rating models is outlined in Section 4 Credit Risk Methodologies on page 247.

Through its ongoing credit review processes, the Group seeks early identification of deteriorating loans with a view to taking corrective action to prevent the loan becoming impaired. Typically, loans that are at risk of impairment are managed by dedicated specialist units/debt collection teams focussed on working-out loans.

The identification of loans for assessment as impaired is driven by the Group's credit risk rating systems. It is the Group's policy to provide for impairment promptly and consistently across the loan book. For those loans that become impaired, the focus is to minimise the loss that the Group will incur from such impairment. This may involve entering into restructuring arrangements or action to enforce security.

Other factors taken into consideration in estimating provisions include domestic and international economic climates, changes in portfolio risk profile and the effect of any external factors such as legal or competition requirements. Whilst provisioning is an ongoing process, all business units formally review and confirm the appropriateness of their provisioning methodologies and the adequacy of their impairment provisions on a half yearly basis. Their conclusions are reviewed by the Credit & Market Risk function and the GRPC.

Under delegated authority from the Court, the Group's provisioning methodology is approved by the GRPC on a half yearly basis, details of which are set out in Section 4 Credit Risk Methodologies on page 247.

The quantum of the Group's impairment charge, impaired loan balances and provisions is also reviewed by the GRPC half yearly, in advance of providing a recommendation to the Group Audit Committee.

An analysis of the Group's impairment provisions at 31 December 2011 is set out in note 31 to the Consolidated Financial Statements.

Details of these valuation methodologies are set out in Section 4 Credit Risk Methodologies on page 247.

Loans and advances to customers in the tables on pages 187 to 195 include loans and advances to customers and loans held for sale at 31 December 2011. The 2010 comparative tables do not include loans held for sale to NAMA.

The following table gives the geographical and industry breakdown of total loans (before impairment provisions).

	Loans and advances to customers 31 December 2011						Loans and advances to customers 31 December 2010

Geographical/industry analysis	Ireland €m		UK & Other €m		Total €m		Ireland €m		UK & Other €m		Total €m
Personal		29,847		30,957		60,804		30,468		33,497		63,965
— Residential mortgages		27,854		29,636		57,490		28,067		32,199		60,266
— Other consumer lending		1,993		1,321		3,314		2,401		1,298		3,699
Property and construction		10,381		10,199		20,580		11,537		12,857		24,394
— Investment		8,231		8,633		16,864		9,122		10,697		19,819
— Land and development		2,150		1,566		3,716		2,415		2,160		4,575
Business and other services		9,193		3,849		13,042		9,660		4,461		14,121
Distribution		3,469		591		4,060		3,897		758		4,655
Manufacturing		3,160		1,134		4,294		3,806		1,581		5,387
Transport		1,186		198		1,384		1,225		324		1,549
Financial		906		262		1,168		1,758		310		2,068
Agriculture		1,628		205		1,833		1,609		161		1,770
Energy		838		99		937		1,454		69		1,523

Total		60,608		47,494		108,102		65,414		54,018		119,432

The Property and construction sector accounted for 19% or €21 billion of total loans at 31 December 2011 (31 December 2010: 20% or €24 billion). This book consists primarily of investment loans.

The Group's deleveraging initiatives contributed significantly to the reduction in loans and advances to customers as at 31 December 2011.

The Group classifies loans and advances to customers assets as 'neither past due nor impaired', 'past due but not impaired' and 'impaired' in line with the requirements of IFRS 7.

The Group applies internal ratings to loans based on an assessment of the credit quality of the customer, as part of its credit risk management system. A thirteen point credit grade rating scale is used for more complex, individually managed loans, including wholesale, corporate and business lending. A seven point credit grade rating scale is used for standard products (including mortgages, personal and small business loans). Both credit scales have a defined relationship with the Group's Probability of Default (PD) scale.

Mappings to external rating agencies are indicative only, as additional factors such as collateral will be taken into account by the Group in assigning a credit grade to a counterparty.

	31 December 2011					31 December 2010

Loans and advances to customers Book composition (before impairment provisions)	€m		%			€m		%
Residential mortgages		57,490		53	%		60,266		51	%
— Retail Ireland		27,854		26	%		28,067		24	%
— Retail UK		29,636		27	%		32,199		27	%
Non-property SME and corporate		26,718		25	%		31,073		26	%
— Republic of Ireland SME		11,497		11	%		11,155		9	%
— UK SME		3,662		3	%		3,895		3	%
— Corporate		11,559		11	%		16,023		13	%
Property and construction		20,580		19	%		24,394		20	%
— Investment		16,864		16	%		19,819		17	%
— Land and development		3,716		3	%		4,575		3	%
Consumer		3,314		3	%		3,699		3	%

Total loans and advances to customers		108,102		100	%		119,432		100	%

The Group's loans and advances to customers at 31 December 2011 were €108 billion before impairment provisions compared to €119 billion before impairment provisions at 31 December 2010. Residential mortgages accounted for 53% of total loans and advances to customers at 31 December 2011 compared to 51% at 31 December 2010. The other loan portfolios account for broadly equivalent proportions of the loan book at 31 December 2011 and at 31 December 2010.

The tables and analysis below summarise the Group's loans and advances to customers over the following categories: 'neither past due nor impaired', 'past due but not impaired' and 'impaired'. Exposures are before provisions for impairment.

Risk profile of loans and advances to customers including held for sale (before impairment provisions)

High quality	49,924	5,530	836	2,154	58,444	54	%
Satisfactory quality	564	10,329	4,526	619	16,038	15	%
Acceptable quality	1,008	4,446	3,961	45	9,460	9	%
Lower quality but not past due nor impaired	—	1,940	2,592	—	4,532	4	%

Neither past due nor impaired	51,496	22,245	11,915	2,818	88,474	82	%
Past due but not impaired	4,520	430	1,042	158	6,150	6	%
Impaired	1,474	4,043	7,623	338	13,478	12	%

Total	57,490	26,718	20,580	3,314	108,102	100	%

Risk profile of loans and advances to customers (before impairment provisions)

High quality	53,799	6,987	2,085	2,268	65,139	55	%
Satisfactory quality	503	12,777	7,595	788	21,663	19	%
Acceptable quality	1,273	4,989	5,114	63	11,439	8	%
Lower quality but not past due nor impaired	—	2,173	2,144	—	4,317	4	%

Neither past due nor impaired	55,575	26,926	16,938	3,119	102,558	86	%
Past due but not impaired	3,614	490	1,579	209	5,892	5	%
Impaired	1,077	3,657	5,877	371	10,982	9	%

Total	60,266	31,073	24,394	3,699	119,432	100	%

As a result of changes in the classification of certain restructured mortgages that are 'neither past due nor impaired' from high quality to satisfactory quality and from satisfactory quality to acceptable quality during the year ended 31 December 2011, the table at year ended 31 December 2010 has been amended to reflect these reclassifications.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Loans and advances to customers classified as 'neither past due nor impaired' amounted to €88 billion or 82% of the Group's loan book at 31 December 2011 compared to €103 billion or 86% at 31 December 2010. Asset disposals as part of the Group's deleveraging initiatives contributed significantly to the reduction in loans and advances to customers classified as 'neither past due nor impaired'.

The 'past due but not impaired' category amounted to €6 billion or 6% of loans and advances to customers at 31 December 2011 compared to €5.9 billion or 5% of loans and advances to customers at 31 December 2010.

'Impaired' loans increased from €11 billion or 9% of loans and advances to customers at 31 December 2010 to €13 billion or 12% of loans and advances to customers at 31 December 2011, an increase of three percentage points.

The increase is primarily driven by continued deterioration in the Residential mortgages and Property and construction sectors.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The tables below provide an aged analysis of loans and advances to customers 'past due but not impaired' by asset classification. Amounts arising from operational and / or timing issues that are outside the control of customers are generally excluded.

Loans and advances to customers including held for sale—past due but not impaired

Past due up to 30 days	1,384	273	479	82	2,218
Past due 31–60 days	741	84	416	54	1,295
Past due 61–90 days	431	73	147	22	673
Past due more than 90 days	1,964	—	—	—	1,964

Total past due but not impaired	4,520	430	1,042	158	6,150
Impaired	1,474	4,043	7,623	338	13,478

Past due but not impaired and impaired	5,994	4,473	8,665	496	19,628

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Loans and advances to customers classified as 'past due but not impaired and impaired' amounted to €20 billion or 18% of the Group's loan book at 31 December 2011 compared to €17 billion or 14% at 31 December 2010.

Residential mortgages classified as 'past due but not impaired and impaired' increased by €1.3 billion from €4.7 billion at 31 December 2010 to €6 billion at 31 December 2011 reflecting increasing default arrears (90 days or more past due) in the owner occupied and particularly in the Buy to let segments.

Property and construction loans classified as 'past due but not impaired and impaired' were €8.7 billion at 31 December 2011 (€7.5 billion at 31 December 2010) an increase of €1.2 billion reflecting lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods in the investment property element of the Property and construction book.

The volume of Non-property SME and corporate loans that are 'past due but not impaired or impaired' has increased from €4.1 billion at 31 December 2010 to €4.5 billion at 31 December 2011. The increase reflects challenging economic conditions in Ireland together with a continuation of poor consumer sentiment and an increase in the level of business insolvencies.

Consumer loans that are 'past due but not impaired or impaired' are €496 million at 31 December 2011 compared to €580 million at 31 December 2010, reflecting the overall reduction in consumer loans due to accelerated repayments and subdued demands for new loans and other credit facilities.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Loans and advances to customers including held for sale Composition and impairment

Residential mortgages	57,490	1,474	2.6	%	1,159	79	%
— Retail Ireland	27,854	1,347	4.8	%	1,026	76	%
— Retail UK	29,636	127	0.4	%	133	105	%
Non-property SME and corporate	26,718	4,043	15.1	%	1,723	43	%
— Republic of Ireland SME	11,497	2,335	20.3	%	1,088	47	%
— UK SME	3,662	605	16.5	%	217	36	%
— Corporate	11,559	1,103	9.5	%	418	38	%
Property and construction	20,580	7,623	37.0	%	3,205	42	%
— Investment	16,864	4,553	27.0	%	1,562	34	%
— Land and development	3,716	3,070	82.6	%	1,643	54	%
Consumer	3,314	338	10.2	%	278	82	%

Total loans and advances to customers	108,102	13,478	12.5	%	6,365	47	%

Loans and advances to customers Composition and impairment

Residential mortgages	60,266	1,077	1.8	%	725	67	%
— Retail Ireland	28,067	921	3.3	%	575	62	%
— Retail UK	32,199	156	0.5	%	150	96	%
Non-property SME and corporate	31,073	3,657	11.8	%	1,474	40	%
— Republic of Ireland SME	11,155	1,782	16.0	%	844	47	%
— UK SME	3,895	550	14.1	%	207	38	%
— Corporate	16,023	1,325	8.3	%	423	32	%
Property and construction	24,394	5,877	24.1	%	2,455	42	%
— Investment	19,819	2,806	14.2	%	951	34	%
— Land and development	4,575	3,071	67.1	%	1,504	49	%
Consumer	3,699	371	10.0	%	321	87	%

Total loans and advances to customers	119,432	10,982	9.2	%	4,975	45	%

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Loans and advances to customers reduced by 10% or €11 billion, from €119 billion at 31 December 2010 to €108 billion at 31 December 2011 due to actions taken by customers to reduce their levels of debt, muted demand for new lending and deleveraging initiatives undertaken by the Group.

'Impaired' loans increased from €11 billion or 9.2% of Loans and advances to customers at 31 December 2010 to €13 billion or 12.5% at 31 December 2011. The loan book continued to be impacted by the general economic downturn in Ireland resulting in falling asset values and low levels of transactions and illiquidity in property markets, high levels of unemployment, lower disposable incomes, poor consumer sentiment and the heightened level of business insolvencies.

The stock of impairment provisions of €6.4 billion at 31 December 2011 represented 47% of impaired loans (31 December 2010: impairment provisions of €5.0 billion representing 45% of impaired loans).

Total Residential mortgages impaired loans increased to €1.5 billion or 2.6% of the loan book at 31 December 2011 from €1.1 billion or 1.8% of the loan book at 31 December 2010, reflecting increasing default arrears (90 days or more past due), in the Irish mortgage book and particularly in the Buy to let segments. In the owner occupied segment, this increase is primarily attributed to the general economic downturn in Ireland and affordability issues including falling disposable incomes and high unemployment levels. In addition, the rise in arrears since August 2011 appears to have been impacted by the implementation of the new code of conduct on mortgage arrears and the considerable public speculation about potential Government policy measures regarding customers in arrears. In the Buy to let segment,

while there has been some stabilisation in rents in 2011, overall rent levels are significantly down on peak (estimated to be down approximately 26% from peak⁽¹⁾) and Buy to let borrowers are increasingly impacted by rising repayments as interest only periods come to an end, which particularly impacted default arrears in the second half of the year.

Default arrears (3+ payments past due) and the associated impairment provisions on Retail UK mortgages (particularly in the Buy to let and self certified segments) in the year ended 31 December 2011, were lower than the year ended 31 December 2010, in an environment where residential property prices performed better than the Group had expected.

Non-property SME and corporate impaired loans increased to €4.0 billion or 15.1% of the loan book at 31 December 2011 from €3.7 billion or 11.8% of the loan book at 31 December 2010. Impairment provisions on Non-property SME and corporate loans increased from €1.5 billion at 31 December 2010 or 40% of the impaired loans to €1.7 billion or 43% of the impaired loans at 31 December 2011. Challenging economic conditions in Ireland, a continuation of poor consumer sentiment and the increase in the level of business insolvencies have negatively impacted trading conditions and caused general pressure on the Irish SME sector. Those sectors correlated with consumer spending or the property markets are particularly impacted. Separately, larger Irish corporate customers trading internationally have continued to experience more favourable economic conditions, with the impairment charge in the Corporate business lower in the year ended 31 December 2011 as compared with the year ended 31 December 2010. In the UK SME segment, rising inflation and concerns regarding the impact of fiscal austerity have combined to leave UK economic conditions subdued. The year on year reduction primarily reflects the non-recurrence of impairment charges on a small number of large individual cases in the year ended 31 December 2010.

Impaired loans in the Property and construction portfolio increased from €5.9 billion or 24.1% of the portfolio at 31 December 2010 to €7.6 billion or 37% of the portfolio at 31 December 2011. In the investment property portfolio, there has been a significant increase in the level of impaired loans in the year ended 31 December 2011 as compared with the year ended 31 December 2010. In particular, weaker consumer spending and sentiment is adversely affecting trading performance, yields and asset values across the retail investment property sector. More generally, the increase in the level of impaired loans is due to lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods, together with a requirement for increased incentives to attract new tenants. Falling asset values in the Republic of Ireland and Northern Ireland have also adversely impacted the level of impaired loans in the year ended 31 December 2011. In the land and development portfolio the proportion of the book that is impaired has increased in the year ended 31 December 2011 as compared with the year ended 31 December 2010, reflecting lower house prices, over supply of residential housing stock, and illiquid property markets in the Republic of Ireland and in Northern Ireland.

Consumer impaired loans amounted to €0.3 billion or 10.2% of the loan portfolio at 31 December 2011 (31 December 2010: impaired loans of €0.4 billion or 10% of the loan portfolio). Consumer loans have reduced significantly reflecting accelerated repayments and subdued demand for new loans and other credit facilities. Default arrears and impairment charges were better than expected, in both the Republic of Ireland and the UK.

Risk profile of loans and advances to customers by division (before impairment provisions)

The tables and analysis below summarise the Group's loans and advances to customers by division over the following categories: 'neither past due nor impaired', 'past due but not impaired' and 'impaired'. Exposures are before provisions for impairment.

High levels of unemployment, lower disposable incomes, falling asset values, poor consumer sentiment, rising business insolvencies and low levels of transactions in property markets are the key drivers of the impairment charges across the Group's loan portfolios.

The impairment charges on loans and advances to customers of €1,939 million for the year ended 31 December 2011 increased by €80 million compared to the impairment charge of €1,859 million for the year ended 31 December 2010 reflecting the lower impairment charges on the Non-property SME and corporate portfolio as well as the Consumer portfolio, offset by the higher impairment charges on Residential mortgages and the Property and construction portfolio.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Impairment charges on loans and advances to customers

Residential mortgages	469	404	231
— Retail Ireland	444	341	159
— Retail UK	25	63	72
Non-property SME and corporate	497	609	655
— Republic of Ireland SME	281	291	339
— UK SME	74	126	46
— Corporate	142	192	270
Property and construction	893	719	1,281
— Investment	593	448	305
— Land and development	300	271	976
Consumer	80	127	166

Total impairment charges on loans and advances to customers	1,939	1,859	2,333

The impairment charge for the nine month period ended 31 December 2009 of €2,333 million comprises a charge for specific provisions (including collective provisions) of €2,010 million and a charge for IBNR provisions of €323 million.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The impairment charge on Residential mortgages increased by €65 million from €404 million for the year ended 31 December 2010 to €469 million for the year ended 31 December 2011. The impairment charge on Retail Ireland mortgages was €444 million for the year ended 31 December 2011. The impairment charge in the year ended 31 December 2010 of €341 million included an amount of approximately €100 million, to reflect a change in the Group's assumption of the expected peak to trough decline in residential property prices from 45% to 55% in the impairment provisioning models for Retail Ireland mortgages.

The impairment charge on the Non-property SME and corporate loan portfolio was €497 million for the year ended 31 December 2011 compared to €609 million for the year ended 31 December 2010.

In the UK SME segment, rising inflation and concerns regarding the impact of fiscal austerity have combined to leave UK economic conditions subdued. The year on year reduction primarily reflects the non-recurrence of impairment charges on a small number of large individual cases in the year ended 31 December 2010.

The impairment charge of €893 million on the Property and construction portfolio for the year ended 31 December 2011 has increased by €174 million compared to the impairment charge of €719 million for the year ended 31 December 2010. The Property and construction portfolio amounted to €21 billion at 31 December 2011 comprising €17 billion of investment property loans and €4 billion of land and development loans.

The increase in the level of impaired loans and associated impairment charges is due to lower rental income arising from reduced market rents and higher vacancy rates for more prolonged periods, together with a requirement for increased incentives to attract new tenants. In addition, weaker consumer spending and sentiment is adversely affecting trading performance, yields and asset values across the retail and investment property sector. Falling asset values in the Republic of Ireland and Northern Ireland in particular, have also adversely impacted the level of impairment charge in the year ended 31 December 2011.

The impairment charge of €80 million on Consumer loans for the year ended 31 December 2011 is €47 million lower compared to the impairment charge of €127 million for the year ended 31 December 2010.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

31 December 2011 Risk profile of loans and advances to customers including held for sale Total before impairment provisions

High Quality	25,627	29,569	3,248	58,444
Satisfactory Quality	6,107	4,081	5,850	16,038
Acceptable Quality	4,074	2,790	2,596	9,460
Lower quality but not past due or impaired	2,268	1,422	842	4,532

Neither past due nor impaired	38,076	37,862	12,536	88,474

Past due but not impaired	3,439	2,440	271	6,150
Impaired	7,754	3,994	1,730	13,478

Past due but not impaired and impaired	11,193	6,434	2,001	19,628

Total	49,269	44,296	14,537	108,102

31 December 2010 Risk profile of loans and advances to customers before impairment provisions

High Quality	26,887	32,334	5,918	65,139
Satisfactory Quality	7,465	5,888	8,310	21,663
Acceptable Quality	4,884	3,446	3,109	11,439
Lower quality but not past due or impaired	2,377	959	981	4,317

Neither past due nor impaired	41,613	42,627	18,318	102,558

Past due but not impaired	2,422	3,393	77	5,892
Impaired	6,105	3,095	1,782	10,982

Past due but not impaired and impaired	8,527	6,488	1,859	16,874

Total	50,140	49,115	20,177	119,432

The table below provides an aged analysis of loans and advances to customers 'past due but not impaired' by division:

Further to the changes to IFRS 7, introduced as part of the improvements to IFRSs 2010, the information on repossessed collateral as at 31 December 2010 has been restated to show the amounts held at that date.

The table below provides an analysis of loans held for sale which are 'neither past due nor impaired' by asset classification based on an assessment of the credit quality of the borrower.

There are no 'past due but not impaired loans' in the held for sale portfolio for the year ended 31 December 2011.

The table below provides an analysis of impaired loans held for sale by asset classification.

Other financial instruments include available for sale financial assets, NAMA senior bonds, derivative financial instruments, loans and advances to banks, interest receivable and any reinsurance assets. The table below sets out the Group's exposure to Other financial instruments based on the gross amount before provisions for impairment.

Other financial instruments are rated using external ratings attributed to external agencies or are assigned an internal rating based on the Group's internal models, or a combination of both. Mappings to external ratings agencies in the table below are therefore indicative only.

Set out in the table below is an analysis of the Group's exposure to sovereign debt and certain other exposures (primarily being financial institution exposure) by selected balance sheet line item as at 31 December 2011. In addition, for these line items, further information on the Group's exposures to selected countries (being Ireland, Italy and Spain) representing eurozone countries that have a credit rating of AA or below from Standard & Poor's and where the Group has an exposure of over €250 million are set out on pages 204 to 207.

The Group's exposure to the United Kingdom shown above and on page 203 in respect of loans and advances to banks primarily relates to liquid assets in excess of regulatory liquidity requirements held by Bank of Ireland (UK) plc. The Group expects its excess holdings of liquid assets in Bank of Ireland (UK) plc to reduce during 2012 as regulatory approval for the transfer of loans to Bank of Ireland (UK) plc is received.

The Group's holdings of 'Other financial assets at fair value through profit or loss' primarily relate to the Group's Life Assurance Business. The majority of these assets are held on behalf of policyholders who bear the inherent risks and rewards thereon. Therefore, any change in the carrying value results in an equal change in the amounts due to policyholders. The assets include Government bonds held by Bank of Ireland Life that back linked and non-linked policyholder liabilities and those held for solvency margin purposes. Information on these bonds is set out on page 204.

Available for sale financial assets consist of Government bonds, senior bank debt, covered bonds, subordinated debt and asset backed securities. See table on page 203 for further details.

NAMA senior bonds amount to €5,016 million as at 31 December 2011. These bonds are secured on NAMA assets and are accounted for as 'loans and receivables' rather than as 'available for sale financial assets'. The maturity date of the NAMA senior bonds is 1 March 2012. NAMA may, with the consent of the Group, settle the bonds by issuing new bonds with the same terms and conditions and a maturity date of up to 364 days.

At 31 December 2011, the Group had no net exposure to credit default swaps (CDS).

The following table sets out, by country of issuer, the Group's exposures to Government bonds, senior bank debt, covered bonds, subordinated debt, asset backed securities and loans and advances to banks as at 31 December 2011. The exposures shown are the carrying value of the assets as reported in the balance sheet at 31 December 2011.

	Available for sale financial assets

	Available for sale financial assets												Loans and advances to banks €m
Type of exposure	Government bonds €m			Senior bank debt €m		Covered bonds €m		Subordinated debt €m			Asset backed securities €m		Loans and advances to banks €m
Australia		—			—		—		—			26		12
Austria		—			—		—		—			—		—
Belgium		—			—		—		9			—		—
Bulgaria		—			—		—		—			—		—
Bermuda		—			—		—		—			2		—
Canada		—			62		123		—			—		56
Cayman Islands		—			—		—		—			—		—
Cyprus		—			—		—		—			—		—
Czech Republic		—			—		—		—			—		—
Denmark		—			5		78		—			—		50
Estonia		—			—		—		—			—		—
Finland		—			—		46		—			—		44
France		20			314		561		5			8		668
Germany		—			83		50		9			11		144
Guernsey		—			—		—		—			1		—
Greece		—			—		—		—			—		—
Hungary		—			—		—		—			—		—
Iceland		—			—		—		—			—		—
Ireland		4,222	⁽¹⁾		93		—		113	⁽²⁾		25		807
Italy		29			238		100		—			11		—
Jersey		—			—		—		—			14		—
Liechtenstein		—			—		—		—			—		—
Lithuania		—			—		—		—			—		—
Luxembourg		—			—		13		—			4		—
Malta		—			—		—		—			—		—
Netherlands		—			201		140		12			85		25
Norway		—			—		102		—			—		3
Poland		—			—		—		—			—		3
Portugal		—			—		63		—			—		—
Romania		—			—		—		—			—		—
Singapore		—			—		—		—			19		—
Slovakia		—			—		—		—			—		—
Slovenia		—			—		—		—			—		—
Spain		—			71		1,178		4			66		7
Sweden		—			—		104		—			—		19
Switzerland		—			—		—		—			—		39
United Kingdom		298			274		634		—			331		6,015
United States		1			53		282		—			69		30
Other		—			—		—		—			—		137

Total		4,570			1,394		3,474		152			672		8,059

The tables below show the Group's exposures to selected countries (being Ireland, Italy and Spain), by selected balance sheet line item representing eurozone countries that have a credit rating of AA or below from Standard & Poor's and where the Group has an exposure of over €250 million.

As at 31 December 2011, Ireland's credit rating from Standard & Poor's was BBB+. The table below shows the Group's exposure to Ireland by selected balance sheet line items:

	Carrying Value														Nominal value

As at 31 December 2011	0-3 months €m		3-12 months €m		1-2 years €m		2-5 years €m		5-10 years €m		Over 10 years €m		Total €m		Total €m
Cash and balances at Central banks		316		—		—		—		—		—		316		316
Other financial assets at fair
value through profit or loss		1		—		102		289		78		58		528		573
—Government bonds		1		—		102		240		78		41		462		501
—Other		—		—		—		49		—		17		66		72
Loans and advances to banks		746		61		—		—		—		—		807		807
Available for sale financial assets		517		27		1,066		1,739		1,100		4		4,453		5,052
—Government bonds		437		—		1,066		1,732		987		—		4,222		4,648
—Other		80		27		—		7		113		4		231		404
NAMA senior bonds		—		—		—		—		5,016		—		5,016		5,079

Total		1,580		88		1,168		2,028		6,194		62		11,120		11,827

As set out in the Group's accounting policies on pages F-13 to F-40, the Group accounts for each of these assets as follows:

At 31 December 2011, the carrying value of the NAMA senior bonds in the Group's balance sheet was €5,016 million. The maturity date of the NAMA senior bonds is based on their ultimate expected maturity.

In the period since 31 December 2011, the Group has increased its holding in Irish Sovereign Debt accounted as available for sale, by nominal value of €1.3 billion. The main increase is in balances classified as 1-2 years. This increase in holdings is net of redemptions since 31 December 2011.

Other financial assets at fair value through profit or loss As at 31 December 2011 Maturity profile

Nominal value	1	—	106	305	97	64	573
—Held for solvency margin purposes	—	—	57	75	—	—	132
—Backing non-linked policyholder liabilities	—	—	—	116	97	47	260
—Linked to policyholder liabilities	1	—	49	60	—	—	110
— Other	—	—	—	54	—	17	71
Fair value	1	—	101	289	79	58	528
—Held for solvency margin purposes	—	—	52	111	—	—	163
—Backing non-linked policyholder liabilities	—	—	—	71	79	41	191
— Linked to policyholder liabilities	1	—	49	58	—	—	108
— Other	—	—	—	49	—	17	66

In the period since 31 December 2011, the Group has decreased its holding in Irish Sovereign Debt accounted at fair value through profit or loss, by €0.1 billion by way of asset sales.

As at 31 December 2011, Italy's credit rating from Standard & Poor's was BBB+. The table below shows the Group's exposure to Italy by selected balance sheet line items:

Italian Government bonds with a nominal value of €260 million and a fair value of €222 million are held on behalf of Bank of Ireland Life policyholders and are shown in the balance sheet in 'Other financial assets at fair value through profit or loss'.

Other financial assets at fair value through profit or loss As at 31 December 2011 Maturity profile

Nominal value	—	4	1	3	66	186	260
—Held for solvency margin purposes	—	—	—	—	—	—	—
—Backing non-linked policyholder liabilities	—	—	—	—	—	30	30
—Linked to policyholder liabilities	—	4	1	3	66	156	230
Fair value	—	4	1	3	61	153	222
—Held for solvency margin purposes	—	—	—	—	—	—	—
—Backing non-linked policyholder liabilities	—	—	—	—	—	24	24
—Linked to policyholder liabilities	—	4	1	3	61	129	198

As at 31 December 2011, Spain's credit rating from Standard & Poor's was A. The table below shows the Group's exposure to Spain by selected balance sheet line items:

Spanish Government bonds with a nominal value of €82 million and a fair value of €86 million are held on behalf of Bank of Ireland Life policyholders and are shown in the balance sheet in 'Other financial assets at fair value through profit or loss'.

Other financial assets at fair value through profit or loss As at 31 December 2011 Maturity profile

Nominal value	—	—	—	1	33	48	82
—Held for solvency margin purposes	—	—	—	—	—	—	—
—Backing non-linked policyholder liabilities	—	—	—	—	—	—	—
—Linked to policyholder liabilities	—	—	—	1	33	48	82
Fair value	—	—	—	1	35	50	86
—Held for solvency margin purposes	—	—	—	—	—	—	—
—Backing non-linked policyholder liabilities	—	—	—	—	—	—	—
—Linked to policyholder liabilities	—	—	—	1	35	50	86

In addition, the Group has an exposure of €7 million at 31 December 2011 to Spain under loans and advances to banks. This has a maturity of less than three months.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The following disclosures represent additional disclosures for the Retail Ireland mortgage loan book. These disclosures provide additional detail and breakdowns on the composition and quality of the loan book.

Retail Ireland mortgages were €27.9 billion at 31 December 2011 compared to €28.1 billion at 31 December 2010. The decrease of €213 million or 0.76% reflects principal repayments and muted demand for new mortgages. Bank of Ireland provided mortgage finance to six in ten (60%) first time buyer customers in the most recently published Irish Mortgage Council market data. Buy to let Retail Ireland mortgages have reduced by €272 million or 3.7% and owner occupied Retail Ireland mortgages have increased by €59 million or 0.28% . Of the owner occupied mortgages of €20.9 billion, 93% are on a 'principal and interest' repayment basis (31 December 2010: 91%). Of the Buy to let mortgages of €7 billion, 50% are on 'principal and interest' repayment basis (31 December 2010: 43%).

The Group has a long established infrastructure for the origination, underwriting and management of its mortgage portfolio. The portfolio has all been underwritten by the Group which manages this entire portfolio.

The processes of underwriting through to account management are centralised and no delegated discretions are in operation outside the centralised units. Mortgage applications are assessed utilising a stressed interest rate. The mortgage process is a fully documented process with documentary evidence of key borrower information including an independent valuation of the security property.

	Total Retail Ireland mortgage loan book				Loans > 90 days past due and/or impaired

31 December 2011 Origination of Retail Ireland mortgage loan book (before impairment provisions)	Balance €m		Number of accounts⁽¹⁾		Balance €m		Number of accounts⁽¹⁾
1996 and before		123		6,841		8		356
1997		67		2,601		5		132
1998		112		3,475		8		178
1999		200		4,862		14		239
2000		353		6,584		25		348
2001		492		7,417		32		403
2002		907		10,903		68		599
2003		1,506		14,751		138		965
2004		2,457		19,239		242		1,312
2005		3,814		24,510		399		1,864
2006		5,572		29,579		771		2,933
2007		4,805		23,981		649		2,331
2008		3,315		17,577		303		1,109
2009		1,816		11,731		44		260
2010		1,278		7,921		3		30
2011		1,037		6,906		—		3

Total		27,854		*198,878*		2,709		*13,062*

The table above illustrates that €10.0 billion or 36% of the Retail Ireland mortgage loan book originated before 2006, €13.7 billion or 49% between 2006 and 2008 and €4.1 billion or 15% in the years since. Total loans that are greater than 90 days past due and/or impaired were €2.7 billion or 9.7% of the Retail Ireland mortgage loan book at 31 December 2011, of which €1.7 billion or 6.3% were originated between 2006 and 2008.

The tables above illustrates that €23.9 billion or 85% of the total Retail Ireland mortgage loan book at 31 December 2011 was classified as 'neither past due nor impaired' compared to €25.6 billion or 91% at 31 December 2010.

The above table shows that the 'past due but not impaired' category amounted to €2.7 billion or 10% of the total Retail Ireland mortgage loan book at 31 December 2011 compared to €1.6 billion or 6.0% at 31 December 2010. This increase is primarily attributed to the general economic downturn in Ireland and affordability issues including falling disposable incomes and high unemployment levels.

'Impaired' Retail Ireland mortgages increased from €0.9 billion or 3% of Residential mortgages at 31 December 2010 to €1.3 billion or 5% of total Retail Ireland mortgages at 31 December 2011, an increase of 46%. This increase in impaired Retail Ireland mortgages reflects increasing default arrears (90 days or more past due), in the owner occupied and particularly in the Buy to let segments. In addition to the factors mentioned above, the increase in past due and impaired since August 2011 appear to have been impacted by the implementation of the new code of conduct on arrears and the considerable public speculation about potential Government policy measures regarding customers in arrears.

In the following tables (3b, 3c, 3d and 3e), property values are determined by reference to the original or latest property valuations held, indexed to the Residential Property Price Index published by the Central Statistics Office (CSO). This index provides the relevant index to be applied to original market values in the period after January 2005. For Retail Ireland mortgages originated prior to January 2005, the Permanent TSB/ESRI House price index is utilised.

Equity/negative equity values are determined using the Residential property price index published by the CSO at 31 December 2011 and the Permanent TSB/ESRI House price index at 31 December 2010.

	31 December 2011						31 December 2010

Arrears profile of Retail Ireland mortgages past due but not impaired (before impairment provisions)	Owner occupied €m		Buy to let €m		Total €m		Owner occupied €m		Buy to let €m		Total €m
1–30 days		395		179		574		294		129		423
31–60 days		284		143		427		175		76		251
61–90 days		188		100		288		105		45		150
91–180 days		355		171		526		211		83		294
181–360 days		342		156		498		191		73		264
Over 360 days		259		79		338		160		42		202

Total Retail Ireland mortgages past due, but not impaired		1,823		828		2,651		1,136		448		1,584

Loans with equity		778		218		996		670		176		846
Loans with negative equity		1,045		610		1,655		466		272		738

Loans with equity represents the total value of all loans which are past due but not impaired and are not subject to negative equity
Loans with negative equity represents the total value of all loans which are past due but not impaired and are subject to negative equity

The table above illustrates that the 'past due but not impaired' category amounted to €2.7 billion or 10% of the total Retail Ireland mortgage loan book at 31 December 2011 compared to €1.6 billion or 6% at 31 December 2010. This increase is primarily attributed to the general economic downturn in Ireland and affordability issues including falling disposable incomes and high unemployment levels.

At 31 December 2011 the total negative equity in the Retail Ireland mortgage loan book was €3.7 billion, which comprised €2.9 billion (79%) related to 'neither past due nor impaired', €0.4 billion (11%) related to 'past due but not impaired' and €0.4 billion (10%) related to 'impaired'.

	Owner occupied					Buy to let					Total

31 December 2011 Loan to value of total Retail Ireland mortgage loan book	€m		%			€m		%			€m		%
Less than 50%		2,904		14	%		396		6	%		3,300		12	%
51% to 70%		2,509		12	%		506		7	%		3,015		11	%
71% to 80%		1,456		7	%		376		5	%		1,832		7	%
81% to 90%		1,570		8	%		421		6	%		1,991		7	%
91% to 100%		1,857		9	%		475		7	%		2,332		8	%

Subtotal		10,296		50	%		2,174		31	%		12,470		45	%

101% to 120%		3,759		18	%		1,276		18	%		5,035		18	%
121% to 150%		4,012		19	%		2,151		31	%		6,163		22	%
151% to 180%		1,871		9	%		1,013		15	%		2,884		10	%
Greater than 181%		925		4	%		377		5	%		1,302		5	%

Subtotal		10,567		50	%		4,817		69	%		15,384		55	%

Total		20,863		100	%		6,991		100	%		27,854		100	%

Weighted average LTV⁽¹⁾:
Stock of Residential mortgages at year end				100	%				118	%				105	%
New Residential mortgages during the year				79	%				60	%				79	%

The table above illustrates the indexed loan to value ratio of the total Retail Ireland mortgage loan book at 31 December 2011. €12.5 billion (45%) of Retail Ireland mortgages are in positive equity. 50% of owner occupied Retail Ireland mortgages and 31% of Buy to let Retail Ireland mortgages are in positive equity.

The weighted average indexed LTV for the total Retail Ireland mortgage loan book is 105% at 31 December 2011, 100% for owner occupied and 118% for Buy to let.

	Owner occupied					Buy to let					Total Residential mortgage portfolio

31 December 2011 Loan to value ratio of Retail Ireland mortgages > 90 days past due and/or impaired	€m		%			€m		%			€m		%
Less than 50%		99		6	%		35		3	%		134		5	%
51% to 70%		120		8	%		54		4	%		174		7	%
71% to 80%		73		5	%		45		4	%		118		4	%
81% to 90%		99		6	%		46		4	%		145		5	%
91% to 100%		102		7	%		60		5	%		162		6	%

Subtotal		493		32	%		240		20	%		733		27	%

101% to 120%		247		16	%		196		17	%		443		17	%
121% to 150%		395		26	%		421		36	%		816		30	%
151% to 180%		260		17	%		234		20	%		494		18	%
Greater than 181%		143		9	%		80		7	%		223		8	%

Subtotal		1,045		68	%		931		80	%		1,976		73	%

Total		1,538		100	%		1,171		100	%		2,709		100	%

Weighted average LTV⁽¹⁾:
> 90 days past due and/or impaired mortgages				121	%				129	%				125	%

The table above illustrates the indexed loan to value ratio of the greater than 90 days past due or impaired Retail Ireland mortgages at 31 December 2011. €0.7 billion (27%) of this element of the Retail Ireland mortgage loan book are not in negative equity. 32% of the greater than 90 days past due or impaired owner occupied Retail Ireland mortgages are not in negative equity and 20% of the greater than 90 days past due or impaired Buy to let Retail Ireland mortgages are not in negative equity.

The weighted average indexed LTV for the greater than 90 days past due or impaired Retail Ireland mortgages is 125% at 31 December 2011, 121% for owner occupied and 129% Buy to let.

At 31 December 2011 total Retail Ireland mortgages were reduced by €213 million or 0.8%, reflecting principal repayments and muted demand for new mortgages.

The impairment charge on the Retail Ireland mortgage loan book has continued to increase during the year ended 31 December 2011 reflecting increasing default arrears (90 days or more past due), in the owner occupied and particularly in the Buy to let segments. This increase is primarily attributed to the general economic downturn in Ireland with high unemployment levels, including affordability issues and falling disposable income.

The impairment charge in the year ended 31 December 2010 included an amount of approximately €100 million, to reflect a change in the Group's assumption of the expected peak to trough decline in residential property prices from 45% to 55% in the impairment provisioning models for Retail Ireland mortgages; the Group estimated that €60 million related to the owner occupied segment and €40 million related to the Buy to let segment.

Overall impairment provision coverage ratios on the Retail Ireland mortgages that are greater than 90 days past due and/or impaired has increased from 34.2% to 37.9% .

The main type of restructuring arrangements for Retail Ireland mortgages are analysed below:

	Loans not in default⁽¹⁾				Loans > 90 days past due and/or impaired				All loans

31 December 2011 Restructuring arrangements—Retail Ireland mortgages (before impairment provisions)	Balance €m		Number of accounts⁽²⁾		Balance €m		Number of accounts⁽²⁾		Balance €m		Number of accounts⁽²⁾
Owner occupied
Interest only (temporary arrangement)		519		3,415		200		1,230		719		4,645
Reduced payment (greater than interest only)		261		1,228		29		114		290		1,342
Term extension (including interest servicing)		191		2,162		15		116		206		2,278
Other		28		176		5		36		33		212

Total		999		*6,981*		249		*1,496*		1,248		*8,477*

Buy to let
Interest only (temporary arrangement)		209		1,030		65		310		274		1,340
Reduced payment (greater than interest only)		185		798		23		48		208		846
Term extension (including interest servicing)		75		517		13		49		88		566
Other		1		4		—		—		1		4

Total		470		*2,349*		101		*407*		571		*2,756*

Total
Interest only (temporary arrangement)		728		4,445		265		1,540		993		5,985
Reduced payment (greater than interest only)		446		2,026		52		162		498		2,188
Term extension (including interest servicing)		266		2,679		28		165		294		2,844
Other		29		180		5		36		34		216

Total		1,469		*9,330*		350		*1,903*		1,819		*11,233*

Bank of Ireland has an operating infrastructure in place to assess and implement restructure arrangements for customers on a case-by-case basis. Arrears are not generally capitalised at point of restructure and remain in the applicable past due category.

The above table illustrates Retail Ireland mortgages that have been subject to restructuring arrangements. These arrangements include temporary forbearance arrangements, permanent forbearance arrangements and permanent restructuring arrangements.

Of the €1.8 billion of Retail Ireland mortgages (before impairment provisions) subject to restructuring at 31 December 2011, 98% of this balance are paying interest only or greater on their balances. 16% are paying full principal and interest having had their mortgage term extended.

The Group has adopted the requirements of the Central Bank of Ireland Code of Conduct on Mortgage Arrears (CCMA) which, among other things, requires mortgage lenders to establish a Mortgage Arrears Resolution Process (MARP) for defined owner occupied mortgages. The MARP sets out the framework for case by case consideration and implementation of a range of measures for qualifying borrowers. In addition, the Group has set out a clearly defined Mortgage Arrears Resolution Strategy incorporating both owner occupied and Buy to let mortgages. The process adopted by the Group seeks to minimise loss arising from non repayment of customer mortgages while ensuring that customers are treated fairly and with respect throughout the arrears management and resolution process.

A range of options are deployed, for customers in arrears or facing potential arrears, in order to arrange, where viable or possible, sustainable mortgage repayment solutions. Implementation of forbearance and/or restructuring solutions occur on either a temporary or permanent basis to facilitate sustainable repayment plans. Forbearance and/or restructuring options are applied as appropriate, subject to individual case assessment.

Temporary forbearance options include setting short term revised repayments or short term suspension of repayments. Permanent forbearance and/or restructuring solutions include, term extensions, phased step-up repayments over total contracted term and capitalisation of arrears.

At 31 December 2011, the Group had possession of properties held as security as follows:

During the year ended 31 December 2011 the Group disposed of 75 repossessed properties^(*) (31 December 2010: 18 repossessed properties disposed of). The total contracted disposal proceeds was adequate to cover the balance outstanding after provisions.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The following disclosures represent additional disclosures on the Retail UK mortgage loan book. These disclosures provide additional detail and breakdowns on the composition and quality of the loan book.

Retail UK mortgages were £24.8 billion at 31 December 2011 compared to £27.7 billion at 31 December 2010. The decrease of £3.0 billion or 11% is primarily due to principal repayments and the Group's deleveraging initiatives. In January 2009 the Group announced its withdrawal from the intermediary sourced mortgage market in the UK, which has resulted in a significant reduction in the volume of new mortgages issued.

	Total Residential mortgages loan book				Loans > 90 days past due and/or impaired

31 December 2011 Origination profile of Retail UK mortgage loan book including held for sale (before impairment provisions)	Balance £m		Number of accounts⁽¹⁾		Balance £m		Number of accounts⁽¹⁾
1996 and before		386		10,861		6		188
1997		74		1,742		1		18
1998		120		2,510		1		19
1999		132		2,811		1		27
2000		159		3,033		2		27
2001		342		4,686		4		37
2002		438		5,759		9		79
2003		961		10,758		23		161
2004		995		10,468		22		165
2005		2,289		20,430		66		441
2006		3,296		28,337		75		474
2007		5,462		43,672		141		908
2008		6,756		53,687		247		1,545
2009		1,321		9,964		10		94
2010		1,175		7,677		1		5
2011		849		5,381		—		1

Total		24,755		*221,776*		609		*4,189*

The table above illustrates that £5.9 billion or 24% of the Retail UK mortgage loan book originated before 2006, £15.5 billion or 63% between 2006 and 2008 and £3.3 billion or 13% in the years since. The fall off in originations since the end of 2008 is primarily due to the Group's withdrawal from the intermediary sourced mortgage market in the UK. Total loans that are greater than 90 days past due and/or impaired were £0.6 billion or 2% of the Retail UK mortgage loan book at 31 December 2011, of which £0.5 billion or 76% were originated between 2006 and 2008.

The table above illustrates that £23.1 billion or 93% of the total Retail UK mortgage loan book at 31 December 2011 was classified as 'neither past due nor impaired' compared to £25.8 billion or 93% at 31 December 2010, within neither past due nor impaired £262 million of exposures have converted to interest only (during the year ended 31 December 2011 which are currently not in default (zero days past due)).

The 'Past due but not impaired' category comprised £1.6 billion or 6% of the total Retail UK mortgage loan book at 31 December 2011 compared to £1.7 billion or 6% at 31 December 2010. This reduction is primarily attributed to the low interest rate environment and a liquid market.

Retail UK mortgages classified as 'impaired' decreased to £0.11 billion or 0.4% of the total Retail UK mortgage loan book at 31 December 2011 from £0.13 billion or 0.5% of the total Retail UK mortgage loan book at 31 December 2010, being a decrease of £28 million or 21% during the year ended 31 December 2011.

In the following tables (3b, 3c, 3d and 3e), property values are determined by reference to the original or latest property valuations held, indexed to the Nationwide UK house price index. In the tables the December 2011 Residential Property Price Index published by Nationwide UK provides the relevant index to be applied to the original market values.

Equity/negative equity values are determined using the Nationwide UK house price index at 31 December 2011 and at 31 December 2010.

	31 December 2011								31 December 2010

Arrears profile of Retail UK mortgages past due but not impaired (before impairment provisions)	Standard £m		Buy to let £m		Self certified £m		Total £m		Standard £m		Buy to let £m		Self certified £m		Total £m
1–30 days		230		193		255		678		235		210		242		687
31–60 days		79		95		88		262		93		103		95		291
61–90 days		33		46		39		118		44		57		56		157
91–180 days		68		82		74		224		72		101		115		288
181–360 days		44		54		61		159		54		64		83		201
Over 360 days		33		41		46		120		34		38		52		124

Total Retail UK mortgages past due, but not impaired		487		511		563		1,561		532		573		643		1,748

Retail UK mortgages with equity		386		451		505		1,342		433		529		595		1,557
Retail UK mortgages with negative equity		101		60		58		219		99		44		48		191

Loans which are greater than 90 days past due but not impaired generally reflect accounts which either continue to make ongoing repayments or are in positive equity positions.

The table above illustrates that the 'past due, but not impaired' category amounted to £1.6 billion of the total Retail UK mortgage loan book at 31 December 2011 compared to £1.7 billion at 31 December 2010.

The total amount of negative equity in the Retail UK mortgage loan book was £161 million at 31 December 2011, which comprised £139 million (86%) related to 'neither past due nor impaired', £17 million (11%) related to 'past due but not impaired' and £5 million (3%) related to 'impaired'.

	Standard					Buy to let					Self certified					Total

31 December 2011 Loan to value ratio of total Retail UK mortgage loan book including held for sale	Standard					Buy to let					Self certified					Total
	£m		%			£m		%			£m		%			£m		%
Less than 50%		2,236		21	%		966		10	%		344		10	%		3,546		15	%
51% to 70%		1,653		15	%		2,675		27	%		735		18	%		5,063		20	%
71% to 80%		1,495		14	%		2,282		23	%		857		21	%		4,634		19	%
81% to 90%		2,103		19	%		2,136		22	%		1,022		25	%		5,261		21	%
91% to 100%		1,846		17	%		1,293		13	%		821		20	%		3,960		16	%

Subtotal		9,333		86	%		9,352		95	%		3,779		94	%		22,464		91	%

101% to 120%		1,452		13	%		412		5	%		224		6	%		2,088		8	%
121% to 150%		72		1	%		45		—			12		—			129		1	%
Greater than 150%		48		—			17		—			9		—			73		—

Subtotal		1,572		14	%		474		5	%		245		6	%		2,290		9	%

Total		10,905		100	%		9,826		100	%		4,024		100	%		24,754		100	%

Weighted average LTV:
Stock of Retail UK mortgages at year end⁽¹⁾				74	%				74	%				78	%				75	%
New Retail UK mortgages during the year⁽¹⁾				81	%				70	%				N/A					97	%

The table above illustrates the indexed loan to value ratio of the total Retail UK mortgage loan book at 31 December 2011. £22.5 billion (91%) of the Retail UK mortgage loan book is not in negative equity. 86% of standard Retail UK mortgages, 95% of Buy to let and 94% of self certified Retail UK mortgages are not in negative equity.

The weighted average LTV of the total book at 31 December 2011 was 75%, with new business written during the year ended 31 December 2011 having an LTV of 80%. At 31 December 2011 the amount of negative equity comprised just under 0.7% of the total Retail UK mortgage book with related loans of £2,291 million.

																Total residential mortgage portfolio

	Standard					Buy to let					Self certified
31 December 2011 Loan to value ratio of Retail UK mortgages > 90 days past due and/or impaired including held for sale	Standard					Buy to let					Self certified
	£m		%			£m		%			£m		%			£m		%
Less than 50%		20		13	%		5		2	%		4		2	%		29		5	%
51% to 70%		22		14	%		26		10	%		18		9	%		66		11	%
71% to 80%		18		12	%		41		16	%		27		14	%		86		14	%
81% to 90%		19		12	%		56		22	%		48		25	%		123		20	%
91% to 100%		21		13	%		58		22	%		59		31	%		138		23	%

Subtotal		100		64	%		186		72	%		156		81	%		442		73	%

101% to 120%		33		21	%		49		19	%		32		16	%		116		18	%
121% to 150%		4		3	%		9		3	%		3		2	%		16		3	%
Greater than 150%		19		12	%		16		6	%		2		1	%		36		6	%

Subtotal		56		36	%		74		28	%		37		19	%		168		27	%

Total		156		100	%		260		100	%		193		100	%		610		100	%

Weighted average LTV:
> 90 days past due and/or mortgages in total				81	%				90	%				88	%				87	%

£442 million (73%) of the greater than 90 days past due and/or impaired Retail UK mortgages are not in negative equity. At 31 December 2011 the overall weighted average LTV for those customers who are greater than 90 days past due and/or impaired was 87%.

At 31 December 2011 total Retail UK mortgages had decreased by £2.9 billion or 12% to £24.8 billion (31 December 2010: £27.7 billion). £1.2 billion of this decrease is attributable to the deleveraging initiatives undertaken by the Group towards the end of the year.

Retail UK mortgages greater than 90 days past due and/or impaired are £609 million at 31 December 2011 compared to £747 million at 31 December 2010.

Overall impairment provision coverage ratios on Retail UK mortgages greater than 90 days past due and/or impaired have increased from 17.3% at 31 December 2010 to 18.2% at 31 December 2011.

At 31 December 2011, the Group had possession of collateral held as security as follows:

During the year ended 31 December 2011 the Group disposed of 780 repossessed properties⁽¹⁾ (31 December 2010: 645 repossessed properties disposed of). The total contracted disposal proceeds was adequate to cover the balance outstanding after provisions.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Liquidity risk is the risk that the Group will experience difficulty in financing its assets and/or meeting its contractual payment obligations as they fall due, or will only be able to do so at substantially above the prevailing market cost of funds. Liquidity risk arises from differences in timing between cash inflows and outflows. Cash inflows are driven, among other things, by the maturity structure of loans and investments held by the Group, while cash outflows are driven by the term of the debt issued by the Group and the outflows from deposit accounts held for customers. Liquidity risk can increase due to the unexpected lengthening of maturities or non-repayment of assets, a sudden withdrawal of deposits or the inability to refinance maturing debt which are often associated with times of distress or adverse events such as a credit rating downgrade(s) or economic or financial turmoil.

The Group's exposure to liquidity risk is governed by the Group's Risk Appetite Statement and associated limits and the Group's liquidity and funding policy, both of which are approved by the Court and the GRPC. The objective of the policy is to ensure that the Group can meet its obligations, including deposit withdrawals and funding commitments, as they fall due. The operation of this policy is delegated to the Group's Asset and Liability Committee (ALCO). Liquidity management within the Group focuses on the overall balance sheet structure together with the control, within prudent limits, of risk arising from the mismatch of maturities of assets and liabilities and the risks arising from undrawn commitments and other contingent liabilities.

The Group performs stress testing and scenario analysis to evaluate the impact of stresses on its liquidity position. These stress tests incorporate Group specific risks and systemic risks and are run at different levels of possible, even if unlikely, severity. Tactical actions and strategies available to mitigate the stress scenarios are evaluated as to their appropriateness. Stress test results are reported to ALCO, the GRPC and the Court.

The Group's cash flow and liquidity reporting processes provide management with daily liquidity risk information by designated cash flow categories. These processes capture the cash flows from both on balance sheet and off balance sheet transactions. The tables below summarise the maturity profile of the Group's financial assets and liabilities, excluding those arising from insurance and participating investment contracts at 31 December 2011 and 31 December 2010 based on the remaining contractual maturity period at the balance sheet date (discounted) and the totals agree to the balance sheet on page F-6. NAMA senior bonds have been included in the table based on their ultimate expected maturity. Unit linked investment liabilities and unit linked insurance liabilities with a carrying value of €4,954 million and €7,037 million respectively (31 December 2010: €5,271 million and €7,188 million respectively) are excluded from this analysis as their repayment is linked directly to the financial assets backing these contracts. The Group measures liquidity risk by adjusting the contractual cash flows on retail deposit books to reflect their inherent stability.

Customer accounts include a number of term accounts that contain access features. These allow the customer to access a portion or all of their deposit notwithstanding that this withdrawal could result in financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the 'demand' category in the table below. The comparative information has been reclassified on this basis which involved reclassifying a total amount of €16 billion into the demand category from the following categories: €3 billion from up to 3 months, €10 billion from 3-12 months and €3 billion from 1-5 years.

31 December 2011 Maturities of financial assets and liabilities

Assets
Cash and balances at central banks	8,181	—	—	—	—	8,181
Trading securities	—	—	4	—	2	6
Derivative financial instruments	735	271	207	2,602	2,547	6,362
Other financial assets at fair value through profit or loss⁽¹⁾	968	25	76	489	1,438	2,996
Loans and advances to banks	2,809	4,807	237	1	205	8,059
Available for sale financial assets⁽¹⁾	—	1,264	675	6,113	2,096	10,148
NAMA senior bonds	—	—	—	—	5,016	5,016
Loans and advances to customers including held for sale (before impairment provisions)	6,283	7,702	7,104	28,210	58,803	108,102

Total	18,976	14,069	8,303	37,415	70,107	148,870

Liabilities
Deposits from banks	115	4,010	906	3,895	78	9,004
Drawings from Monetary Authorities (gross)	430	14,600	—	7,500	—	22,530
Customer accounts	48,368	18,223	2,331	1,371	213	70,506
Derivative financial instruments	614	224	419	2,033	2,728	6,018
Debt securities in issue	—	2,006	719	12,391	4,007	19,123
Subordinated liabilities	—	—	—	1,069	358	1,427

Total	49,527	39,063	4,375	28,259	7,384	128,608

31 December 2010 Maturities of financial assets and liabilities

Assets
Cash and balances at central banks	1,014	—	—	—	—	1,014
Trading securities	—	137	—	8	6	151
Derivative financial instruments	840	382	582	2,759	1,812	6,375
Other financial assets at fair value through profit or loss⁽¹⁾	754	20	101	488	1,513	2,876
Loans and advances to banks	3,608	3,679	153	16	2	7,458
Available for sale financial assets⁽¹⁾	2	1,342	3,350	7,712	3,060	15,466
NAMA senior bonds	—	—	—	—	5,075	5,075
Loans and advances to customers (before impairment provisions)	3,671	9,481	8,276	32,983	65,021	119,432
Assets classified as held for sale to NAMA (before
impairment provisions)	11	460	261	86	61	879

Total	9,900	15,501	12,723	44,052	76,550	158,726

Liabilities
Deposits from banks	359	7,984	411	2,380	78	11,212
Drawings from Monetary Authorities (gross)	—	33,438	—	—	—	33,438
Customer accounts	48,213	14,816	969	1,060	385	65,443
Derivative financial instruments	815	195	319	2,233	1,883	5,445
Debt securities in issue	—	1,175	3,525	14,280	6,138	25,118
Subordinated liabilities	—	—	—	83	2,692	2,775

Total	49,387	57,608	5,224	20,036	11,176	143,431

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

While liquidity conditions are constrained at present, the Group in the normal course, aims to maintain funding diversification, minimise concentrations across funding sources and control the level of short term wholesale sources of funds. During the year ended 31 December 2011, the Group issued €4 billion of secured term funding using UK mortgage notes (Colston SPEs) as collateral.

The Group's customer deposit strategy is focussed on growing high quality 'sticky' deposits by leveraging the Group's extensive retail and corporate customer franchise in Ireland and by accessing the UK retail market through Bank of Ireland (UK) plc and particularly the Group's joint venture with the UK Post Office. In Retail Ireland the Group has grown deposits in the second half of the year by €1.2 billion. The continued success of the joint venture with the UK Post Office has delivered a deposit base of Stg£16 billion at 31 December 2011 which has exceeded the Group's targets. In addition, the positive market sentiment shown towards the Group has aided retention of corporate banking customer relationships in Ireland, the UK and internationally which enable the Group to access corporate customer deposits. Corporate deposits have grown in the second half of the year by €1.7 billion. The Group continues to focus on the growth of retail deposits and relationship-based corporate deposits which arise from the Group's broader lending and treasury risk management activities with a view to further reducing its dependence on wholesale funding and reducing its customer loan to deposit ratio.

Following the downgrade of the Irish sovereign in early 2011, the Group's credit ratings were downgraded to BB+/Ba2/BBB for Standard & Poor's, Moody's and DBRS respectively. Over the remainder of 2011 and into 2012, credit ratings have remained stable at these levels.

The Group has access to the liquidity operations offered by Monetary Authorities using its pool of contingent collateral. The Group has decreased its usage of liquidity facilities made available by Monetary Authorities by asset deleveraging, growing customer deposits and the use of collateralised market term funding. The Group's funding from Monetary Authorities further decreased to €22 billion (net) at 31 December 2011 from €31 billion (net) at 31 December 2010. As described on page F-159, the Group participates in the ELG scheme, which guarantees certain liabilities of Irish financial institutions. A key priority of the Group is to reduce its reliance on Monetary Authorities as market conditions improve and the Group's wholesale funding requirement reduces.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Summary Consolidated Balance Sheet

Loans and advances to customers⁽¹⁾ (after impairment provisions)	102		114		(11	%)
Assets held for sale to NAMA (after impairment provisions)	—		1		—
Liquid assets	31		30		3	%
Other assets	22		22		—

Total assets	155		167		(7	%)

Customer deposits⁽²⁾	71		65		8	%
Wholesale funding	51		70		(27	%)
Subordinated liabilities	1		3		(67	%)
Other liabilities	22		22		—

Total liabilities	145		160		(10	%)

Total stockholders' equity	10		7		43	%

Total liabilities and stockholders' equity	155		167		(7	%)

Loan to deposit ratio	144	%	175	%

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The 2011 PCAR incorporates a deleveraging plan (PLAR) which anticipates a loan to deposit ratio of less than 122.5% for the Group by 31 December 2013. This plan includes the proposed disposal of c.€10 billion of the non-core loan portfolios by 31 December 2013. The Group has frontloaded the majority of these disposals before 31 December 2011. The Group has been successful in deleveraging non-core portfolios

with c.€8.6 billion sales achieved. For further information see note 17 to the Consolidated Financial Statements.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Customer deposits

Retail Ireland	36		35
— Deposits	25		24
— Current account credit balances	11		11
Retail UK	27		21
Retail UK (Stg£bn equivalent)	22		18
— UK Post Office	16		11
— Other Retail UK	6		7
Corporate and Treasury	8		9
— Corporate and Treasury deposits	8		8
— BoISS related	—		1
Total customer deposits	71		65

Loan to deposit ratio	144	%	175	%

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Group customer deposits were €71 billion at 31 December 2011 compared to €65 billion at 31 December 2010 as set out in the table above. Following the successful recapitalisation of the Group in July 2011 the Group has experienced a strong growth in deposit balances (growing by €8 billion between July 2011 and December 2011). Key drivers of this increase included a significant Group wide focus on deposit gathering, new product developments and maximisation of cross selling and new business opportunities through our distribution channels in Ireland and the UK.

The Group's loan to deposit ratio was 144% at 31 December 2011, compared to 175% at 31 December 2010 which is in line with the targets that were set out in the PCAR/PLAR 2011.

The Group's retail deposit gathering activities in its joint venture with the UK Post Office continue to exceed expectations on both retention rates and new deposit growth as balances amounted to £16 billion at 31 December 2011, which represents an increase of £5.0 billion or 44% since 31 December 2010. The Group's deposit gathering strategy in the UK has been successfully underpinned by the incorporation in November 2010 of the Group's UK licensed banking subsidiary—Bank of Ireland (UK) plc. Deposits in the Group's offshore unit declined by €0.6 billion in 2011, however stabilised in the second half of the year following the recapitalisation of the Group.

customers had placed deposits of c.€1 billion with the Group at 31 December 2010, and a reduction in corporate balances in the first half of 2011. Corporate balances experienced growth of c.€1 billion in the second half of the year following the recapitalisation of the Group indicating a stabilisation of the Group's core corporate deposit base.

At 31 December 2011, €43 billion of the Group's customer deposits are guaranteed under the Irish Deposit Guarantee Scheme (DGS) and the UK Financial Services Compensation Scheme (FSCS) (31 December 2010: €35 billion), while €26 billion are covered by the Eligible Liabilities Guarantee Scheme (31 December 2010: €29 billion).

On a constant currency basis the Group's customer deposits at 31 December 2011 grew by 7% (€4.3 billion) when compared to the Group's customer deposits at 31 December 2010.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

	31 December 2011					31 December 2010

Wholesale funding sources	€bn		%			€bn		%
Secured funding		40		78	%		53		76	%
— Monetary authority (gross)		23		45	%		33		47	%
— Covered bonds (asset backed securities)		6		12	%		7		10	%
— Securitisations		4		8	%		5		7	%
— Private market repo		7		14	%		8		11	%
Unsecured funding		11		22	%		17		24	%
— Senior debt		9		18	%		13		19	%
— Bank deposits		2		4	%		3		4	%
— Commercial Paper and Certificates of Deposits		—		—			1		1	%

Total Wholesale funding		51		100	%		70		100	%

Wholesale funding > 1 year to maturity		28		55	%		22		32	%
Wholesale funding < 1 year to maturity		23		45	%		48		68	%
Drawings from Monetary Authorities (net)		22		—			31		—

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Wholesale funding requirements reduced from €70 billion at 31 December 2010 to €51 billion at 31 December 2011 primarily due to:

The Group's senior unsecured debt at 31 December 2011 of €9 billion has reduced by €4 billion from €13 billion at 31 December 2010.

In early December 2011, the Group announced it will not call notes issued by the Brunel and Kildare securitisation vehicles on the relevant call dates in March 2012 and April 2012, with any future redemption decisions being taken on an economic basis and having regard to prevailing market conditions.

In January 2011, following changes to the ECB eligibility criteria for sterling denominated collateral, the Group issued and retained Government guaranteed own-use bonds which are eligible for ECB monetary policy operations. These bonds have a liquidity value of €8.45 billion. They have consistently rolled over on a quarterly basis and the current maturity date is April 2012.

In March 2012, the Group participated in the second ECB three year LTRO when it converted c.€4.8 billion of mainly shorter term funding to three year funding with a maturity of February 2015.

At 31 December 2011, 55% of wholesale funding had a term to maturity of greater than one year compared with 32% at 31 December 2010, reflecting secured term funding raised and the participation in the ECB three year LTRO. The Group's unsecured maturities are €2.7 billion in 2012 and €2.6 billion in 2013.

The refinancing requirement for the Group from unsecured wholesale maturities remains low in 2012 and in subsequent years. This reflects the overall reduction in wholesale funding achieved to date and expected futher reductions in wholesale funding in line with PLAR targets.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Market risk is the exposure of the Group's earnings or net worth to movements in interest rates, foreign exchange rates or other market prices. Interest rate risk, which is the most material market risk to which the Group is exposed in its normal day-to-day operations, is the risk of loss arising from changes in the general level of interest rates or changes in the differential or spread between different interest rates. Foreign exchange risk is the risk of loss arising from movements in exchange rates. Exposure to other forms of market risk is insignificant.

Market risk arises naturally through conventional customer banking, the servicing of customer foreign exchange and other risk management needs, wholesale funding and investment in securities for liquid asset purposes. Market risk also arises through certain structural features of the balance sheet, notably the presence of non-interest related assets and liabilities, the multi-currency mix of assets and liabilities and the requirement in the Group's case to fund sterling assets out of euro. The market risk profile of the Group can be affected by loan losses, asset disposals and balance sheet management initiatives.

It is Group policy to eliminate market risk as far as practicable, subject to a relatively conservative permission to take discretionary risk. The Group does not seek to generate a material proportion of its earnings through discretionary risk taking and it has a low tolerance for earnings volatility arising from this activity which is reflected in the policy, limits and other controls that are applied.

In addition to discretionary risk-taking, certain structural market risks arise and these are managed at an overall balance sheet level as part of the Group's asset liability management process. In recent years, these structural market risks have become more material and more challenging to manage.

Interest rate risk also arises in the Group's non-linked life assurance subsidiary, New Ireland Assurance Company plc, to the extent that the expected duration of cash flows on the liability side differs from the duration of the matching fixed interest rate assets (comprising Irish and other euro fixed interest government bonds). This mismatch is managed to within very tight limits.

New Ireland Assurance Company plc does not bear equity risk directly as this is borne by the unit linked policyholders. However, New Ireland Assurance Company plc is indirectly exposed to movements in equity markets because of the management fees that it receives are related to the value of assets under management. Finally, the Group maintains an available for sale securities portfolio for liquidity purposes. These assets are held at fair value on the balance sheet with movements in fair value (other than changes due to impairments) recognised in the reserves. While not regarded formally as a market risk position, the Group nonetheless monitors the sensitivity of the value of this portfolio to changes in spreads.

The management of market risk in the Group is governed by the Group's Risk Appetite Statement and by the Statement of High Level Principles Governing Market Risk, both of which are approved by the Court and a detailed statement of policy approved by the GRPC. Market risk limits and other controls are set by the Asset and Liability Committee (ALCO) within the confines of Risk Appetite limits set by the Court. ALCO has primary responsibility for the oversight of market risk.

It is a requirement of policy that, as far as practicable, market risk is removed from customer-facing units by way of internal hedging arrangements. This is the effect of substantially eliminating fixed rate risk in these units and materially reducing variable rate (basis) risk. This means that the major part of market risk is centralised on the books of BoIGM. Here it is split into fixed-rate risk, the major part of which is hedged with the outside world, and basis risk which is managed as a structural market risk (see below).

Discretionary market risk is any risk that is voluntarily assumed in anticipation of movements in financial markets. Discretionary risk can be taken by leaving naturally arising customer risk un-hedged for a period—and in practice this accounts for the major part of the discretionary risk that is taken—or by proactively assuming proprietary risk in the market. Risk positions that arise from the flow of customer business or the Groups's funding or hedging activity are booked in the Banking Book for the purposes of the Capital Requirement Directive (CRD). Proprietary positions are booked in the Trading Book.

Discretionary market risk is subject to strict controls which set out the markets and instruments in which risk can be assumed, the types of positions which can be taken and the limits which must be complied with. BoIGM's discretionary market risk is predominantly interest rate risk taken in derivative markets. Further detail on the derivative instruments which can be used to assume discretionary risk is set out in the Derivatives section below. Discretionary market risk is also taken in currency and, to a very minor extent, in traded credit markets.

The Group employs a Value at Risk (VaR) approach to measure, and set limits on, discretionary market risk. This applies to risk taken in the Banking Book (naturally arising risk that is left un-hedged) or risk that is pro-actively assumed in the Trading Book.

The Group measures VaR for a 1 day horizon at the 99% level of statistical confidence. This means that, for a given set of market risk positions on a given day, the Group believes there is no more than a 1% chance of a gain or loss in excess of the VaR number over the following day.

The Group calculates VaR by using estimates of market volatility and correlation that are updated daily using the Exponentially Weighted Moving Average (EWMA) approach. This widely used approach gives greater weight to more recent data and, as a consequence, estimates of VaR are more responsive to changes in market conditions.

For the nature of the risks assumed by BoIGM, VaR remains a relatively reliable basis of risk measurement. Nonetheless, management recognises that VaR is subject to certain inherent limitations and therefore VaR limits are supplemented by a range of controls that include position limits and loss tolerances. In addition, scenario based stress tests and long run historic simulations are used to assess and manage discretionary market risk.

The Group's peak, average and end-of-year one-day VaR is shown in the table below for interest rate and foreign exchange risk. In the case of interest rate risk, this distinguishes between overall interest rate risk (Trading plus Banking Book) and interest rate risk in the Trading Book.

The Group's peak, average and end of period, 1 day VaR in the year ended 31 December 2011 and in the year ended 31 December 2010 are set out in the following table:

Structural interest rate risk arises from the presence of non-interest bearing liabilities and assets on the balance sheet. The principal non-interest bearing liabilities are equity and non-interest bearing current accounts; the principal assets are expected recoveries on impaired loans, a proportion of which the Group treats as an offset to non-interest bearing liabilities. It is Group policy to invest its net non-interest bearing liabilities (or free funds) in a portfolio of swaps with an average life of three and a half years and a maximum life of seven years. This has the effect of mitigating the impact of the interest rate cycle on net interest margin. At year-end, the Group has c.€9 billion of euro-denominated swaps and c.€5 billion euro equivalent of sterling swaps held against free funds.

Basis risk arises where variable rate assets and liabilities and swaps (on the floating leg) re-price against different interest rate conventions (or 'indices'). The principal interest rate indices are one, three and six month Euribor/Libor, the ECB refinancing rate and Bank of England Base rate. Changes in the level of systemic stress in financial markets can bring about sustained changes in the differential, or basis, between these different floating rate indices and this, in turn, can have an adverse impact on the Group's net interest margin. The Group can also be exposed to the sterling / euro cross currency basis because of its requirement to fund a material proportion of its sterling assets out of euro. Cross currency basis is the net cost, over and above the interest differential, of borrowing in one currency to fund assets on a fully hedged basis in a second currency.

It is Group policy to manage structural basis risk through selective, strategic hedging. In 2010 and 2011, cross currency basis risk was the principal focus of basis hedging and the major part of the Group's requirement to fund sterling assets out of euro was hedged with 1 and 2 year currency swaps. In addition, defensive basis hedging within euro and sterling was undertaken.

The Group defines structural foreign exchange risk to be the exposure of its key capital ratios to changes in exchange rates. This exposure arises from the presence of non-euro assets on the balance sheet. Changes in exchange rates will increase or decrease the overall euro-equivalent level of Risk Weighted Assets. It is Group Policy to manage structural foreign exchange risk by ensuring that the currency composition of its Risk Weighted Assets and its structural net asset position by currency are broadly similar. This is designed to minimise the impact of the exchange rate movements on the principal capital ratios.

The Group's structural net asset positions in sterling and US dollar are set out in the table below:

New Ireland Assurance Company plc bears interest rate risk to the extent that the expected duration of cash flows on the liability side differs from the duration of the matching fixed interest rate assets (comprising Irish and other euro fixed interest government bonds). This is managed to within tight limits.

New Ireland Assurance Company plc is also indirectly exposed to movements in equity and foreign exchange markets because the management fees it receives are related to the value of assets under management.

New Ireland Assurance Company plc pursues a policy of close asset/liability matching and any difference in the mean duration of non-linked assets and liabilities is minimised by buying and selling euro fixed interest government securities. No corporate bonds are held. At 31 December 2011, the sensitivity of the non-linked portfolio to a 50 basis points parallel shift in the yield curve assuming a similar shift in the yield used to discount the liabilities was as follows:

A 5% fall in equity and property markets, applied to the book at 31 December 2011, would reduce earnings by €6 million (31 December 2010: a reduction of €6 million for the same percentage decline).

Similarly, New Ireland Assurance Company plc bears indirect exposure to changes in exchange rates through management fees earned on non-euro unit linked funds under management. A 5% increase in the euro exchange rate against all other currencies midway through the year would reduce earnings by €3 million (31 December 2010: a reduction of €4 million for the same percentage decline).

The Group maintains an available for sale securities portfolio for liquidity purposes. These assets are held at fair value on the balance sheet with movements in fair value (other than changes due to impairments) recognised in the reserves. While not regarded formally as a market risk position, the Group nonetheless monitors the sensitivity of the value of this portfolio to changes in spreads.

At 31 December 2011, the Group held €10.3 billion in debt securities classified as available for sale financial assets (31 December 2010: €15.6 billion). Available for sale financial assets include both floating rate securities and fixed rate securities swapped to a floating rate. A one basis point increase in the average spread to Euribor or Libor of the book at 31 December 2011 would have reduced its value by €3.4 million (31 December 2010: €3.5 million).

A derivative is a financial contract whose value is linked to movements in interest rates, exchange rates, equity or commodity prices or, more generally, to any objectively measured variable agreed between the parties. Derivative markets are an efficient mechanism for the transfer of risk and risk mitigation.

The Group uses derivatives to manage the market risks that arise naturally in its retail and wholesale banking activities. In addition, it transacts in derivatives with its business and corporate clients for the purpose of assisting these clients in managing their exposure to changes in interest and foreign exchange rates. Finally, the Group takes discretionary market risk in derivative markets. The Group also uses credit derivatives, on a very limited basis, within its Trading Book to take exposure to specific and general credit spread movements and in its Banking Book to provide default protection on specific credit exposures. Further details can be found in note 23 to the Consolidated Financial Statements and the accounting policy is set out on page F-26.

The Group's participation in derivatives markets is subject to policy approved by the Court and, at a more detailed level, by the GRPC. The Group makes a clear distinction between derivatives which must be transacted on a perfectly hedged basis, and those whose risks can be managed within broader interest rate or foreign exchange books. Since these books can be structured to assume some degree of discretionary market risk, derivative positions held within them will not necessarily be exactly hedged.

Discretionary market risk can only be assumed in clearly defined categories of derivatives which are traded in well-established liquid markets, supported by industry standard conventions and documentation and valued in accordance with generally accepted methods. BoIGM is permitted to take discretionary market risk in derivatives such as interest rate futures, bond futures, forward rate agreements, interest rate swaps, single name credit default swaps and credit spread indices, forward foreign exchange and currency swaps. In addition, it is permitted to take exposure in the most widely traded option markets, principally options on futures, caps, floors, swap options (swaptions) and conventional currency options. In practice, option risk is non material and is typically taken in exchange traded interest rate options or currency options. Transactions executed in more complex derivatives are typically completed on a perfectly matched, back-to-back basis.

The Group has executed Collateral Support Agreements (CSAs) with its principal interbank derivatives counterparties and, as a result, a very high proportion of its total interbank derivatives book is covered by CSAs. The purpose of a CSA is to limit the potential cost of replacing derivative contracts at market prices in the event of default by the original counterparty. Under the terms of a CSA, if the aggregate market value of a set of derivative contracts between the two parties exceeds an agreed threshold figure, the party which would be exposed to loss in the event of default receives a deposit of cash or eligible securities equal to the excess aggregate value over the threshold. In BoIGM's case, valuations are agreed and collateral is typically exchanged on a daily basis and in some cases weekly.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Life insurance risk is defined as the volatility in the amount and timing of claims caused by an unexpected change in mortality, longevity, persistency or morbidity. Mortality risk is the risk that the claim payments incurred by the business due to deaths within the portfolio of assured lives are greater than expected. Longevity risk is the risk that claim payments incurred by the business due to the rates of survival within the portfolio of annuitants are greater than expected. Morbidity risk, primarily critical illness risk, is the risk that claim payments incurred by the business due to critical illness events are greater than expected. Persistency or lapse risk is the risk that customers lapse their policies earlier than expected resulting in a loss of future anticipated fees.

Life insurance risk is underwritten and managed by NIAC, a wholly owned subsidiary of the Group. The management of insurance risk is the responsibility of the Board of NIAC. Responsibilities delegated by the Board to the Reinsurance Committee include completing a review of the reinsurance arrangements at least annually and reporting on this review to the Board Risk Committee. This includes a review of the panel of reinsurers that may be used and the optimal structure of its reinsurance arrangements. The Reinsurance Committee comprises of senior members of the management team with actuarial and underwriting expertise.

The amount at risk on each life insurance policy is the difference between the sum assured payable on the insured event and the reserve held. Risk experience is monitored monthly. Actual claims experience is compared to the underlying risk assumptions. Risk profits and losses are reported to senior management and reflected in new business pricing and new product design.

NIAC mitigates the potential impact of insurance risk through a number of measures. These include reinsurance, underwriting, contract design and diversification.

An update on the status of life insurance risk is included in the Court Risk Report which is presented to the GRPC, the CRC and the Court by the Chief Credit and Market Risk Officer.

Solvency II is the new supervisory regime that will apply to assurers in the EU from 2014. It is designed to facilitate the development of a single market in insurance services in the EU, whilst at the same time securing an adequate level of consumer protection. It is a risk based system of regulation based on economic principles for the measurement of assets and liabilities. Often called 'Basel for insurers', the structure of Solvency II is somewhat similar to the banking regulations of Basel II. For example, the proposed Solvency II framework has three main areas (pillars):

Risk of loss due to variance between the actual investment return in the financial year and the expected investment return.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

Regulatory and compliance risk is the risk arising from a breach of regulatory or compliance deadlines and requirements. It arises from a failure to comply with the laws, regulations or codes applicable to the financial services industry in the jurisdictions within which the Group operates. Non-compliance has adverse reputational implications and may lead to fines, public reprimands, enforced suspension of operations or, in extreme cases, withdrawal of authorisation to operate.

The Group manages regulatory and compliance risk under an overall framework, which is implemented by accountable executives, monitored by the GRPC, the GAC, the CRC and the GRCORC, and supported by the GRCOR function. The effective management of regulatory and compliance risk is primarily the responsibility of business management. The Group's regulatory and compliance practices are governed by policy formulated by the GRCORC and approved by the GRPC, on behalf of the Court. This requires the conduct of business in accordance with applicable regulations and with an awareness of regulatory and compliance risk by all employees.

The Group has established a formal approach to the management of regulatory and compliance risk and the objective is the identification, assessment, monitoring and management of regulatory and compliance risks. Business units, divisions, and the GRCOR function undertake risk based regulatory and compliance monitoring, and annual monitoring plans are reviewed to reflect changes or emerging risks. Business Unit regulatory compliance reports are analysed and reviewed by the GRCOR function and by the GRCORC.

The Group faces operational risks in the normal pursuit of its business objectives. Operational Risk is defined as the risk of loss resulting from inadequate or failed internal processes and systems, or from external events, including legal risk, but excluding reputation and strategic risks. As such, operational risk encompasses a very broad range of sources of potential financial loss which the Group actively seeks to mitigate, transfer and control including for instance, business continuity, fraud, outsourcing and technology risks.

The primary goals of operational risk management and assurance are ensuring the sustainability of the Group's operations and the protection of its reputation; by controlling, mitigating or transferring the risk of financial losses. By its nature operational risk cannot be fully eliminated, however the Group has established a formal approach to the management of operational risk in the form of the 'Operational Risk

Management Framework' to identify, assess, monitor and report on the operational risks which may impact the achievement of the Group's business objectives. It consists of:

The Group's exposure to operational risk is governed by policy formulated by the GRCORC and approved by the GRPC, on behalf of the Court. Policies for management of specific aspects of operational risk are approved and monitored by GRCORC.

Business units are responsible for effective implementation of the operational risk policy. To this end, the head of each business unit provides the GRCOR function with a certificate of compliance with the requirements of the policy semi-annually. Business units across the Group apply risk assessment techniques to identify, evaluate and prioritise the critical operational risks to which they are exposed. In so doing business managers are able to formulate specific actions to enhance controls, define countermeasures and implement specific initiatives to mitigate their operational risks.

In addition, the GRCOR function monitors compliance through review of management reports made available by the business units; through periodic visits to business and support functions to inspect practices and compliance with policies; and through monitoring of the nature, scale and frequency of loss events.

In addition to business unit risk mitigation initiatives, the Group implements specific policies and risk mitigation measures for key operational risks, including financial crime, data protection and privacy, outsourcing and business continuity risks. This strategy is further supported by risk transfer mechanisms such as the Group's insurance programme, whereby selected risks are reinsured externally. The Group holds Pillar 1 regulatory capital to cover the financial impact of operational risk events, and adopts the Standardised Approach (TSA) to determine its capital requirement.

An operational risk event is any circumstance where as a result of an operational risk materialising, the Group has, or could have made a gross financial loss. A standard reporting threshold is used across the Group for recording risk events and for normal COREP reporting to the Central Bank of Ireland. Through its membership of the Operational Risk data eXchange (ORX), (a not-for-profit association of international banks formed to share anonymous loss data information), the Group utilises external loss information to inform its risk identification and evaluation practices.

The Court receives a quarterly update on the status of operational risk events and associated losses, and the measures in place to monitor and mitigate the risks through the Court Risk Report. In addition, there is an annual process that ensures that the Court and CRC are comfortable that the processes in place to

manage operational risks are sufficient and that residual risk is within the Group's Risk Appetite, which is reviewed annually by the Court.

The Head of the GRCOR function reports to the GRCORC on the status of operational risk in the Group, including status of the primary (top) risks across the Group and progress of risk mitigation initiatives, significant loss events and the nature, scale and frequency of overall losses. The Group is required to report to the Central Bank of Ireland on loss performance as part of its COREP obligations.

Business risk is the volatility of the Group's projected outcomes (i.e. income, net worth or reputation), associated with damage to the franchise or operational economics of a Group's business and reflected in the income or net worth of the Group. It includes volatilities caused by changes in the competitive environment, new market entrants, new products or failure to develop and execute a strategy or anticipate or mitigate a related risk. Typically business risk occurs in a one year time-frame and relates to volatilities in earnings caused by changes in the competitive environment, new market entrants and/or the introduction of new products or inflexibility in the cost base. Strategic risk relates generally to a longer timeframe and pertains to volatilities in earnings arising from a failure to develop or execute an appropriate strategy.

The Group reviews business and strategic risk as part of the annual risk identification process. The risk is managed on a divisional basis, and measured quarterly, with a scorecard addressing moves in key indicators around income diversification, margin trends, customer advocacy, direct and indirect costs and staff turnover. Input from the Group's divisions is collated by Risk Strategy Analysis and Reporting, who liaise with Group Finance to provide an overall group context and assess the impact of changes in the environment on the Group's business plan. An update is provided quarterly in the Court Risk Report.

The Group mitigates Business Risk through business planning methods, such as the diversification of revenue streams, cost base management and oversight of business plans. At an operational level, the Group's annual budget process sets expectation at a business unit level for volumes and margins. The tracking of actual volumes and margins against budgeted levels is a key financial management process in the mitigation of business risk.

In the case of Strategic Risk, this risk is mitigated through update to the Court on (i) industry developments (ii) the Group's EU Restructuring Plan commitments (iii) the Group's PCAR/PLAR deleveraging plan. The Group's EU Restructuring Plan commitments are monitored by an EC appointed

Monitoring Trustee with updates on progress provided by Group Strategy Development to (a) the Project Steering Committee, comprised primarily of members of the Group executive (b) the Court through a CEO Report. Group Strategy Development reports on the progress against the Group PCAR/PLAR deleveraging plan to (a) the Group's Deleveraging Committee (chaired by a non-executive Director) and (b) to the Court regularly.

Pension risk is the risk that the assets in the Group's defined benefit pension schemes fail to generate returns that are sufficient to meet the schemes' liabilities and the sponsor would elect to or may have to make up the shortfall, or a significant part of it. This risk crystallises when a deficit emerges of a size which implies a material probability that the liabilities will not be fully met.

The Group maintains a number of defined benefit pension schemes for past and current employees. The Group's net IAS 19 pension deficit at 31 December 2011 was €414 million (31 December 2010: €424 million). The investment policy pursued to meet the schemes' estimated future liabilities is a matter for the Trustees and the schemes' Investment Committees. The Group, as sponsor, is afforded an opportunity to communicate its views on investment strategy to the Trustees and receives regular updates including scenario analysis of pension risk. The Court receives quarterly updates on pension risk through the Court Risk Report. In addition, there is an annual review of pension risk to ensure that the Court is satisfied with the processes in place to manage the risk and that residual risk is within the Group's Risk Appetite.

In order to mitigate pension risk, a new scheme was introduced in 2006 for all new entrants which adjusted terms for new members (see note 46). In 2010, the Group carried out an extensive pensions review in order to address the pension deficit by a combination of benefits restructuring and additional employer contributions over a period of time. The Group received 100% acceptance from the individual active members of five of its pension schemes, including the main Bank of Ireland Staff Pensions Fund, to a series of benefit reductions which have delivered a reduction of approximately 50% in the total deficit across all schemes relative to the 31 December 2009 IAS 19 deficit position. As the proposals have been accepted by staff and have been implemented, the Group expects to make discretionary cash contributions, in addition to existing cash contributions, to the schemes so as to eliminate the remaining approximately 50% of the IAS 19 deficit as at 31 December 2009 over approximately six years.

Reputation risk is defined as the risk of loss/volatility of earnings arising from adverse perception of the Group's image on part of customers, suppliers, investors, counterparties, shareholders and regulators. This risk typically materialises through a loss of business in the areas affected. The Group uses business and management processes to manage this risk.

Group Communications is the primary function responsible for managing reputation risk. It includes all external and internal communications, government relations and corporate responsibility, helping to reinforce the Group's reputation with its employees, customers, government, general public and the wider community. Reputation risk indicators are tracked on an ongoing basis. These indicators include external market conditions and risk events which may have the potential to impact reputation. The Group reviews reputation risk as part of the annual risk identification process. Quarterly updates are reported to the GRPC, the CRC and the Court as part of the Court Risk Report, in addition there is an annual review of Reputation Risk to ensure that the Court is comfortable with the processes in place to manage Reputation Risk and that residual risk is within the Group's Risk Appetite.

A wide range of processes and structures are used to identify, assess and mitigate the potential risk to the Group's reputation. Managing the Group in a manner that ensures that the potential impact on the Group's reputation is taken into account in decision making is paramount in mitigating against reputation risk.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The objectives of the Group's capital management policy are to at all times comply with regulatory capital requirements and to ensure that the Group has sufficient capital to cover the risks of its business and support its strategy. It seeks to minimise refinancing risk by managing the maturity profile of non equity capital whilst the currency mix of capital is managed to ensure that the sensitivity of capital ratios to currency movements is minimised. The capital adequacy requirements set by the Central Bank are used by the Group as the basis for its capital management. These requirements set a floor under which capital levels must not fall. The Group seeks to maintain sufficient capital to ensure that even under difficult conditions these requirements are met.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The EU Capital Requirements Directive (CRD) came into force on 1 January 2007 and is divided into three sections commonly referred to as Pillars. Pillar I introduced the Internal Ratings Based Approach (IRBA) which permits banks to use their own internal rating systems to calculate their capital requirements for credit risk. Use of IRBA is subject to regulatory approval. Where credit portfolios are not subject to IRBA, the calculation of the minimum capital requirements is subject to the Standardised Approach. Pillar II of the CRD deals with the regulatory response to the first pillar whereby banks undertake an Internal Capital Adequacy Assessment Process (ICAAP) which is then subject to supervisory review. Pillar III of the CRD (Market Discipline) involves the disclosure of a range of qualitative and quantitative information relating to capital and risk. The Group most recently disclosed this information for the year ended 31 December 2010, on 24 June 2011. The CRD also introduced a requirement to calculate capital requirements, and to set capital aside, with respect to operational risk. In assessing capital adequacy the Group is also required to set capital aside for market risk. The Group considers other methodologies of capital metrics used by rating agencies. Separately it also calculates economic capital based on its own internal models. The Group stress tests the capital held to ensure that under difficult conditions, it continues to comply with regulatory minimum ratios.

A number of regulatory initiatives have recently been proposed or enacted such as CRD II, III, IV, Basel III and Solvency II which have had or will have a future impact on the Group's capital ratios.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The information below is additional disclosure and it does not form an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

In the year ended 31 December 2011 the Group's total capital resources increased by €1.5 billion to €11.7 billion due primarily to:

a requirement to generate incremental equity capital of €4.2 billion including a regulatory buffer of €0.5 billion, leading to a very strongly capitalised Group with a Core tier 1 ratio at 31 December 2011 of 15.1% (14.3% of PCAR/EBA stress test basis).

The European Banking Authority (EBA) was established on 1 January 2011 with a broad remit that includes safeguarding the stability of the EU financial system. The EBA is required, in cooperation with the European Systemic Risk Board (ESRB), to initiate and coordinate EU-wide stress tests to assess the resilience of financial institutions to adverse market developments. Building on experience of two previous EU-wide stress tests undertaken by the EBA's predecessor, the Committee of European Banking Supervisors (CEBS), the EBA conducted a stress test on a wide sample of banks (including the Group) in the first half of 2011. This exercise was undertaken in coordination with national supervisory authorities, the ESRB, the European Central Bank (ECB) and the European Commission.

The EBA stress test was carried out across 91 banks, covering over 65% of the EU banking system total assets, it sought to assess the resilience of European banks to severe shocks and their specific solvency to hypothetical stress events under certain restrictive conditions.

The methodology applied in the EBA stress test incorporated a number of differences to that applied in the Prudential Capital Assessment Review (PCAR) which assessed the capital requirements of Irish Banks under a base and adverse stress scenario as well as including specific deleveraging objectives for Irish Banks in order to reduce their reliance on short term wholesale funding and achieve a loan to deposit ratio of 122.5% by December 2013. The EBA stress test set a 5% Core tier 1 capital requirement in the adverse stress scenario over a two year time frame (2011–2012) whereas PCAR applied a 6% Core tier 1 requirement under the adverse stress scenario over a three year timeframe (2011–2013). In addition, the EBA methodology also applied a significantly different approach in relation to future changes in the balance sheet, the calculation of loan losses, the application of funding constraints, and treatment of sovereign and bank credit losses.

The information below forms an integral part of the audited financial statements as described in the Basis of preparation on page F-13.

The use of internal credit rating models and scoring tools, which measure the degree of risk inherent in lending to specific counterparties, is central to the credit risk assessment and ongoing management processes within the Group. The primary model measures used are:

These measures are used to calculate expected loss and are fully embedded in, and form an essential component of, the Group's operational and strategic credit risk management and credit pricing practices.

For the Group's retail consumer and smaller business portfolios, which are characterised by a large volume of customers with smaller individual exposures, the credit risk assessment is grounded on application and behavioural scoring tools. For larger commercial and corporate customers, the risk assessment is underpinned by statistical risk rating models which incorporate quantitative information from the customer (e.g. financial accounts) together with a qualitative assessment of non-financial risk factors such as management quality and market/trading outlook. Other financial assets are assigned an internal rating supported by external ratings of the major rating agencies.

The credit risk rating systems employed within the Group use statistical analysis combined, where appropriate, with external data and the judgement of professional lenders.

An independent unit annually validates internal credit risk models from a performance and compliance perspective. This unit provides reports to the Risk Measurement Committee (RMC).

Risk modelling is also applied at a portfolio level in the Group's credit businesses to guide economic capital allocation and strategic portfolio management.

The measures to calculate credit risk referred to above are used to calculate expected loss. A different basis is used to derive the amount of incurred credit losses for financial reporting purposes. For financial reporting purposes, impairment allowances are recognised only with respect to losses that have been incurred at the balance sheet date based on objective evidence of impairment.

The Bank of Ireland Group has regulatory approval to use its internal credit models in the calculation of its capital requirements for 73% of its credit exposures which results in 70% of credit risk weighted assets being calculated using internal credit models. This approval covers the adoption of the Foundation IRB approach for non-retail exposures and the Retail IRB approach for retail exposures.

The Group divides its internal rating systems into non-retail and retail approaches. Both approaches differentiate Probability of Default estimates into 11 grades in addition to the category of default. For both non-retail and retail internal rating systems, default is defined based on the likelihood of non-payment

indicators that vary between borrower types. In all cases, exposures 90 days or more past due are considered to be in default.

The Group has adopted the Foundation IRB approach for certain of its non-retail exposures. Under this approach, the Group calculates its own estimates for probability of default and uses supervisory estimates of loss given default, typically 45%, and credit conversion factors. To calculate probability of default, the Group assesses the credit quality of borrowers and other counterparties using criteria particular to the type of borrower under consideration. In the case of financial institutions, external credit agency ratings are a significant component of the Group's ratings approach. For exposures other than financial institutions, external ratings, when available for borrowers, play a role in the independent validation of internal estimates.

The Group has adopted the Retail IRB approach for its retail exposures. Under this approach, the Group calculates its own estimates for probability of default, loss given default and credit conversion factors. External ratings do not play a role within the Group's retail internal rating systems, however, external credit bureau data does play a significant role in assessing UK retail borrowers. To calculate loss given default and credit conversion factors, the Group assesses the nature of the transaction and underlying collateral. Both loss given default and credit conversion factors estimates are calibrated to produce estimates of behaviour characteristic of an economic downturn.

Internal estimates play an essential role in risk management and decision making processes, the credit approval functions, the internal capital allocation function and the corporate governance functions of the Group. The specific uses of internal estimates differ from portfolio to portfolio, and for retail and non-retail approaches, but typically include:

For non-retail exposures, through the cycle PD estimates are used to calculate internal economic capital. For other purposes, the cyclical PD estimates are used. Both estimates feature within internal management reporting.

The control mechanisms for rating systems are set out in the Group's model risk policy. Model risk is one of the ten key risk types identified by the Group, the governance of which is outlined in the Group's Risk Framework. A sub-committee of the Group Risk Policy Committee (GRPC), the Risk Measurement Committee (RMC), approves all risk rating models, model developments, model implementations and all associated policies. The Group mitigates model risk through four lines of defence as follows:

Independent Validation: All models are subject to in-depth analysis at least annually. This analysis is carried out by a dedicated unit (the Independent Control Unit—ICU). It is independent of credit origination and management functions. In addition, Group Internal Audit regularly reviews the risk control framework including policies and standards to ensure that these are being adhered to, meet industry good practices and are compliant with regulatory requirements. The ICU function is independently audited on an annual basis.

Where models are found to be inadequate, they are remediated on a timely basis or are replaced.

All credit exposures, either individually or collectively, are regularly reviewed for objective evidence of impairment. Where such evidence of impairment exists, the exposure is measured for an impairment provision. The criteria used to determine if there is objective evidence of impairment include:

The following factors are also taken into consideration when assessing whether a loss event has occurred at the balance sheet date that may lead to recognition of impairment losses:

Loans with a specific impairment provision attaching to them together with loans (excluding Residential mortgages) which are more than 90 days in arrears are included as impaired loans.

Where objective evidence of impairment exists, as a result of one or more past events, the Group is required to estimate the recoverable amount of the exposure or group of exposures.

For financial reporting purposes, loans on the balance sheet that become impaired are written down to their estimated recoverable amount. The amount of this write down is taken as an impairment charge in the income statement.

The Group's impairment provisioning methodologies are compliant with IFRS. International Accounting Standard (IAS) 39 requires that there is objective evidence of impairment and that the loss has been incurred. The standard does not permit the recognition of expected losses, no matter how likely these expected losses may appear.

An individual impairment assessment is performed for any exposure for which there is objective evidence of impairment and where the exposure is above an agreed threshold. The carrying amount of the exposure net of the estimated recoverable amount (and thus the specific provision required) is calculated using a discounted cashflow analysis. This calculates the estimated recoverable amount as the present value of the estimated future cash flows, discounted at the exposure's original effective interest rate (or the current effective interest rate for variable rate exposures). The estimated future cash flows include forecasted principal and interest payments (not necessarily contractual amounts due) including cash flows, if any, from the realisation of collateral/security held, less realisation costs.

Where exposures fall below the threshold for individual assessment of impairment, such exposures with similar credit risk characteristics (e.g. portfolio of consumer personal loans) are pooled and are collectively assessed for impairment. A provision is then calculated by estimating the future cash flows of a group of exposures that are collectively evaluated for impairment. This estimation considers the expected contractual cash flows of the exposures in a portfolio and the historical loss experience for exposures with credit risk characteristics similar to those in the portfolio being assessed. Assumptions and parameters used to create the portfolio provision, which are based on historical experience (i.e. amount and timing of cash flows/loss given default), are regularly compared against current experience in the loan book and current market conditions.

Where there is objective evidence of impairment on a collective basis, this is reported as a specific provision in line with individually assessed loans.

Impairment provisions are also recognised for losses not specifically identified but which, experience and observable data indicate, are present in the portfolio at the date of assessment. These are described as incurred but not reported provisions. Statistical models are used to determine the appropriate level of IBNR provisions. These models estimate latent losses taking into account three observed and/or estimated factors:

Account performance is reviewed periodically to confirm that the credit grade or probability of default assigned remains appropriate and to determine if impairment has arisen. For consumer and smaller ticket commercial exposures, the review is largely based on account behaviour and is highly automated. Where there are loan arrears, excesses, dormancy, etc. the account is downgraded to reflect the higher underlying risk. For larger commercial loans the relationship manager re-assesses the risk at least annually (more frequently if circumstances or grade require) and re-affirms or amends the grade (credit and PD grade) in light of new information or changes (e.g. up to date financials or changed market outlook). Grade migration and adjusted PD grades are analysed for inclusion in the loss model. Recent data sets are used in order to capture current trends rather than averaging over a period which might include earlier and less stressed points in the credit cycle.

The emergence period is calculated using historical loan loss experience. Given the current economic environment the emergence periods are adjusted to reflect the more intensive credit management model

in place, where all vulnerable portfolios are reviewed on a shortened cycle. The range of emergence periods is typically three to nine months.

The loss given default (LGD) is calculated using historical loan loss experience and is adjusted where appropriate to apply management's credit expertise to reflect current observable data (including an assessment of the deterioration in the property sector, discounted collateral values, rising unemployment and reduced repayment prospects, etc).

Retail Ireland mortgage loan book property values are determined by reference to the original or latest property valuations held indexed to the Residential Property Price Index published by the Central Statistics Office (CSO). This index provides the relevant index to be applied to original market values in the period after January 2005. For Retail Ireland mortgages originated prior to January 2005, the Permanent TSB/ESRI House price index is utilised. Retail UK mortgage loan book property values are determined by reference to the original or latest property valuations held indexed to the Nationwide UK house price index. The weighted average indexed LTV for the total Retail Ireland mortgage loan book is 105% at 31 December 2011 and 75% for the Retail UK mortgage loan book.

Where cash flows arising from the realisation of collateral held are included in impairment assessments, management typically rely on valuations or business appraisals from independent external professionals. However, in the case of property assets (both investment property and development), in particular in Ireland, where restricted market liquidity continues to be a feature of the market, the Group uses estimated cash flows based on valuations from the most appropriate source available for the asset in question. These valuation methodologies include formal written valuations from independent external professionals, desktop valuations informed by consultations with external valuers, local market knowledge made available by relevant bank management and/or residual value methodologies.

Up to date, independent, professional valuations in writing are sought in circumstances where there continues to be sufficient transactional evidence and market liquidity to support an expert objective view. These circumstances are more likely to exist in markets outside Ireland and/or where land and development property assets are at or near practical completion. External qualified firms with appropriate knowledge of the particular market are commissioned to provide formal written valuations, including an assessment of the timeline for disposal, in respect of the property.

Given the significant dislocation experienced in property markets, the requirements for sufficient transactional evidence and market liquidity to support a formal written expert view are not always met. Whilst less formal than written valuations, verbal consultations with external valuers familiar with local market conditions provide general information on market developments, trends and outlook. These consultations are used to benchmark asset values and the potential timeline for realisation and form the basis for the estimation of the recoverable amount to be used for impairment provisioning.

Local market knowledge made available by relevant bank management occurs typically where the loan and underlying property asset are relatively small and illiquid. In such cases, estimated valuations of undeveloped sites may be expressed on a 'per plot' basis if there is suitable zoning/planning in place, whereas unzoned rural land may be assumed to have only agricultural value.

Residual value methodologies are used to estimate the current value of a site or part-completed development based on a detailed appraisal that assesses the costs (building, funding and other costs) and receipts (forecast sales and/or lettings) associated with bringing a development to completion. This approach looks at the cost of developing the asset and assessing the expected cash flows from completing the development to determine the residual value to the Group. The type, size and location of the property asset and its development potential and marketability are key factors in this assessment process. The Group may look to some of the other valuation methodologies outlined earlier e.g. residual value methodologies may look to formal professional valuations, verbal consultations with external professionals or local market knowledge made available by relevant bank management, in determining the appropriate inputs to this analysis.

The appropriate methodology applied depends in part on the options available to management to maximise recovery which are driven by the particular circumstances of the loan and underlying collateral, e.g. the degree of liquidity and recent transactional evidence in the relevant market segment, the type, size and location of the property asset and its development potential and marketability. Irrespective of the valuation methodology applied, it is Group policy to review impaired loans above agreed thresholds quarterly, with the review including a reassessment of the recovery strategy, the continued appropriateness of the valuation methodology and the adequacy of the impairment provision.

Where information is obtained between reviews that impact expected cash flows (e.g. evidence of comparable transactions emerging, changes in local market conditions, etc.), an immediate review and assessment of the required impairment provision is undertaken.

In all cases where the valuation methodologies outlined for property collateral are used, the initial recommendation of the realisable value and the timeline for realisation are arrived at by specialist work out units. These estimated valuations are subject to review, challenge and, potentially, revision by experienced independent credit professionals in underwriting units within the Credit & Market Risk function and are ultimately approved in line with delegated authority upon the recommendation of the credit underwriting unit. At all approval levels, the impairment provision and the underlying valuation methodology is reviewed and challenged for appropriateness, adequacy and consistency.

The Group operates a tiered approval framework for impairment provisions, depending on the exposure or impairment provision amount, which are approved by various delegated authorities up to Credit Committee level.

Property and construction loans are the principal asset class where one or more valuation methods as described above are applied. Property and construction loans total €21 billion or 20% of total loans at 31 December 2011 (before impairment provisions) (31 December 2010: €24 billion or 20% of total loans).

After applying one or more of the above methodologies, resulting valuations for impaired land and development assets within the Property and construction portfolio show a wide range of discounts (typically between 50% and 95%) to the estimated peak market values for the underlying property collateral assets. Key influencing factors as to the level of discount include the type of property asset (with undeveloped land incurring a relatively high discount), the status of zoning and planning and the location in terms of both jurisdiction/region and proximate environment, e.g. whether city centre, suburban, provincial town or rural.

End of information in the Risk Management Report that forms an integral part of the audited financial statements.

The Bank of New York Mellon as Depositary, collects fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal, or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:		For:

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		• Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
		• Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) (A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance in ADSs)		• Distribution of deposited securities by the Depositary to registered ADS holders
Applicable Registration or transfer fee		• Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when the holder deposits or withdraws shares
Applicable Expenses of the Depositary		• Cable, telex and facsimile transmissions
Applicable Taxes and other governmental charges the Depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes		• As necessary

The Depositary has agreed to reimburse certain Group expenses related to the Group's ADS programme and incurred by the Group in connection with the ADS programme. For the year ended 31 December 2011, the Depositary reimbursed to the Group, or paid amounts on its behalf to third parties, a total sum of €202,481.

The table below sets forth the categories of expense that the Depositary has agreed to reimburse the Group and the amounts reimbursed for the year ended 31 December 2011.

The Depositary has also agreed to waive fees for standard costs associated with the administration of the ADS program.


€0.05 Ordinary Stock		the units of Ordinary Stock following the Renominalisation in July 2011;
€0.10 Ordinary Stock		the units of Ordinary Stock following the Renominalisation in May 2010;
2010 EU Restructuring Plan		The EU restructuring plan for the Group approved by the European Commission on
		15 July 2010;
2010 Proposals		The Proposals for the recapitalisation of the Bank in the year ended 31 December
		2010;
2011 EU Restructuring Plan		The revised restructuring plan for the Group, approved by the European Commission on 20 December 2011, prepared under EU State aid rules for the purpose of establishing the bank's long term viability without State support, adequate burden sharing and measures to minimise any distortion of competition arising from State aid provided to the bank;
AFS		available for sale;
Annual General Court or AGC		an annual general meeting of stockholders of the Bank;
CCN		Contingent Capital Note;
Central Bank		the Central Bank of Ireland;
CIFS Scheme		the Credit Institutions (Financial Support) Scheme 2008 (S.I. No 411 of 2008);
CIWUD		Credit Institution Winding Up Directive;
Closing Price		the closing middle market quotation of a unit of Ordinary Stock as derived from the
		Daily Official List;
Control Resolution		a resolution of those Stockholders who are entitled to so vote for the approval of any agreement or transaction (including a merger) whereby, or in consequence of which, Control of the Group, or substantially all of the Group's business, is or may be acquired by any person or persons (excluding any government concert party) acting in concert and which for the avoidance of doubt shall include any resolution to approve a scheme of arrangement pursuant to section 201 of the Companies Act 1963 pursuant to which a takeover of the Group (within the meaning of the Irish Takeover Panel Act 1997 Takeover Rules (as amended, replaced or substituted from time to time)) would be effected or approved or a merger or division of The Bank pursuant to the European Communities (Mergers and Divisions of Companies) Regulations, 1987 (Statutory Instrument 137 of


		1987) or a merger of The Bank pursuant to the European Communities (Cross Border Mergers) Regulations 2008 (Statutory Instrument 157 of 2008);
CSO		Central Statistics Office;
Dáil		Dáil Eireann (the House of Representatives) which forms one branch of The Houses of the Oireachtas (Ireland's National Parliament), the other two being Seanad Eireann (the Senate) and the President of Ireland;
Debt for Equity Offers		each of the US Debt for Equity Offers and the Non-US Debt for Equity Offers which formed part of the recapitalisation of the Bank in the year ended 31 December 2011 and the year ended 31 December 2010;
Deferred Stock		units of deferred stock in the capital of the Bank created pursuant to the Renominalisation in May 2010 and July 2011;
Department of Finance		Department of Finance of Ireland;
DWT		dividend withholding tax;
EBA		European Banking Authority;
ECB		European Central Bank;
ELG		Eligible Liabilities Guarantee Scheme;
Eligible Bank Assets		those classes of assets prescribed as eligible bank assets by the Minister for Finance, in accordance with section 69 of the NAMA Act;
ESOS		the executive stock option scheme as described in the Remuneration of Directors and Officers;
Existing Stock		the units of Ordinary Stock in issue as at 26 April 2010;
Extraordinary General Court or EGC		an extraordinary general meeting of stockholders of the Bank;
Financial Regulator		the Irish Financial Services Regulatory Authority;
FSA		Financial Services Authority;
FVTPL		Fair value through profit or loss;
Government Appointee		a director appointed by a Government Preference Stockholder or the Minister for Finance pursuant to the CIFS scheme (being a provision that survives the expiry of the CIFS scheme as continued under the terms of the ELG scheme);
GRPC		Group Risk Policy Committee;
Hybrid/Preferred Securities		Bank of Ireland Capital Funding (No. 1) LP, €600,000,000 Fixed Rate/Variable Rate Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities, the LP2 Securities, the LP3 Securities and Bank of Ireland Capital Funding (No. 4) LP £500,000,000 Fixed Rate/Floating Rate Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities;
IBNR		Incurred but not reported;


IMF		International Monetary Fund;
Institutional Placing		the placing of Ordinary Stock with institutional investors (but excluding the NPRFC) as part of the recapitalisation of the Bank in the year ended 31 December 2010;
IRBA		Internal Ratings Based Approach;
Irish Code		the Central Bank of Ireland's Corporate Governance Code for Credit Institutions and Insurance Undertakings;
Joint Bookrunners or joint bookrunners		Citi, Credit Suisse, Davy, Deutsche Bank and UBS;
LTRO		Long Term Refinancing Operation (by the European Central Bank);
Minister for Finance or Minister		the Minister for Finance of Ireland;
NAMA		the National Asset Management Agency and, where the context permits, other members of NAMA's group including subsidiaries and associated companies. For further information refer to www.nama.ie;
National Pensions Reserve Fund		the fund established by the National Pensions Reserve Fund Act, 2000 to meet (insofar as possible) the costs of Ireland's social welfare and public service pensions from 2025 onwards;
NPRFC		the National Pensions Reserve Fund Commission, established by the National Pensions Reserve Fund Act 2000 to, inter alia, control, manage and invest the assets of the National Pensions Reserve Fund. References herein to the NPRFC mean the NPRFC acting in its capacity as controller and manager of the National Pensions Reserve Fund;
NPRFC Coupon Ordinary Stock		184,394,378 units of Ordinary Stock issued to the NPRFC on Monday 22 February 2010 in lieu of the cash dividend otherwise due on the 2009 Preference Stock;
NPRFC Placing		the conversion by the NPRFC of units of 2009 Preference Stock to units of Ordinary Stock as part of the recapitalisation of the Bank in the year ended 31 December 2010;
Participating Institution		a credit institution designated by the Minister for Finance as a participating institution in accordance with the provisions of section 67 of the NAMA Act;
PCAR		Prudential Capital Assessment Review;
Placees		persons with whom Placing Stock was placed, including, in the case of the NPRFC Placing and where the context so permits, the NPRFC;
Placing Stock		the 326,797,386 units of Ordinary Stock issued by the Bank pursuant to the Institutional Placing as part of the recapitalisation of the Bank in the year ended 31 December 2010;
PLAR		Prudential Liquidity Assessment Review;


Preference Stock		means the 2009 Preference Stock and the 1992 Preference Stock;
Qualifying Stockholders		holders of Ordinary Stock on the register of members of the Bank at the Record Date and Placees (excluding the NPRFC in respect of the NPRFC Coupon Ordinary Stock);
Record Date		5.00 p.m. on 17 May 2010;
Renominalisation		The reduction in the nominal value of each unit of ordinary stock (from €0.10 per unit to €0.05 per unit in July 2011 and from €0.64 per unit to €0.10 per unit in May 2010) and the creation of Deferred Stock. The July 2011 renominalisation also included a reduction in the nominal value of each unit of Deferred Stock from €0.54 per unit to €0.01 per unit;
Rights Issue		the offer by way of rights to Qualifying Stockholders to acquire Rights Issue Stock;
RWA		Risk Weighted Assets;
State		The Republic of Ireland, its Government and, where and if relevant, Government departments, agencies and local Government bodies;
State Placing		the placing of up to 794,912,043 units of new Ordinary Stock with the NPRFC in the year ended 31 December 2010;
Thirty Day Average Price		(i) 100% of the average daily closing price of the Ordinary Stock on the Irish Stock Exchange over the 30 dealing days immediately preceding the original scheduled dividend declaration date, (in the event that the Ordinary Stock issued in the event of non-payment of dividends on the 2009 Preference Stock is settled on the dividend payment date to which it relates); or (ii) 95% of the average daily closing price of the Ordinary Stock on the Irish Stock Exchange over the 30 dealing days immediately preceding the original scheduled dividend declaration date (in the event that the Ordinary Stock, issued in the event of non-payment of dividends on the 2009 Preference Stock, is settled after the dividend payment date to which it relates).
UK Code		the UK Corporate Governance Code (formerly the Combined Code published by the Financial Reporting Council in the UK);

Item 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS & USE OF PROCEEDS

See Item 8 and note 49 of the consolidated financial statements for a discussion of changes to preferential shares relevant to holders of ordinary shares.

An evaluation has been completed under the supervision and with the participation of the Group's management, including the Group Chief Executive and the Group Chief Financial Officer, of the effectiveness of the design and operation of the Group's disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures are defined in Exchange Act Rules 13a-15(e) and generally refer to those controls and procedures designed to ensure that information required to be disclosed in reports filed under the US Securities Exchange Act of 1934 is recorded, processed, summarised and reported within specific time periods. As of the date of the evaluation, the Group's management, including the Group Chief Executive and Group Chief Financial Officer, concluded that the design and operation of these disclosure controls and procedures were effective.

The management of the Group is responsible for establishing and maintaining adequate internal control over financial reporting. The Group's internal control over financial reporting is a process designed under the supervision of the Group Chief Executive and the Group Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with IFRS as adopted by the European Union and the IASB. Management assessed the effectiveness of the Group's internal control over financial reporting as of 31 December 2011 based on the criteria set forth by the Committee of Sponsoring Organisations of the Treadway Commission ("COSO") in Internal Control Integrated Framework. Based on this assessment, management has concluded that, as of 31 December 2011 the Group's internal control over financial reporting was effective.

Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. See section 'Corporate Governance Statement: Internal Controls' for additional information.

PricewaterhouseCoopers, an independent registered public accounting firm, audited the consolidated financial statements of the Group for the year ended 31 December 2011, and has issued an audit report on the effectiveness of Group's internal controls over financial reporting as of 31 December 2011.

Please see Report of independent registered public accounting firm on internal control over financial reporting on page F-3.

There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Group Audit Committee comprises only independent non-executive Directors as described in the NYSE guidelines. The Court has determined that the Committee members' collective skills together with their recent and relevant financial experience enable the Committee to discharge its responsibilities.

A written code of ethics has been adopted applicable to all staff including the Group Chief Executive, Group Chief Financial Officer and persons performing the functions of the principal accounting officer or controller. The code is available to any person without charge upon request to the Group Secretary. Requests should be submitted in writing to Bank of Ireland, 40 Mespil Road, Dublin 4, Ireland, Attention: Group Secretary.

During the year, the audit committee operated a comprehensive policy on the provision of non-audit services by the principal accountant to the Group. This policy provides for the pre-approval of all non-audit services as well as the prohibition on the provision of certain other named services by the Group's auditor, PricewaterhouseCoopers. Management seeks annual pre-approval for certain categories of services which may be rendered by PricewaterhouseCoopers, along with budgets attaching to each category, which cannot be exceeded without the prior approval of the Committee. Any assignment outside of the approved categories or which would cause fees to exceed the agreed budget must be pre-approved by any one member of the Audit Committee and notified to the Audit Committee for ratification at its next meeting. Management periodically reports to the Audit Committee the amount of fees committed in respect of each category of service. For further details see note 13 to the Consolidated Financial Statements.

Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers

As at 31 December 2010, 5,694,172 units of ordinary stock held by the Group's life assurance company were categorised as 'own shares'. There was a net acquisition of 17,430,456 units of ordinary stock by the life assurance company during the year ended 31 December 2011. At 31 December 2011 the Group's life assurance company held 23,124,628 units of ordinary stock as 'own shares'.

Significant differences between the Group's corporate governance practices and the requirements of the NYSE applicable to US companies are shown on page 152.


	1.1		Charter & Acts (incorporated by reference to Exhibit 1.1 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 March, 2001, File No. 1-14452).
	1.2		Bye-Laws.
	4.1		Rules of the Bank of Ireland Group Stock Options Scheme—2004 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 March, 2001, File No. 1-14452).
	4.2		Rules of the Bank of Ireland Group Long Term Performance Stock Plan (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 March, 2001, File No. 1-14452).
	4.3		Rules of the Bank of Ireland Group Long Term Incentive Plan 2004 and Executive Stock Option Scheme 2004 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 March, 2006, File No. 1-14452).
	4.4		Rules of the Bank of Ireland Group Staff Stock Issue 2006 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 March, 2006, File No. 1-14452).
	4.5		Transaction Agreement between The Minister for Finance, The National Pensions Reserve Fund Commission and The Governor and Company of the Bank of Ireland, dated 26 April 2010 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 December, 2009, File No. 1-14452).
	4.6		Placing and Rights Issue Underwriting and Sponsors' Agreement, dated 26 April 2010 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 December, 2009, File No. 1-14452).
	4.7		Transaction Agreement between The Minister for Finance, The National Pensions Reserve Fund Commission, The National Treasury Management Agency, The Governor and Company of the Bank of Ireland, The Sponsers and the Joint Bookrunners dated 18 June 2011 (incorporated by reference to Exhibit 4 of the annual report on Form 20-F of The Governor and Company of the Bank of Ireland for the financial year ended 31 December, 2010, File No. 1-14452).
	8		List of significant subsidiaries—incorporated by reference to page 26 of this Form 20-F.
	12.1		Certification by the Chief Executive Officer as required by Section 302 of Sarbanes Oxley Act of 2002.

BANK OF IRELAND GROUP

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended 31 December 2011

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations adopted by the European Union (EU) and with those parts of the Companies Acts, 1963 to 2009 applicable to companies reporting under IFRS, the European Communities (Credit Institutions: Accounts) Regulations, 1992 and, in respect of the Consolidated financial statements, Article 4 of the IAS Regulation. In preparing these financial statements, the Directors have also elected to comply with IFRS issued by the International Accounting Standards Board (IASB).

Irish company law requires the Directors to prepare financial statements which give a true and fair view of the state of affairs of the Bank and the Group and of the profit or loss of the Group. In preparing these financial statements for the year ended 31 December 2011, the Directors are required to:

The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Bank and enable them to ensure that the financial statements are prepared in accordance with IFRS and IFRIC interpretations adopted by the European Union and with those parts of the Companies Acts, 1963 to 2009 applicable to companies reporting under IFRS and the European Communities (Credit Institutions: Accounts) Regulations, 1992 and, in respect of the Consolidated financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Bank and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and the requirements of the Listing Rules issued by the Irish Stock Exchange, the directors are also responsible for preparing a Directors' Report and reports relating to directors' remuneration and corporate governance. The Directors are also required by the Transparency (Directive 2004 / 109 / EC) Regulations 2007 and the Transparency Rules of the Central Bank to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group. Statutory Instrument number 450 of 2009 'European Communities (Directive 2006 / 46 / EC)' (S.I. 450) requires the Directors to make a statement with a description of the main features of the internal control and risk management systems in relation to the process for preparing consolidated accounts for the Group and its subsidiaries.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Bank's website.

Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm that, to the best of each Director's knowledge and belief:

To the Court of Directors and members of The Governor and Company of the Bank of Ireland

In our opinion, the accompanying consolidated balance sheets and the related consolidated income statements, consolidated statements of other comprehensive income, consolidated statements of cash flows and consolidated statements of changes in equity present fairly, in all material respects, the financial position of The Governor and Company of the Bank of Ireland (the 'Group') and its subsidiaries at 31 December 2011 and 31 December 2010 and the results of their operations and cash flows for the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009, in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union. Also, in our opinion the Group maintained, in all material respects, effective internal control over financial reporting as of 31 December 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). The Group's management are responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in "Management's Report on Internal Control over Financial Reporting" appearing under item 15(b) of this Form 20-F. Our responsibility is to express opinions on these financial statements and on the Group's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Dublin
Ireland



Interest income	3	4,618		5,179		4,188
Interest expense	4	(3,084	)	(2,960	)	(2,009	)

Net interest income		1,534		2,219		2,179
Net insurance premium income	5	929		969		665
Fee and commission income	6	612		633		474
Fee and commission expense	6	(192	)	(257	)	(255	)
Net trading income / (expense)	7	19		225		(28	)
Life assurance investment income, gains and losses	8	(38	)	474		958
Gain on liability management exercises	9	1,789		1,402		1,037
Other operating income	10	12		199		31

Total operating income		4,665		5,864		5,061
Insurance contract liabilities and claims paid	11	(750	)	(1,268	)	(1,462	)

Total operating income, net of insurance claims		3,915		4,596		3,599
Other operating expenses	12	(1,644	)	(1,803	)	(1,387	)
Impact of amendments to defined benefit pension schemes	46	2		733		—

Operating profit before impairment charges on financial assets and gain / (loss) on NAMA / deleveraging		2,273		3,526		2,212
Impairment charges on financial assets (excluding assets sold to NAMA)	14	(1,960	)	(2,027	)	(2,335	)
Impairment charges on assets sold to NAMA	15	(44	)	(257	)	(1,722	)
Gain / (loss) on sale of assets to NAMA including associated costs	16	33		(2,241	)	—
Loss on deleveraging of financial assets	17	(565	)	—		—

Operating loss		(263	)	(999	)	(1,845	)
Share of results of associates and joint ventures (after tax)	18	39		49		35
Profit / (loss) on disposal of business activities	19	34		—		(3	)

Loss before taxation		(190	)	(950	)	(1,813	)
Taxation credit	20	230		341		344

Profit / (loss) for the period		40		(609	)	(1,469	)

Attributable to non-controlling interests		(5	)	5		(9	)
Attributable to stockholders		45		(614	)	(1,460	)

Profit / (loss) for the period		40		(609	)	(1,469	)

Loss per unit of €0.05 ordinary stock (2010: €0.10; 2009: €0.64)	21	(0.7c	)	*(21.5c	)	*(105.5c	)
Diluted loss per unit of €0.05 ordinary stock (2010: €0.10; 2009: €0.64)	21	(0.7c	)	*(21.5c	)	*(105.5c	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Profit / (loss) for the period	40		(609	)	(1,469	)
Other comprehensive income, net of tax:

Revaluation of property, net of tax	(6	)	(15	)	(53	)

Cash flow hedge reserve
Changes in fair value	(800	)	(105	)	(419	)
Transfer to income statement	1,114		380		501

Net change in cash flow hedge reserve	314		275		82

Available for sale reserve
Changes in fair value	60		(354	)	973
Transfer to income statement
—On asset disposal	24		(13	)	(49	)
—Impairment	19		147		—

Net change in available for sale reserve	103		(220	)	924

Net actuarial (loss) / gain on defined benefit pension funds	(117	)	391		(74	)
Foreign exchange translation gains	180		157		117

Other comprehensive income for the period net of tax	474		588		996

Total comprehensive income for the period net of tax	514		(21	)	(473	)

Total comprehensive income attributable to equity stockholders	520		(26	)	(464	)
Total comprehensive income attributable to non-controlling interests	(6	)	5		(9	)

Total comprehensive income for the period net of tax	514		(21	)	(473	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



ASSETS
Cash and balances at central banks	53	8,181		1,014
Items in the course of collection from other banks		443		491
Trading securities	22	6		151
Derivative financial instruments	23	6,362		6,375
Other financial assets at fair value through profit or loss	24	8,914		10,045
Loans and advances to banks	25	8,059		7,458
Available for sale financial assets	26	10,262		15,576
NAMA senior bonds	27	5,016		5,075
Loans and advances to customers	28	99,314		114,457
Assets held for sale to NAMA	29	—		804
Other assets classified as held for sale	30	2,446		119
Interest in associates	32	31		26
Interest in joint ventures	33	245		199
Intangible assets-goodwill	34	—		44
Intangible assets-other	34	393		408
Investment properties	35	1,204		1,304
Property, plant and equipment	36	336		372
Current tax assets		9		125
Deferred tax assets	45	1,381		1,128
Other assets	37	2,270		2,291
Retirement benefit asset	46	8		11

Total assets		154,880		167,473

EQUITY AND LIABILITIES
Deposits from banks	38	31,534		41,075
Customer accounts	39	70,506		65,443
Items in the course of transmission to other banks		271		293
Derivative financial instruments	23	6,018		5,445
Debt securities in issue	40	19,124		28,693
Liabilities to customers under investment contracts	41	4,954		5,271
Insurance contract liabilities	41	7,037		7,188
Other liabilities	43	3,111		3,102
Current tax liabilities		86		139
Provisions	44	38		64
Deferred tax liabilities	45	88		91
Retirement benefit obligations	46	422		435
Subordinated liabilities	42	1,426		2,775
Other liabilities classified as held for sale	30	13		52

Total liabilities		144,628		160,066

EQUITY
Capital stock	48	2,452		1,210
Stock premium account		5,127		3,926
Retained earnings		3,507		3,740
Other reserves		(869	)	(1,510	)
Own stock held for the benefit of life assurance policyholders		(15	)	(15	)

Stockholders' equity		10,202		7,351
Non-controlling interests		50		56

Total equity		10,252		7,407

Total equity and liabilities		154,880		167,473

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Capital stock
Balance at the beginning of the year	1,210		699
Issue of ordinary stock (note 49, 50)	1,242		238
Conversion of 2009 Preference Stock (note 50)	—		155
Dividend on 2009 Preference Stock paid in ordinary stock (note 50)	—		118

Balance at the end of the year	2,452		1,210

Stock premium account
Balance at the beginning of the year	3,926		4,092
Premium on issue of ordinary stock (note 49, 50)	1,331		1,409
Transaction costs (note 49, 50)	(114	)	(121	)
Transferred from retained earnings (note 49)	(16	)	(800	)
Loss on cancellation of warrants (note 50)	—		(381	)
Conversion of 2009 Preference Stock (note 50)	—		(155	)
Dividend on 2009 Preference Stock paid in ordinary stock (note 50)	—		(118	)

Balance at the end of the year	5,127		3,926

Retained earnings
Balance at the beginning of the year	3,740		3,263
Profit / (loss) for the year attributable to stockholders	45		(614	)
Dividends on 2009 Preference Stock and other equity interests paid in cash	(222	)	—
Transfer to capital reserve	(2	)	(46	)
Loss retained	(179	)	(660	)
Transfer to stock premium account	16		800
Net actuarial (loss) / gain on defined benefit pension schemes	(117	)	391
Transfer from share based payment reserve	5		4
Transfer from revaluation reserve	2		—
Repurchase of capital note (note 9)	41		24
Repurchase of treasury stock	(1	)	(79	)
Other movements	—		(3	)

Balance at the end of the year	3,507		3,740

Other Reserves:
Available for sale reserve
Balance at the beginning of the year	(828	)	(608	)
Net changes in fair value	68		(402	)
Deferred tax on reserve movements	(14	)	29
Transfer to income statement (pre tax)
—Asset disposal	28		(15	)
—Impairment (note 14)	21		168

Balance at the end of the year	(725	)	(828	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Cash flow hedge reserve
Balance at the beginning of the year	(235	)	(510	)
Changes in fair value	(1,034	)	(205	)
Transferred to income statement (pre tax)
—Net interest income (note 3)	154		411
—Net trading income (foreign exchange)	1,226		109
Deferred tax on reserve movements	(32	)	(40	)

Balance at the end of the year	79		(235	)

Foreign exchange reserve
Balance at the beginning of the year	(1,042	)	(1,199	)
Exchange adjustments during the year	180		157

Balance at the end of the year	(862	)	(1,042	)

Capital reserve
Balance at the beginning of the year	508		462
Transfer from retained earnings	2		46

Balance at the end of the year	510		508

Share based payment reserve
Balance at the beginning of the year	12		22
Credit to the income statement	—		(6	)
Transfer to retained earnings	(5	)	(4	)

Balance at the end of the year	7		12

Revaluation reserve
Balance at the beginning of the year	14		29
Revaluation of property	(8	)	(18	)
Deferred tax on revaluation of property	2		3
Transfer to retained earnings	(2	)	—

Balance at the end of the year	6		14

US$150 million capital note
Balance at the beginning of the year	61		114
Repurchase of capital note (note 9, 49)	(61	)	(53	)

Balance at the end of the year	—		61

Capital contribution
Balance at the beginning of the year	—		—
Contribution during the year (note 42)	116		—

Balance at the end of the year	116		—

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Core and secondary tranche warrants
Balance at the beginning of the year	—		110
Cancellation of warrants	—		(110	)

Balance at the end of the year	—		—

Total other reserves	(869	)	(1,510	)

Own stock held for the benefit of life assurance policyholders
Balance at the beginning of the year	(15	)	(87	)
Changes in value and amount of stock held	—		72

Balance at the end of the year	(15	)	(15	)

Total stockholders' equity excluding non-controlling interests	10,202		7,351

Non-controlling interests
Balance at the beginning of the year	56		50
Share of net (profit) / loss	(5	)	5
Other movements	(1	)	1

Balance at the end of the year	50		56

Total equity	10,252		7,407

Total comprehensive income included within the above:
Total comprehensive income attributable to equity stockholders	520		(26	)
Total comprehensive income attributable to non-controlling interests	(6	)	5

Total comprehensive income for the year net of tax	514		(21	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Cash flows from operating activities
Loss before taxation	(190	)	(950	)	(1,813	)
Share of results of associates and joint ventures	(39	)	(49	)	(35	)
(Profit) / loss on disposal of business activities	(34	)	(15	)	3
Depreciation and amortisation	136		147		107
Impairment charges on financial assets (excluding assets sold to NAMA)	1,960		2,027		2,335
Impairment charges assets sold to NAMA	44		257		1,722
(Gain) / loss on sale of assets to NAMA including associated costs	(33	)	2,241		—
Loss on deleveraging of financial assets	565		—		—
Decline in value of property below cost	15		10		6
Revaluation of investment property	10		(49	)	98
Interest expense on subordinated liabilities and other capital instruments	171		312		163
Charge for retirement benefit obligation	88		174		149
Impact of amendments to defined benefit pension schemes	(2	)	(733	)	—
Gain on subordinated liability management exercises	(1,789	)	(1,402	)	(1,037	)
(Gains) / Charges arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss'	(56	)	(360	)	6
Other non-cash items	45		144		(86	)

Cash flows from operating activities before changes in operating assets and liabilities	891		1,754		1,618

Net change in items in the course of collection from other banks	30		8		78
Net change in trading securities	145		252		(278	)
Net change in derivative financial instruments	1,021		(768	)	1,106
Net change in other financial assets at fair value through profit or loss	1,124		(273	)	(2,062	)
Net change in loans and advances to banks	148		(258	)	3,901
Net change in loans and advances to customers	4,938		6,288		3,474
Net change in other assets	252		(20	)	81
Net change in deposits from banks	(9,556	)	23,143		(10,813	)
Net change in customer accounts	4,272		(20,355	)	566
Net change in debt securities in issue	(8,478	)	(15,721	)	(1,521	)
Net change in liabilities to customers under investment contracts	(317	)	226		966
Net change in insurance contract liabilities	(151	)	589		1,024
Net change in other liabilities	(105	)	(275	)	(192	)
Effect of exchange translation and other adjustments	(757	)	(616	)	(1,823	)

Net cash flow from operating assets and liabilities	(7,434	)	(7,780	)	(5,493	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements



Net cash flow from operating activities before taxation	(6,543	)	(6,026	)	(3,875	)
Taxation refunded	22		2		45

Net cash flow from operating activities	(6,521	)	(6,024	)	(3,830	)
Investing activities (section a)	12,750		5,230		6,778
Financing activities (section b)	1,334		(558	)	(838	)

Net change in cash and cash equivalents	7,563		(1,352	)	2,110
Opening cash and cash equivalents	8,135		9,187		7,259
Effect of exchange translation adjustments	74		300		(182	)

Closing cash and cash equivalents (note 53)	15,772		8,135		9,187

(a) Investing activities
Additions to available for sale financial assets	(21,532	)	(8,106	)	(8,587	)
Disposal of available for sale financial assets	27,160		13,375		15,389
Additions to property, plant and equipment	(31	)	(41	)	(11	)
Disposal of property, plant and equipment	5		8		4
Additions to intangible assets	(72	)	(50	)	(47	)
Disposal of investment property	30		7		33
Dividends received from joint ventures	52		35		—
Net change in interest in associates	(6	)	2		(3	)
Net proceeds from disposal of loan portfolios	6,996		—		—
Net proceeds from disposal of business activities	148		—		—

Cash flows from investing activities	12,750		5,230		6,778

(b) Financing activities
Net proceeds from Rights Issue and institutional placing⁽¹⁾	1,794		908		—
Net proceeds from Contingent Capital note	985		—		—
Dividends on other equity interests paid	(222	)	—		(4	)
Interest paid on subordinated liabilities	(240	)	(218	)	(144	)
Consideration paid in respect of liability management exercises	(983	)	—		—
Redemption of subordinated liabilities	—		(750	)	(683	)
Cancellation of warrants	—		(491	)	—
Buyback of treasury stock	—		(7	)	(7	)

Cash flows from financing activities	1,334		(558	)	(838	)

The notes on pages F-47 to F-182
form an integral part of these consolidated financial statements

The financial statements comprise the Consolidated income statement, the Consolidated statement of other comprehensive income the Consolidated balance sheet, the Consolidated statement of changes in equity, the Consolidated cash flow statement, the Group accounting policies and the notes to the Consolidated financial statements. The notes include the information contained in those parts of the Risk Management Report in Item 11 'Quantitative and Qualitative Disclosures about Market Risk' that are described as being an integral part of the financial statements.

The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union (EU) and with those parts of the Companies Acts, 1963 to 2009 applicable to companies reporting under IFRS, with the European Communities (Credit Institutions: Accounts) Regulations, 1992 and with the Asset Covered Securities Acts, 2001 to 2007. The EU adopted version of IAS 39 currently relaxes some of the hedge accounting rules in IAS 39 'Financial Instruments—Recognition and Measurement'. The Group has not availed of this, hence these financial statements comply with both IFRS as adopted by the EU and IFRS as issued by the IASB.

The financial statements have been prepared under the historical cost convention as modified to include the fair valuation of certain financial instruments and land and buildings.

The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. A description of the critical estimates and judgements is set out on pages F-41 to F-44.

The time period that the Directors have considered in evaluating the appropriateness of the going concern basis in preparing the financial statements for the year ended 31 December 2011 is a period of twelve months from the balance sheet date (the period of assessment).

In making this assessment, the Directors considered the Group's business, profitability forecasts, funding and capital plans, including under base and stress scenarios, together with a range of factors such as the outlook for the Irish economy taking account of the impact of fiscal realignment measures, the impact of the EU / IMF Programme, the availability of collateral to access the Eurosystem, together with the possible impacts of the eurozone sovereign debt crisis, and in particular the Directors have focused on the matters set out below:

The deterioration of the Irish economy throughout 2010, culminating in the Programme for the Recovery of the Banking System announced by the Irish Government on 28 November 2010 (the 'EU / IMF programme'), adversely impacted the Group's financial condition and performance and poses ongoing challenges.

During 2010, the Group experienced a significant outflow of ratings sensitive customer deposits following a number of downgrades to the credit ratings of the Irish Sovereign and of the Group and the withdrawal of the Irish Sovereign from the funding markets. Since that time, the Group has had limited access to market sources of wholesale funding and as a result the Group became dependent on secured funding from the European Central Bank (ECB) and exceptional liquidity assistance from the Central Bank of Ireland (Central Bank). These challenges also caused the Group to notify the Central Bank of temporary breaches of regulatory liquidity requirements in January 2011, April 2011, June 2011 and September 2011. All breaches were subsequently remediated.

The Group does not currently have access to unsecured term wholesale funding markets and it is expected that the Group will continue to be dependent on Monetary Authorities for funding during the period of assessment. This poses a liquidity risk for the Group which the Directors addressed in detail as part of the going concern assessment.

The EU / IMF programme provided for a fundamental downsizing and reorganisation of the banking sector so that it was proportionate to the size of the economy. The EU / IMF programme envisaged that the banking sector would be capitalised to the highest international standards, and in a position to return to normal market sources of funding. As a result, the Group had to generate additional capital to meet these requirements.

Concerns regarding the European sovereign debt crisis intensified during 2011 which resulted in renewed instability in financial markets adversely impacting market sentiment and restricting access to wholesale funding markets for certain sovereigns and financial institutions across Europe. These concerns prompted a series of strong policy responses from European governments and institutions including the ECB. However, political and economic risks remain.

On 21 July 2011, a formal Statement by the Heads of State or Government of the euro area and EU institutions reaffirmed their commitment to the euro and to do whatever was needed to ensure the financial stability of the euro area as a whole and its Member States. This Statement ultimately led to the decision by the ECB to actively implement its Securities Markets Programme.

The Statement also included a number of announcements that were positive for Ireland including a reduction in the interest rates on loans under the EU / IMF Programme and an extension to the maturity date of these loans. It also noted the commitment of the Heads of State or Government of the euro area and the EU institutions to the success of the EU / IMF Programme and critically it confirmed their determination to provide support to countries under such programmes until they have regained market access, provided they successfully implement those programmes.

Following their most recent quarterly review under the EU / IMF Programme in January 2012 the IMF stated that the programme implementation remains strong, that the substantial fiscal consolidation targeted for 2011 had been achieved with a margin and that major progress was made in strengthening and downsizing the banking system in 2011.

Amid rising tensions, a package of measures to restore confidence and address the tensions in financial markets was also agreed by the European Council and euro area Heads of State or Government on 9 December 2011. These measures included a new fiscal compact and the strengthening of stabilisation tools for the euro area, including a more effective European Financial Stability Facility (EFSF), the bringing forward of the implementation of the European Stability Mechanism (ESM) and a solution for the unique challenges faced by Greece.

Within the above context, the Group has achieved a number of significant milestones in the past twelve months, most notably generating the additional capital required under the 2011 Prudential Capital Assessment Review (2011 PCAR) and meeting its 2011 deleveraging targets.

As part of the EU / IMF programme, the Central Bank undertook the 2011 PCAR incorporating a Prudential Liquidity Assessment Review (2011 PLAR) and the results were announced on 31 March 2011.

The 2011 PCAR is a stress test of the capital resources of the bank. The resultant capital requirements are derived from the results of BlackRock's independent assessment of forecast loan losses through to the end of 2013, the outputs from the Group's deleveraging plans under the 2011 PLAR (including the phased sales of certain non-core assets) and the estimated income and expenditure items based on conservative, Central Bank specified, economic and other factors together with prudent additional regulatory buffers. The process was conducted in close consultation with the staff of the EC, ECB and the IMF, who reviewed the methodology utilised.

As a result the Central Bank assessed that the Group needed to generate an additional €4.2 billion (including a prudent regulatory buffer of €0.5 billion) of equity capital. In addition, €1.0 billion of Contingent Capital was required via the issue of a debt instrument which, under certain circumstances, would convert to equity capital.

The Group successfully generated all of the required equity capital of €4.2 billion by 31 December 2011 and in July 2011, the Group issued a €1 billion debt instrument to the Irish Government which under certain circumstances will convert to equity capital.

The Group separately passed the EBA stress test in July 2011 and the EBA capital exercise (incorporating a capital buffer against sovereign exposures) in December 2011 without any requirement for further additional capital.

The 2011 PLAR established funding targets in order to reduce the leverage of the Group, reduce its reliance on short-term, largely ECB and Central Bank funding, and ensure convergence to Basel III liquidity standards over time.

As a consequence the Group is required to achieve a target loan to deposit ratio of 122.5% by December 2013. An objective of the Central Bank in the 2011 PLAR was to ensure that the required improvement in banks' loan to deposit ratios would be by way of deleveraging i.e. the reduction of loans through the disposal and run-down of non-core portfolios.

The successful implementation of the deleveraging plan is expected to reinforce the benefits of higher capital and help the Group to regain access to market sources of financing.

During 2011, the Group announced divestments totalling €8.6 billion representing 86% of the required three year (2011 - 2013) target of €10 billion. The proceeds in respect of €7.6 billion of divestments were settled by 31 December 2011. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months.

During 2011, the Group increased its customer deposits by €5.1 billion from €65.4 billion at 31 December 2010 to €70.5 billion at 31 December 2011. The Group's loan-to-deposit ratio at 31 December 2011 was 144% representing a reduction of 31 percentage points from the level of 175% at 31 December 2010.

The impact of the above, together with the €4.2 billion of secured term wholesale funding transactions executed during 2011, allowed the Group to reduce its net drawings from Monetary Authorities by €9 billion from €31 billion at 31 December 2010 to €22 billion at 31 December 2011 consisting of secured funding from the ECB of €22 billion (net) (31 December 2010: €23 billion (net)) and exceptional liquidity assistance from the Central Bank of €nil (31 December 2010: €8 billion).

The Group's term wholesale funding profile was improved further through its participation in the three year ECB Long Term Refinancing Operation ('LTRO') in December 2011 when the Group converted €7.5 billion of shorter term ECB funding into the three year facility. In March 2012, the Group participated in the second ECB three year LTRO when it converted c. €4.8 billion of mainly shorter term funding to three year funding with a maturity of February 2015.

It is expected that the Group will continue to be dependent on Monetary Authorities for funding during the period of assessment.

Continued access to Eurosystem refinancing requires that the Group is solvent. The additional €4.2 billion of equity capital and €1.0 billion of Contingent Capital has substantially strengthened the Group and given it a sound capital base, particularly given the conservative nature of the assumptions and methodologies that were used in the 2011 PCAR process. Following the announcement on 31 March 2011 that the Irish banks would generate the 2011 PCAR capital, the ECB confirmed that the Eurosystem would continue to provide liquidity to banks in Ireland and hence the Group.

In addition, in the context of its assessment of going concern, the Group discussed the relevant public announcements from the ECB, the EC and the IMF and the Minister for Finance (together 'the announcements') with the Central Bank and the Department of Finance (together 'the State authorities') and it sought assurance on the continued availability of required liquidity from the Eurosystem during the period of assessment. The Directors are satisfied, based on the announcements and the clarity of confirmations received from the State authorities, that, in all reasonable circumstances, the required liquidity and funding from the ECB and the Central Bank will be available to the Group during the period of assessment.

The Directors believe that this satisfactorily addresses the liquidity risk above.

On the basis of the above, the Directors consider it appropriate to prepare the financial statements on a going concern basis having concluded that there are no material uncertainties related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern over the period of assessment.

The following standards and amendments to standards have been adopted by the Group during the year ended 31 December 2011:

IAS 32 (Amendment)—'Classification of Rights Issues' The amendment addresses the accounting for Rights Issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such Rights Issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously such issues had to be accounted for as derivative liabilities. The adoption of this amendment has had no impact on the financial statements.

IAS 24 (Amendment)—'Related Party Disclosures' The amendment clarifies and simplifies the definition of a related party and removes the requirement on entities for whom the Government is a related party to disclose details of all transactions with the government and other government-related entities. The Group had early adopted the partial exemption for government-related entities in the year ended 31 December 2010 and adopted the rest of the amendment in the year ended 31 December 2011.

IFRIC 14 (Amendment)—'Prepayments of a Minimum Funding Requirement' The amendment removes an unintended consequence of IFRIC 14 related to voluntary pension prepayments when there is a minimum funding requirement. The adoption of this amendment has no impact on the financial statements.

IFRIC 19—'Extinguishing Financial Liabilities with Equity Instruments' The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). IFRIC 19 requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. There is no impact on the Group as the clarification is consistent with the Group's existing accounting policy.

Improvements to IFRSs 2010 The 'Improvements to IFRSs 2010' standard amends 6 standards and 1 interpretation based on the exposure draft issued in August 2009. The improvements include changes in presentation, recognition and measurement as well as terminology and editorial changes. The changes have not had a material impact on the Group.

Details of those IFRS pronouncements which will be relevant to the Group but which were not effective at 31 December 2011 and which have not yet been adopted by the Group are set out on pages F-38 to F-40.

Comparative figures have been adjusted where necessary, to conform with changes in presentation or where additional analysis has been provided in the current period. The analysis of the impairment charge for the year ended 31 December 2010 and the nine month period ended 31 December 2009 between loans and advances to customers and assets held for sale to NAMA has been re-presented on the basis of the loans sold to NAMA during the year ended 31 December 2011 and the year ended 31 December 2010 to enhance comparability with no change to the total impairment charge.

Subsidiaries, which are those companies and other entities (including Special Purpose Entities (SPEs)) in which the Group, directly or indirectly, has power to govern the financial and operating policies, generally accompanying a shareholding of more than half of its voting rights, are consolidated.

Assets, liabilities and results of all Group undertakings have been included in the Group financial statements on the basis of financial statements made up to the end of the financial period.

The existence and effect of potential voting rights that are currently exercisable or currently convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. In addition, foreign exchange gains and losses which arise on the retranslation to functional currency of intercompany monetary assets and liabilities are not eliminated.

Even if there is no shareholder relationship, SPEs are consolidated in accordance with SIC 12, if the Group controls them from an economic perspective. SPEs are consolidated when the substance of the relationship between the Group and that entity indicates control. Potential indicators of control include, amongst others, an assessment of the Group's exposure to the risks and benefits of the SPE. Whenever there is a change in the substance of the relationship between the Group and the SPE, the Group performs a reassessment of consolidation. Indicators for a reassessment of consolidation can include changes in ownership of the SPE, changes in contractual arrangements and changes in the financing structure.

Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

Upon adoption of IFRS, the Group availed of the exemption not to restate the Group financial statements for any acquisitions or business combinations that took place prior to 1 April 2004.

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Joint ventures are contractual arrangements whereby the Group and another party undertake an economic activity that is subject to joint control.

Investments in associates and joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. Under this method, the Group's share of the post-acquisition profits or losses in associates and joint ventures is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture the Group does not recognise further losses unless it has incurred obligations or made payments on behalf of the associate or joint venture.

The Group utilises the venture capital exemption for investments where significant influence is present and the business operates as a venture capital business. These investments are designated at initial recognition at fair value through profit or loss.

Unrealised gains on transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group's interest in the associate / joint venture; unrealised losses are also eliminated on the same basis unless the transaction provides evidence of an impairment of the asset transferred. The Group's investment in associates and joint ventures includes goodwill (net of any accumulated impairment losses) on acquisition.

Accounting policies of associates and joint ventures have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

Transactions with non-controlling interests where the Group has control over the entity are accounted for using the Economic entity model. This accounting model requires that any surplus or deficit, that arises on any transaction(s) with non-controlling interests to dispose of or to acquire additional interests in the entity, are settled through equity.

Certain Group undertakings have entered into securitisation transactions in order to finance specific loans and advances to customers. All financial assets continue to be held on the Group balance sheet, and a liability recognised for the proceeds of the funding transaction, unless:

Where the above conditions apply to a fully proportionate share of all or specifically identified cash flows, the relevant accounting treatment is applied to that proportion of the asset.

A business combination involving entities or businesses under common control is excluded from the scope of IFRS 3: Business Combinations. The exemption is applicable where the combining entities or businesses are controlled by the same party both before and after the combination. Where such transactions occur, the Bank, in accordance with IAS 8, uses its judgement in developing and applying an accounting policy that is relevant and reliable. In making this judgement management considers the requirements of IFRS dealing with similar and related issues and the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the framework. Management also considers the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards, to the extent that these do not conflict with the IFRS framework or any other IFRS or interpretation.

Accordingly the Bank has applied the guidance as set out in FRS 6 'Acquisitions and Mergers' as issued by the Accounting Standards Board. Where the transactions meet the definition of a group reconstruction or achieves a similar result, predecessor accounting is applied. The assets and liabilities of the business transferred are measured in the acquiring entity upon initial recognition at their existing book value in the Group, as measured under IFRS. The Bank incorporates the results of the acquired businesses only from the date on which the business combination occurs.

Items included in the financial statements of each entity of the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements of the Group are presented in euro.

Foreign currency transactions are translated into functional currency at the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items such as equities, classified as available for sale, are recognised in other comprehensive income. Exchange differences arising on translation to presentation currency and on consolidation of overseas net investments, are recognised in other comprehensive income.

Assets, liabilities and equity of all the group entities that have a functional currency different from the presentation currency are translated at the closing rate at the balance sheet date and items of income and expense are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the date of the transactions). All resulting exchange differences are recognised in other comprehensive income.

The Group availed of the exemption to deem all accumulated balances arising from translation of foreign subsidiaries to be nil on transition to IFRS on 1 April 2004.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The principal rates of exchange used in the preparation of the financial statements are as follows:

Interest income and expense are recognised in the income statement for all instruments measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received

between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purposes of measuring the impairment loss. Where the Group revises its estimates of payments or receipts on a financial instrument measured at amortised cost, the carrying amount of the financial instrument (or group of financial instruments) is adjusted to reflect actual and revised estimate cash flows. The Group recalculates the carrying amount by computing the present value of estimated future cash flows at the financial instrument's original effective interest rate. The adjustment is recognised in profit or loss as income or expense.

Fees and commissions which are not an integral part of the effective interest rate of a financial instrument are generally recognised on an accruals basis when the service has been provided. Commissions and fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts usually on a time apportioned basis. Asset management fees related to investment funds are recognised rateably over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Loan commitment fees for loans that are likely to be drawn down, are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan once drawn.

Operating loss / profit includes the Group's earnings from ongoing activities after impairment charges, gain / (loss) on sale of assets to NAMA and loss on deleveraging of financial assets, and before share of profit or loss on associates and joint ventures (after tax) and gain / loss on disposal of business activities.

The total payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property and the present value of the minimum lease payments.

The corresponding rental obligations, net of finance charges, are included in long term payables. The interest element of the finance costs is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

When assets are held under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is included within net interest income and is recognised over the term of the lease reflecting a constant periodic rate of return on the net investment in the lease.

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables and available for sale financial assets. The Group determines the classification of its financial assets at initial recognition.

At 31 December 2010, financial assets that the Group expected would be transferred to NAMA were classified as assets held for sale to NAMA (refer to accounting policy on page F-30).

Financial assets at fair value through profit or loss can either be held for trading, if acquired principally for the purpose of selling in the short term, or designated at fair value through profit or loss at inception.

A financial asset may be designated at fair value through profit or loss only when:

The principal category of assets designated at fair value through profit or loss are those held by the Group's life assurance business, which are managed on a fair value basis.

Regular way purchases and sales of financial assets at fair value through profit or loss are recognised on trade date: the date on which the Group commits to purchase or sell the asset. Thereafter they are carried on the balance sheet at fair value, with all changes in fair value included in the income statement.

Financial assets may not be transferred out of this category, except for non-derivative financial assets held for trading, which may be transferred out of this category where:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable.

Loans are recorded at fair value plus transaction costs when cash is advanced to the borrowers. They are subsequently accounted for at amortised cost using the effective interest method.

Available for sale financial assets are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

Purchases and sales of available for sale financial assets are recognised on trade date. They are initially recognised at fair value plus transaction costs. Movements are recognised in other comprehensive income. Interest is calculated using the effective interest method and is recognised in the income statement.

If an available for sale financial asset is derecognised or impaired the cumulative gain or loss previously recognised in other comprehensive income is reclassified to the income statement.

Dividends on available for sale equity instruments are recognised in the income statement when the Group's right to receive payment is established.

Available for sale financial assets that would have met the definition of loans and receivables may be reclassified to loans and receivables if the Group has the intention and ability to hold the asset for the foreseeable future or until maturity.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership.

The Bank's investments in its subsidiaries are stated at cost less any impairment.

The Group has two categories of financial liabilities: those that are carried at amortised cost and those that are carried at fair value through profit or loss. Financial liabilities are initially recognised at fair value, (normally the issue proceeds i.e. the fair value of consideration received) less, in the case of financial liabilities subsequently carried at amortised cost, transaction costs. For liabilities carried at amortised cost, any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement using the effective interest method.

Preference shares which carry a mandatory coupon are classified as financial liabilities. The dividends on these preference shares are recognised in the income statement as interest expense using the effective interest method.

A liability may be designated as at fair value through profit or loss only when:

The Group designates certain financial liabilities at fair value through profit or loss as set out in note 51 to the financial statements. Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expires.

The Group recognises trading securities, other financial assets and liabilities designated at fair value through profit or loss, derivatives and available-for-sale financial assets at fair value in the balance sheet. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm's length transaction.

The fair values of financial assets and liabilities traded in active markets are based on unadjusted bid and offer prices respectively. If an active market does not exist, the Group establishes fair value using valuation techniques. These include the use of recent arm's length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. To the extent possible, these valuation techniques use observable market data. Where observable data does not exist, the Group uses estimates based on the best information available.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price in an arm's length transaction, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique which primarily uses observable market inputs. When such evidence exists, the initial valuation of the instrument may result in the Group recognising a profit on initial recognition. In the absence of such evidence, the instrument is initially valued at the transaction price. Any day one profit is deferred and recognised in the income statement to the extent that it arises from a change in a factor that market participants would consider in setting a price. Straight line amortisation is used where it approximates to the amount. Subsequent changes in fair value are recognised immediately in the income statement without the reversal of deferred day one profits or losses.

Where a transaction price in an arm's length transaction is not available, the fair value of the instrument at initial recognition is measured using a valuation technique.

For liabilities designated at fair value through profit or loss, the fair values reflect changes in the Group's own credit spread.

The fair values of the Group's financial assets and liabilities are disclosed within note 52 together with a description of the valuation technique used for each asset or liability category. For assets or liabilities recognised at fair value on the balance sheet, a description is given of any inputs into valuation models that have the potential to significantly impact the fair value, together with an estimate of the impact of using reasonably possible alternative assumptions.

Assets sold subject to repurchase agreements (repos) are retained on the balance sheet and reclassified as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral; the counterparty liability is included in deposits by banks or customer accounts, as appropriate.

Securities purchased under agreements to resell (reverse repos) are treated as collateralised loans and recorded as loans and advances to banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and recognised in the income statement over the life of the agreement using the effective interest method.

Securities lent to counterparties are also retained on the balance sheet. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss included in trading income. The obligation to return the securities is recorded at fair value as a trading liability.

The classification of instruments as a financial liability or an equity instrument is dependent upon the substance of the contractual arrangement. Instruments which carry a contractual obligation to deliver cash or another financial asset to another entity are classified as financial liabilities. The coupons on these instruments are recognised in the income statement as interest expense using the effective interest method. Where the Group has absolute discretion in relation to the payment of coupons and repayment of principal, the instrument is classified as equity and any coupon payments are classified as distributions in the period in which they are made.

If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of the liability and the consideration paid is included in net trading income.

Due to the materiality of the gains on liability management exercises (detailed in note 9), those gains have been disclosed as a separate line item within the income statement, rather than included within net trading income.

Where the Group exchanges and an existing borrower agrees to exchange financial liabilities and where the terms of the original financial liability and the new financial liability are substantially different, the exchange is treated as an extinguishment of the original financial liability and the recognition of a new financial liability. The Group considers both quantitative and qualitative measures in determining whether the terms are substantially different. The difference between the carrying amount of the financial liability extinguished and the consideration paid, including any non-cash asset transferred or liabilities assumed, is recognised in profit or loss. Any costs or fees incurred are recognised as part of the gain or loss on extinguishment.

Where the Group settles a liability through the issuance of its own equity instruments the difference between the carrying amount of the financial liability and the fair value of equity instruments issued is recognised in profit or loss. If the fair value of the equity instruments cannot be reliably measured then the fair value of the existing financial liability is used to measure the gain or loss.

Derivatives are initially recognised at fair value on the date on which the contract is entered into and are subsequently remeasured at their fair value at each balance sheet date. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

Certain derivatives embedded in other financial instruments are separated from the host contract and accounted for as derivatives, when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss.

Fair value gains or losses on derivatives are normally recognised in the income statement. However where they are designated as hedging instruments, the treatment of the fair value gains and losses depends on the nature of the hedging relationship.

Hedge accounting is applied to these derivatives provided certain criteria are met. The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If the criteria for hedge accounting cease to be met, no further adjustments are made to the hedged item for fair value changes attributable to the hedged risk. The cumulative adjustment to the carrying amount of a hedged item is amortised to profit or loss over the period to maturity using the effective interest method.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in other comprehensive income are reclassified to the income statement in the periods in which the hedged item affects profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised in the income statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately reclassified to the income statement.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following loss events:

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans and advances has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient the Group may measure impairment on the basis of an instrument's fair value using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Group's grading process that considers asset type, industry, geographical location, collateral type, past due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for

impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement. When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the charge for loan impairment in the income statement.

The Risk Management Report on pages 247 to 253 contains further detail on loan loss provisioning methodology.

The Group assesses at each balance sheet date whether there is objective evidence that an available for sale financial asset is impaired. In addition to the factors set out above, a significant or prolonged decline in the fair value of an investment in an available for sale equity instrument below its cost is considered in determining whether an impairment loss has been incurred. If an impairment loss has been incurred, the cumulative loss that had been recognised in other comprehensive income is removed from equity and recognised in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

Freehold land and buildings are initially recognised at cost, and subsequently are revalued annually to open market value by independent external valuers. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from the open market value at the balance sheet date.

All other property, plant and equipment, including freehold and leasehold adaptations, are stated at historical cost less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.

Increases in the carrying amount arising on the revaluation of land and buildings are recognised in other comprehensive income. Decreases that offset previous increases on the same asset are recognised in other comprehensive income: all other decreases are charged to the income statement.

The Directors consider that residual values of freehold and long leasehold property based on prices prevailing at the time of acquisition or subsequent valuation are such that depreciation is not material.

Depreciation is calculated on the straight line method to write down the carrying value of other items of property, plant and equipment to their residual values over their estimated useful lives as follows:

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset's fair value less costs to sell or its value in use.

Gains and losses on the disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining profit before tax. If the asset being disposed of had previously been revalued then any amount in other comprehensive income relating to that asset is reclassified to retained earnings on disposal.

Property held for long term rental yields and capital appreciation is classified as investment property. Investment property comprises freehold and long leasehold land and buildings. It is carried at fair value in the balance sheet based on annual revaluations at open market value and is not depreciated. Changes in fair values are recorded in the income statement. Rental income from investment properties is recognised as it becomes receivable over the term of the lease.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates or joint ventures is included in 'investments in associates' and 'investments in joint ventures' as appropriate. The carrying amount of goodwill in the Irish GAAP balance sheet as at 31 March 2004 has been broughtforward without adjustment on transition to IFRS.

Goodwill is tested annually for impairment or more frequently if there is any indication that it may be impaired, and carried at cost less accumulated impairment losses. Goodwill is allocated to cash generating units (CGU) for the purpose of impairment testing. The CGU is considered to be the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The Group impairment model compares the recoverable amount of the CGU with the carrying value at the review date. An impairment loss arises if the carrying value of the CGU exceeds the recoverable amount. The recoverable amount of a CGU is the higher of its fair value less costs

to sell and its value in use, where the value in use is the present value of the future cash flows expected to be derived from the CGU.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives, which is normally five years.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group and which will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised using the straight line method over their useful lives, which is normally five years.

Computer software is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset's fair value less costs to sell and its value in use.

Other intangible assets are carried at cost less amortisation and impairment, if any and, are amortised on a straight line basis over their useful lives which range from five years to twenty years and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset's fair value less costs to sell or its value in use.

At 31 December 2010, assets and liabilities that the Group expected to transfer to NAMA within twelve months of that reporting date, all of which were financial assets and liabilities, were classified as assets and liabilities held for sale to NAMA.

These assets and liabilities were measured in accordance with the Group's accounting policies for measurement of financial assets and financial liabilities respectively, set out on pages F-22 and F-23. Loans and advances which were held for sale to NAMA were measured at amortised cost less any incurred impairment losses, which were calculated in accordance with the Group's accounting policy on impairment of financial assets, set out on pages F-27 and F-28. Derivatives held for sale to NAMA were measured at fair value through profit or loss.

The assets and liabilities were derecognised when substantially all of the risks and rewards transferred to NAMA, which was the date when ownership of or the beneficial interest in the assets had legally transferred to NAMA. This occurred on a phased basis when ownership of each tranche transferred. Until

the date of derecognition, interest income on the assets continued to be recognised using the effective interest method.

On the derecognition date, a gain or loss was recognised, measured as the difference between the fair value of the consideration received and the balance sheet value of the assets transferred, less transaction costs and any provision for the ongoing cost of servicing these assets on behalf of NAMA. The consideration received was measured at fair value at initial recognition.

An asset or a disposal group is classified as held for sale if the following conditions are met:

When an asset (or disposal group), other than a financial asset or financial liability, is initially classified as held for sale, it is measured at the lower of its carrying amount or fair value less costs to sell at the date of reclassification. Impairment losses subsequent to classification of such assets as held for sale are recognised in the income statement. Increases in fair value less costs to sell of such assets that have been classified as held for sale are recognised in the income statement to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in respect of the asset.

The measurement of financial assets or financial liabilities which are classified as held for sale is not impacted by that classification, and they continue to be measured in accordance with the Group's accounting policies for measurement of financial assets and financial liabilities respectively, set out on pages F-22 and F-23.

When an asset (or disposal group) is classified as held for sale, amounts presented in the balance sheet for the prior period are not reclassified.

Where the criteria for the classification of an asset (or disposal group) as held for sale cease to be met, the asset (or disposal group) is reclassified out of held for sale and included in the appropriate balance sheet headings.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Provision is made for the anticipated costs of restructuring, including related redundancy costs, when an obligation exists. An obligation exists when the Group has a detailed formal plan for restructuring a business and has raised valid expectations in those affected by the restructuring by starting to implement the plan or announcing its main features.

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless the probability of their occurrence is remote.

The Group companies operate various pension schemes. The schemes are funded and the assets of the schemes are held in separate trustee administered funds. The Group has both defined contribution and defined benefit plans. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees' benefits relating to employee service in the current and prior periods.

The asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for unrecognised past service cost. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly to reserves through the statement of other comprehensive income. Past service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting period.

Gains and losses on curtailments are recognised when the curtailment occurs which is when amendments have been made to the terms of the plan so that a significant element of future service will no longer qualify for benefits or will qualify only for reduced benefits or when there is a demonstrable commitment to make a significant reduction in the number of employees covered by the plan. The effect of any reduction for past service is a negative past service cost.

For defined contribution plans, once the contributions have been paid, the company has no further payment obligations. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

The Group has a number of equity settled share based payment schemes. The fair value at the date of grant of the employee services received in exchange for the grant of the options or shares is recognised as an expense. The total amount to be expensed over the vesting period is determined on the date the options or shares are granted by reference to their fair value, excluding the impact of any non-market vesting conditions (for example, growth in EPS). Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At each balance sheet date, the Group revises its estimate of the number of options or shares that are expected to vest. It recognises the impact of the revision of the original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

Where an option is cancelled, the Group immediately recognises, as an expense, the amount of the expense that would have otherwise been recognised over the remainder of the vesting period.

Where new shares are issued, the proceeds received net of any directly attributable transaction costs are credited to share capital (at nominal value) and to share premium, when the options are exercised.

The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the life of the option and other relevant factors.

Upon transition to IFRS, the Group availed of the exemption only to apply IFRS 2 to share based payments which were granted on or after 7 November 2002 that had not yet vested by 1 January 2005.

Short term employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period in which the employees' service is rendered. Bonuses are recognised where the Group has a legal or constructive obligation to employees that can be reliably measured.

Termination payments are recognised as an expense when the Group is demonstrably committed to a formal plan to terminate employment before the normal retirement date. Termination payments for voluntary redundancies are recognised where an offer has been made by the Group, it is probable that the offer will be accepted and the number of acceptances can be reliably estimated.

Income tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as an expense in the period in which profits arise. The tax effects of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be available against which these losses are utilised.

Tax provisions are provided on a transaction by transaction basis using a best estimate approach.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised and by reference to the expiry dates (if any) of the relevant unused tax losses or tax credits. Deferred tax assets and liabilities are not discounted.

Deferred income tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future.

Deferred tax on items taken to other comprehensive income is also recognised in other comprehensive income and is subsequently reclassified to the income statement together with the deferred gain or loss.

Investment tax credits are not recognised until there is reasonable assurance that: (a) the Group has complied with the conditions attaching to them; and (b) the credits will be received. They are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the credits are intended. Investment tax credits related to assets are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset.

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and balances with central banks and post office banks which can be withdrawn on demand. It also comprises balances with an original maturity of less than three months.

Incremental external costs directly attributable to the issue of new equity stock or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends on ordinary stock and preference stock are recognised in equity in the period in which they are approved by the Bank's stockholders or the Court of Directors, as appropriate.

Where the Bank or its subsidiaries purchases the Bank's equity capital stock, the consideration paid is deducted from total stockholders' equity as treasury stock until they are cancelled. Where such stock is subsequently sold or reissued, any consideration received is included in stockholders' equity. Any changes in the value of treasury stock held are recognised in equity at the time of the disposal and dividends are not recognised as income or distributions. This is particularly relevant in respect of Bank of Ireland stock held by Bank of Ireland Life for the benefit of policyholders.

The capital reserve represents transfers from retained earnings and other reserves in accordance with relevant legislation. The capital reserve is not distributable.

The foreign exchange reserve represents the cumulative gains and losses on the translation of the Group's net investment in its foreign operations since 1 April 2004.

The revaluation reserve represents the cumulative gains and losses on the revaluation of property occupied by Group businesses, included within property, plant and equipment and non-financial assets classified as held for sale.

The available for sale reserve represents the cumulative change in fair value of available for sale financial assets together with the impact of any fair value hedge accounting adjustments.

The cash flow hedge reserve represents the cumulative changes in fair value, excluding any ineffectiveness, of cash flow hedging derivatives. These are transferred to the income statement when the hedged transactions impact the Group's profit or loss.

Where a financial instrument is issued by the Group to a party acting in its capacity as a stockholder, a portion of the proceeds received, equal to the initial fair value of the financial instrument, is considered to be consideration for the issuance of the financial instrument, with any amount received in excess of this considered to be a capital contribution from the stockholder, and credited directly to this reserve.

In accordance with IFRS 4, the Group classifies all life assurance products as either insurance or investment contracts for accounting purposes.

Insurance contracts are those contracts that transfer significant insurance risk. These contracts are accounted for using an embedded value basis.

Investment contracts are accounted for in accordance with IAS 39. All of the Group's investment contracts are unit linked in nature. These contracts are accounted for as financial liabilities whose value is contractually linked to the fair value of the financial assets within the policyholders' unit linked funds. The value of the unit linked financial liabilities is determined using current unit prices multiplied by the number of units attributed to the contract holders at the balance sheet date. Their value is never less than the amount payable on surrender, discounted for the required notice period where applicable.

The Group recognises an asset for deferred acquisition costs relating to investment contracts. Upfront fees received for investment management services are deferred. These amounts are amortised over the period of the contract.

Non unit linked insurance liabilities are calculated using either a gross premium or net premium method of valuation. The assumptions are also set in accordance with the guidelines in the Insurance Regulations and

contain a margin for adverse development. The key assumptions used in the valuation of insurance contract liabilities are:

The Group recognises the value of in force life assurance business asset as the present value of future profits expected to arise from contracts classified as insurance contracts under IFRS 4. The asset has been calculated in accordance with the embedded value achieved profits methodology in the Statement of Recommended Practice issued by the Association of British Insurers which came into force in 2002. The asset is determined by projecting the future statutory surpluses attributable to stockholders estimated to arise from insurance contracts. The surpluses are projected using appropriate assumptions as to future investment returns, persistency, mortality and expense levels and include consideration of guarantees and options. These surpluses are then discounted at a risk adjusted rate. Thus, the use of best estimate assumptions in the valuation of the value of in force asset ensures that the net carrying amount of insurance liabilities less the value of in force asset is adequate.

The value of in force asset in the consolidated balance sheet and movements in the asset in the income statement are presented on a gross of tax basis. The tax charge comprises both current and deferred tax expense and includes tax attributable to both stockholders and policyholders for the period.

Premiums receivable in respect of non unit linked insurance contracts are recognised as revenue when due from policyholders. Premiums received in respect of unit linked insurance contracts are recognised in the same year in which the related policyholder liabilities are created. Claims are recorded as an expense when they are incurred.

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group are dealt with as insurance contracts, subject to meeting the significant insurance risk test in IFRS 4. Outward reinsurance premiums are accounted for in accordance with the contract terms when due for payment.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right of set off and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

The Group enters into master agreements with counterparties, to ensure that if an event of default occurs, all amounts outstanding with those counterparties will be settled on a net basis.

The Group obtains collateral in respect of customer liabilities where this is considered appropriate. The collateral normally takes the form of a lien over the customers' assets and gives the Group a claim on these assets for both existing and future liabilities. The collateral is, in general, not recorded on the Group balance sheet.

The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as stock borrowing contracts and derivative contracts, in order to reduce credit risk. Collateral received in the form of securities is not recorded on the balance sheet. Collateral received in the form of cash is recorded on the balance sheet, with a corresponding liability recognised within deposits from banks or deposits from customers. Any interest payable arising is recorded as interest expense.

In certain circumstances, the Group pledges collateral in respect of liabilities or borrowings. Collateral pledged in the form of securities or loans and advances continues to be recorded on the balance sheet. Collateral placed in the form of cash is recorded in loans and advances to banks or customers. Any interest receivable arising is recorded as interest income.

Financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities (facility guarantees), and to other parties in connection with the performance of customers under obligations related to contracts, advance payments made by other parties, tenders, retentions and the payment of import duties. Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee is given. Subsequent to initial recognition, the Group's liabilities under such guarantees are measured at the higher of the initial measurement, less amortization calculated to recognise in the income statement the fee income earned over the period, and the best estimate of the expenditure required to settle any financial obligation arising as a result of the guarantees at the balance sheet date.

Any increase in the liability relating to guarantees is taken to the income statement and recognised on the balance sheet within provisions for undrawn contractually committed facilities and guarantees.

The segment analysis of the Group's results and financial position is set out in note 2. The Group has identified five reportable operating segments, which are as follows: Retail Ireland, Bank of Ireland Life, Retail UK, Corporate and Treasury and Group Centre.

These segments have been identified on the basis that the chief operating decision maker uses information based on these segments to make decisions about assessing performance and allocating resources. The analysis of results by operating segment is based on management accounts information.

Transactions between the operating segments are on normal commercial terms and conditions. Internal charges and transfer pricing adjustments have been reflected in the performance of each segment. Revenue sharing agreements are used to allocate external customer revenues to operating segments on a reasonable basis.

In its assessment of materiality, the Group considers the impact of any misstatements based on both:

The following standards, interpretations and amendments to standards will be relevant to the Group but were not effective at 31 December 2011 and have not been applied in preparing these financial statements. The Group's initial view of the impact of these accounting changes is outlined below.

Pronouncement	Nature of change	Effective date	Impact

Amendment to IFRS 7 'Disclosures—Transfer of financial assets'	The amendment addresses disclosures required to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position. The amendment is still subject to EU endorsement.	Financial periods beginning on or after 1 July 2011	Not significant

Amendment to IAS 12 'Income Taxes'	The amendment introduces an exception to the existing principle for the measurement of the deferred tax asset or liabilities arising on investment property measured at fair value. The amendment is still subject to EU endorsement.	Financial periods beginning on or after 1 January 2012	Not significant

IAS 1, 'Presentation of financial statements'	The amendments to IAS 1, 'Presentation of Financial Statements' require companies to group together items within other comprehensive income (OCI) that may be reclassified to the income statement. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two separate statements. The amendments are still subject to EU endorsement.	Financial periods beginning on or after 1 July 2012	Not significant

IAS 19, 'Employee benefits'	The amended standard eliminates the option for deferred recognition of all changes in the present value of the defined benefit obligation and in the fair value of plan assets (including the corridor approach, which is not applied by the Group). In addition, the amended standard requires a net interest approach, which will replace the expected return on plan assets, and will enhance the disclosure requirements for defined benefit plans. The amended standard is still subject to EU endorsement.	Financial periods beginning on or after 1 January 2013	The Group is assessing the impact of adopting the amended IAS 19.

IFRS 10, 'Consolidated Financial Statements'	This standard replaces IAS 27, 'Consolidated and Separate Financial Statements' and SIC-12, 'Consolidation—Special Purpose Entities'. It establishes a single control model that applies to all entities, including those that were previously considered special purpose entities under SIC-12. An investor controls an investee when it is exposed, or has rights, to variable returns from the investee, and has the ability to affect those returns through its power over the investee. The assessment of control is based on all facts and circumstances and the conclusion is reassessed if there is an indication that there are changes in facts and circumstances. The new standard is still subject to EU endorsement.	Financial periods beginning on or after 1 January 2013	The Group is assessing the impact of adopting IFRS 10.

Pronouncement	Nature of change	Effective date	Impact

IFRS 11, 'Joint arrangements'	IFRS 11 supersedes IAS 31, 'Interests in Joint Ventures' and SIC-13, 'Jointly-controlled Entities—Nonmonetary Contributions by Venturers'. IFRS 11 classifies joint arrangements as either joint operations or joint ventures and focuses on the nature of the rights and obligations of the arrangement. IFRS 11 requires the use of the equity method of accounting for joint arrangements by eliminating the option to use the proportionate consolidation method, which is not applied by the Group. The new standard is still subject to EU endorsement.	Accounting periods starting on or after 1 January 2013	The Group is assessing the impact of adopting IFRS 11

IFRS 12, 'Disclosures of Interests in Other Entities'	IFRS 12 establishes the provision of information on the nature, associated risks, and financial effects of interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities, as disclosure objectives. IFRS 12 requires more comprehensive disclosure, and specifies minimum disclosures that an entity must provide to meet the disclosure objectives. The new standard is still subject to EU endorsement.	Accounting periods starting on or after 1 January 2013.	The Group is assessing the impact of adopting IFRS 12.

IFRS 13, 'Fair Value Measurement'	In May 2011, the IASB issued IFRS 13, 'Fair Value Measurement' which establishes a single source of guidance for fair value measurement under IFRS. IFRS 13 provides a revised definition of fair value and guidance on how it should be applied where its use is already required or permitted by other standards within IFRS and introduces more comprehensive disclosure requirements on fair value measurement. The new standard is still subject to EU endorsement.	Accounting periods starting on or after 1 January 2013	The Group is assessing the impact of adopting IFRS 13.

IAS 27 (revised), 'Separate Financial Statements'	IAS 27 (revised) includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The revised standard is still subject to EU endorsement.	Accounting periods starting on or after 1 January 2013	The Group is assessing the impact of adopting IAS 27 (revised).

IAS 28 (revised), 'Investments in Associates and Joint Ventures'	IAS 28 (revised) includes the requirements for joint ventures, as well as associates to be equity accounted following the issue of IFRS 11. The revised standard is still subject to EU endorsement.	Accounting periods starting on or after 1 January 2013	The Group is assessing the impact of adopting IAS 28 (revised).

Amendments to IAS 32 and IFRS 7 'Financial Instruments' on Asset and Liability Offsetting	These amendments are to the application guidance in IAS 32, 'Financial Instruments: Presentation', that clarify some of the requirement for offsetting financial assets and financial liabilities on the balance sheet. The IASB has also published an amendment to IFRS 7, 'Financial Instruments: Disclosures'. These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The revised standards are still subject to EU endorsement.	IFRS 7: Accounting periods starting on or after 1 January 2013 IAS 32: Accounting periods starting on or after 1 January 2014	The Group is assessing the impact of adopting the amendments to IAS 32 and IFRS 7.

Pronouncement

Nature of change

Effective date

Impact

IFRS 9, 'Financial instruments'

IFRS 9 is the standard which will replace IAS 39, 'Financial instruments: recognition and measurement'. The first stage of IFRS 9 dealt with the classification and measurement of financial assets and was issued in November 2009. An addition to IFRS 9 dealing with financial liabilities was issued in October 2010. The main changes from IAS 39 and the new concepts in IFRS 9 are summarised as follows:

•

The multiple classification model for financial assets in IAS 39 is replaced with a single model that has only two classification categories: amortised cost and fair value;

•

Classification under IFRS 9 is driven by the entity's business model for managing financial assets and the contractual characteristics of the financial assets;

•

The requirement to separate embedded derivatives from financial asset hosts is removed;

•

The cost exemption for unquoted equities is removed;

•

Most of IAS 39's requirements for financial liabilities are retained, including amortised cost accounting for most financial liabilities;

•

Guidance on separation of embedded derivatives will continue to apply to host contracts that are financial liabilities;

•

Fair value changes attributable to changes in own credit risk for financial liabilities designated under the fair value option other than loan commitments and financial guarantee contracts are required to be presented in the statement of other comprehensive income unless the treatment would create or enlarge an accounting mismatch in profit or loss. These amounts are not subsequently reclassified to the income statement but may be transferred within equity.

The new standard is still subject to EU endorsement.

Financial periods beginning on or after 1 January 2015

The Group is assessing the impact of adopting IFRS 9. The impact of IFRS 9 may change as a consequence of further developments resulting from the IASB's ongoing financial instruments project.

In preparing the financial statements, the Group makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. As management judgement involves an estimate of the likelihood of future events, actual results could differ from those estimates, which could affect the future reported amounts of assets and liabilities. The estimates and judgements that have had the most significant effect on the amounts recognised in the Group's financial statements are set out below.

The Group reviews its loan portfolios for impairment on an ongoing basis. The Group first assesses whether objective evidence of impairment exists. This assessment is performed individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Impairment provisions are also recognised for losses not specifically identified but which, experience and observable data indicate, are present in the portfolio at the date of assessment.

Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio, when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. The use of historical loss experience is supplemented with significant management judgement to assess whether current economic and credit conditions are such that the actual level of inherent losses is likely to differ from that suggested by historical experience. In normal circumstances, historical experience provides objective and relevant information from which to assess inherent loss within each portfolio. In other circumstances, historical loss experience provides less relevant information about the inherent loss in a given portfolio at the balance sheet date, for example, where there have been changes in economic conditions such that the most recent trends in risk factors are not fully reflected in the historical information. In these circumstances, such risk factors are taken into account when calculating the appropriate levels of impairment allowances, by adjusting the impairment loss derived solely from historical loss experience.

A key judgemental area is in relation to Residential mortgages. This loan portfolio has been significantly affected in the current economic climate, as values of security have considerably reduced, particularly in Ireland, and there are very low levels of activity in the sector. Residential mortgage loans before impairment provisions at 31 December 2011 amounted to €57 billion (31 December 2010: €60 billion), against which were held provisions for impairment of €1.2 billion (31 December 2010: €0.7 billion). At 31 December 2011, the assumption adopted by the Group in respect of the expected average decline in the value of Irish residential properties was 55% from their peak in 2007. A 5% decline in average values beyond this assumed level would give rise to additional impairment provisions of c.€125 million to €150 million.

A further important judgemental area is in relation to the level of impairment provisions for Property and construction loans and advances. The loans in this portfolio have been similarly affected by the current economic climate. Property and construction loan before impairment provisions at 31 December 2011 amounted to €20.6 billion (31 December 2010: €24.4 billion), against which were held provisions for impairment of €3.2 billion (31 December 2010: €2.5 billion).

The estimation of impairment charges is subject to uncertainty, which has increased in the current economic environment, and is highly sensitive to factors such as the level of economic activity, unemployment rates, bankruptcy trends, property price trends and interest rates. The assumptions

underlying this judgement are highly subjective. The methodology and the assumptions used in calculating impairment charges are reviewed regularly in the light of differences between loss estimates and actual loss experience.

The detailed methodologies, areas of estimation and judgement applied in the calculation of the Group's impairment charge on financial assets are set out in the Risk Management Report on pages 247 to 253.

The taxation charge accounts for amounts due to fiscal authorities in the various territories in which the Group operates and includes estimates based on a judgement of the application of law and practice in certain cases to determine the quantification of any liabilities arising. In arriving at such estimates, management assesses the relative merits and risks of tax treatments assumed, taking into account statutory, judicial and regulatory guidance and, where appropriate, external advice.

At 31 December 2011, the Group had a net deferred tax asset of €1,293 million (31 December 2010: €1,037 million), of which €1,195 million (31 December 2010: €898 million) related to incurred trading losses. See note 45.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences and unutilised tax losses can be utilised. The recognition of a deferred tax asset relies on management's judgements surrounding the probability and sufficiency of future taxable profits, and the future reversals of existing taxable temporary differences.

To the extent that the recognition of a deferred tax asset is dependent on sufficient future profitability, a degree of estimation and the use of assumptions are required. The Group's judgement takes into consideration the impact of both positive and negative evidence, including historical financial performance, projections of future taxable income, the impact of tax legislation and future reversals of existing taxable temporary differences.

The most significant judgement relates to the Group's assessment of the recoverability of the portion of the deferred tax asset relating to trading losses. Under current Irish and UK tax legislation, there is no time restriction on the utilisation of these losses. There is however, a restriction on the utilisation of Irish tax losses carried forward by a financial institution participating in NAMA. This significantly lengthens the period over which the deferred tax asset will reverse by restricting by 50% the amount of profits against which the carried forward trading losses can be utilised. The balance continues to be available for indefinite carry forward and there is no time limit on the utilisation of these losses.

Based on its projection of future taxable income, the Group has concluded that it is probable that sufficient taxable profits will be generated to recover this deferred tax asset, and it has been recognised in full.

The Group measures certain of its financial instruments at fair value on the balance sheet. This includes trading securities, other financial assets and liabilities at fair value through profit or loss, all derivatives and available for sale financial assets. The fair values of financial instruments are determined by reference to observable market prices where available and where an active market exists.

Where market prices are not available or are unreliable, fair values are determined using valuation techniques including discounted cash flow models which, to the extent possible, use observable market inputs. Where valuation techniques are used they are validated and periodically reviewed by qualified personnel independent of the area that created them. All models are calibrated to ensure that outputs

reflect actual data and comparable market prices. Using valuation techniques may necessitate the estimation of certain pricing inputs, assumptions or model characteristics such as credit risk, volatilities and correlations and changes in these assumptions could affect reported fair values.

The fair value movement on assets and liabilities held at fair value through profit or loss, including those held for trading, are included in net trading income.

The most significant area of judgement is in relation to certain financial assets and liabilities classified within level 3 of the 3-level fair value hierarchy. Further details are set out in note 52.

Liabilities classified within level 3 comprise certain debt securities in issue, certain customer deposits and certain subordinated liabilities which together have a fair value of €495 million (31 December 2010: €670 million) which are measured at fair value through profit or loss, and the fair value of which is based on valuation techniques incorporating significant unobservable market data. The key judgement relates to the Group's credit spread. The Group estimates this spread by reference to recent transactions in the same instrument or in similar instruments issued by the Group. In addition the Group considers the credit spread applicable to Irish Government bonds. A 1% increase / (decrease) in the estimated credit spread at 31 December 2011 would result in a decrease of €26 million / (increase of €26 million) in the fair value of the liabilities, with a corresponding impact on the income statement.

The Contingent Capital note issued to the State during the year ended 31 December 2011 (see note 49) was fair valued on initial recognition by discounting the expected cash flows on the note, in the absence of conversion, using the estimated market yield for the instrument, including the conversion feature. This yield is not considered to be observable. A 0.50% increase / (decrease) in this yield at the date of initial recognition of the note in July 2011 would have resulted in an increase of €10 million (decrease of €10 million) in the capital contribution credited directly to reserves.

The equity conversion feature of the note is considered to be an embedded derivative requiring separation, with changes in its fair value recognised in profit or loss. The derivative is valued using a discounted cash flow model in which the principal input is the yield differential, or spread, between the Contingent Capital note and the yield on similar notes without the conversion feature. This spread is not considered to be observable. A 0.50% increase / (decrease) in this spread at 31 December 2011 would result in an increase of €9 million (decrease of €9 million) in the fair value of the derivative, with a corresponding impact on the income statement. The host instrument is subsequently measured at amortised cost.

As with all financial assets, NAMA senior bonds are measured at fair value at initial recognition. The bonds do not trade in an active market. Fair value at initial recognition has been estimated by using a valuation technique which takes into consideration the Government guarantee, collateral and other support, valuations in the repo market and the yield on Irish Government bonds of similar maturity. The bonds are subsequently measured at amortised cost.

The Group operates a number of defined benefit pension schemes. In determining the actual pension cost, the actuarial values of the liabilities of the schemes are calculated by external actuaries. This involves modelling their future growth and requires management to make assumptions as to discount rates, price inflation, dividend growth, salary and pensions increases, return on investments and employee mortality. There are acceptable ranges in which these estimates can validly fall. The impact on the results for the period and financial position could be materially different if alternative assumptions were used. An analysis of the sensitivity of the defined benefit pension liability to changes in the key assumptions is set out in note 46 on retirement benefit obligations.

The Group accounts for the value of the stockholders' interest in long term assurance business using the embedded value basis of accounting. Embedded value is comprised of the net tangible assets of Bank of Ireland Life and the present value of its in force business. The value of in force business is calculated by projecting future surpluses and other net cash flows attributable to the shareholder arising from business written up to the balance sheet date and discounting the result at a rate which reflects the shareholder's overall risk premium, before provision has been made for taxation.

Future surpluses will depend on experience in a number of areas such as investment returns, lapse rates, mortality and investment expenses. Surpluses are projected by making assumptions about future experience, having regard to both actual experience and forecast long term economic trends.

Changes to these assumptions may cause the present value of future surpluses to differ from those assumed at the balance sheet date and could significantly affect the value attributed to the in force business. The value of in force business could also be affected by changes in the amounts and timing of other net cash flows (principally annual management charges and other fees levied upon the policyholders) or the rate at which the future surpluses and cash flows are discounted. In addition, the extent to which actual experience is different from that assumed will be recognised in the income statement for the period. An analysis of the sensitivity of profit after tax and stockholders' equity to changes in the key life assurance assumptions is set out in note 59 on the life assurance business.

On 17 February 2010 the Group changed its fiscal year end from 31 March, to 31 December to align its financial calendar with that of its peer banks. Accordingly, these financial statements cover the twelve month period from 1 January 2011 to 31 December 2011, with comparatives for prior periods covering the twelve month period from 1 January 2010 to 31 December 2010 and the nine month period from 1 April 2009 to 31 December 2009. As a result, the amounts presented in the financial statements are not entirely comparable.

The Group has five reportable operating segments which reflect the internal financial and management reporting structure and are organised as follows:

Retail Ireland includes all the Group's branch operations in the Republic of Ireland. The branches offer a wide range of financial products and services in addition to the deposit, lending, current account and other money transmission services traditionally offered by banks. It also includes Bank of Ireland Mortgage Bank, ICS Building Society, Business Banking, Private Banking, an instalment credit and leasing business, credit card operations, commercial finance / factoring businesses, together with direct telephone and online banking services.

The Group operates in the life and pensions market in Ireland through its wholly owned subsidiary New Ireland Assurance Company plc which trades as Bank of Ireland Life. Bank of Ireland Life offers life assurance, protection, pensions and investment products to the Group's customers in Ireland via the Bank of Ireland Life network. These products are manufactured by New Ireland Assurance Company plc. New Ireland Assurance Company plc also operates in the independent intermediary market under the New Ireland brand and through a direct sales force.

During the year ended 31 December 2011, the Group sold a portion of its UK mortgage loan portfolio and a portion of its UK investment property portfolio. See note 17 for more detail.

This division comprises Global Markets, Corporate Banking and IBI Corporate Finance.

Global Markets is responsible for managing the Group's interest rate and foreign exchange risks, while also executing the Group's liquidity and funding requirements. Global Markets trades in a range of market instruments on behalf of the Group itself and the Group's customers. The trading activities include dealing in inter-bank deposits and loans, foreign exchange spot and forward contracts, options, financial futures, bonds, swaps, forward rate agreements and equity tracker products. Global Markets' operations are based in Ireland, the UK and the US.

Corporate Banking provides integrated relationship banking services to a significant number of the major Irish corporations, financial institutions and multinational corporations operating in or out of Ireland. The range of lending products provided includes overdraft and short term loan facilities, term loans, project finance and structured finance. Corporate Banking is also engaged in international lending with offices located in the UK, France, Germany, Australia and the US. Its international lending business includes acquisition finance, project finance, term lending and asset based financing principally in the UK, Continental Europe and the US.

During the year ended 31 December 2011, the Group announced the deleveraging of certain project finance loan portfolios, its US investment property portfolio, the Burdale business and certain other international loans, all of which formed part of the Corporate Banking business. Certain of these portfolios were deleveraged during the year with the remaining portfolios included in assets held for sale at the balance sheet date. Further information is shown in notes 17 and 30.

The Group disposed of Bank of Ireland Asset Management, Bank of Ireland Securities Services and Paul Capital Investments LLC during the year ended 31 December 2011.

Group Centre comprises capital management activities, unallocated Group support costs and the cost of the Government Guarantee Schemes.

The Group changed the name of three of its segments as detailed above with no change to composition of its segments.

Other reconciling items represent inter segment transactions which are eliminated upon consolidation.

The analysis of results by operating segment is based on the information used by management to allocate resources and assess performance. Transactions between the business segments are on normal commercial terms and conditions. Internal charges and transfer pricing adjustments have been reflected in the

performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis.

The measures of segmental assets and liabilities provided to the chief operating decision maker are not adjusted for transfer pricing adjustments or revenue sharing agreements as the impact on the measures of segmental assets and liabilities is not significant.

The Group's management reporting and controlling systems use accounting policies that are the same as those referenced in 'Accounting policies and basis of preparation' on pages F-13 to F-40. Allocation methods are also unchanged other than a modification to the method used to allocate funding expense between segments. The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as 'Underlying profit' in its internal management reporting systems.

Capital expenditure comprises additions to property, plant and equipment and intangible assets.

Gross revenue comprises interest income, net insurance premium income, fee and commission income, net trading income, life assurance investment income gains and losses, gain on liability management exercises, other operating income, insurance contract liabilities and claims paid and share of results of associates and joint ventures.

There were no revenues deriving from transactions with a single external customer that amounted to 10% or more of the Group's revenues.

Year ended 31 December 2011

Interest income	4,532		24		2,811		4,250		(886	)	(6,113	)	4,618
Interest expense	(3,683	)	(19	)	(2,444	)	(3,508	)	466		6,104		(3,084	)

Net interest income	849		5		367		742		(420	)	(9	)	1,534
Other income, net of insurance claims	297		122		119		44		(36	)	(22	)	524

Total operating income, net of insurance claims	1,146		127		486		786		(456	)	(31	)	2,058

Other operating expenses	(818	)	(95	)	(342	)	(178	)	(77	)	—		(1,510	)
Depreciation and amortisation	(43	)	(6	)	(38	)	(9	)	(41	)	—		(137	)

Total operating expenses	(861	)	(101	)	(380	)	(187	)	(118	)	—		(1,647	)

Operating profit / (loss) before impairment charges on financial assets and loss on NAMA	285		26		106		599		(574	)	(31	)	411
Impairment charges on financial assets (excluding sold to NAMA)	(1,297	)	—		(435	)	(228	)	—		—		(1,960	)
Impairment charges on assets sold to NAMA	(9	)	—		(26	)	(9	)	—		—		(44	)
Gain / (loss) on sale of assets to NAMA including associated costs	1		—		(5	)	24		13		—		33
Share of results of associates and joint ventures	3		—		36		—		—		—		39

Underlying (loss) / profit before tax	(1,017	)	26		(324	)	386		(561	)	(31	)⁽¹⁾	(1,521	)

Reconciliation of underlying loss before tax to loss before taxation

Underlying loss before tax	(1,521	)
Gain on liability management exercises	1,789
Loss on deleveraging of financial assets	(565	)
Gains arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss'	56
Profit on disposal of business activities	34
Gross-up for policyholder tax in the Life business	10
Cost of restructuring programmes	3
Impact of amendments to defined benefit pension schemes	2
Investment return on treasury stock held for policyholders in the Life business	2

Loss before taxation	(190	)

Year ended 31 December 2010

Interest income	3,853		19		2,818		4,048		(400	)	(5,174	)	5,164
Interest expense	(2,843	)	(21	)	(2,226	)	(3,163	)	151		5,174		(2,928	)

Net interest income	1,010		(2	)	592		885		(249	)	—		2,236
Other income, net of insurance claims	347		175		62		43		(61	)	—		566

Total operating income, net of insurance claims	1,357		173		654		928		(310	)	—		2,802

Other operating expenses	(865	)	(95	)	(336	)	(275	)	(67	)	—		(1,638	)
Depreciation and amortisation	(54	)	(8	)	(36	)	(12	)	(37	)	—		(147	)

Total operating expenses	(919	)	(103	)	(372	)	(287	)	(104	)	—		(1,785	)

Operating profit / (loss) before impairment charges on financial assets and loss on NAMA	438		70		282		641		(414	)	—		1,017
Impairment charges on financial assets (excluding sold or held for sale to NAMA)⁽²⁾	(1,142	)	—		(448	)	(367	)	(70	)	—		(2,027	)
Impairment charges on assets sold or held for sale to NAMA⁽²⁾	(100	)	—		(31	)	(126	)	—		—		(257	)
Loss on sale of assets to NAMA including associated costs	(675	)	—		(398	)	(1,121	)	(47	)	—		(2,241	)
Share of results of associates and joint ventures	12		—		37		—		—		—		49

Underlying (loss) / profit before tax	(1,467	)	70		(558	)	(973	)	(531	)	—		(3,459	)

	Group

Reconciliation of underlying loss before tax to loss before taxation	€m
Underlying loss before tax		(3,459	)
Gain on liability management exercises		1,413
Impact of amendments to defined benefit pension schemes		733
Gains arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss'		360
Impact of 'coupon stopper' on certain subordinated debt		(36	)
Gross-up for policyholder tax in the Life business		22
Investment return on treasury stock held for policyholders in the Life business		20
Cost of restructuring programmes		(18	)
Gain on disposal of business activities⁽³⁾		15

Loss before taxation		(950	)

9 months ended 31 December 2009

Interest income	3,304		14		2,339		3,438		(513	)	(4,394	)	4,188
Interest expense	(2,425	)	(16	)	(1,874	)	(2,733	)	578		4,394		(2,076	)

Net interest income	879		(2	)	465		705		65		—		2,112
Other income, net of insurance claims	129		153		70		83		(96	)	—		339

Total operating income, net of insurance claims	1,008		151		535		788		(31	)	—		2,451

Other operating expenses	(646	)	(78	)	(277	)	(222	)	(59	)	—		(1,282	)
Depreciation and amortisation	(48	)	(4	)	(27	)	(8	)	(26	)	—		(113	)

Total operating expenses	(694	)	(82	)	(304	)	(230	)	(85	)	—		(1,395	)

Operating profit / (loss) before impairment charges on financial assets and loss on NAMA	314		69		231		558		(116	)	—		1,056
Impairment charges on financial assets (excluding held for sale to NAMA)⁽⁴⁾	(1,245	)	—		(699	)	(391	)	—		—		(2,335	)
Impairment charges on assets sold or held for sale to NAMA⁽⁴⁾	(591	)	—		(363	)	(768	)	—		—		(1,722	)
Share of results of associates and joint ventures	8		—		26		1		—		—		35

Underlying (loss) / profit before tax	(1,514	)	69		(805	)	(600	)	(116	)	—		(2,966	)

Reconciliation of underlying loss before tax to loss before taxation

Underlying loss before tax	(2,966	)
Gain on liability management exercises	1,037
Charges arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss'	(6	)
Impact of 'coupon stopper' on subordinated debt	67
Gross-up for policyholder tax in the Life business	64
Investment return on treasury stock held for policyholders in the Life business	(6	)
Loss on disposal of business activities	(3	)

Loss before taxation	(1,813	)

Year ended 31 December 2011 Analysis by operating segment

Capital expenditure	14	4	18	—	67	—		103

Investment in associates
and joint ventures	150	52	74	—	—	—		276

External assets	45,860	11,486	55,034	39,834	2,666	—		154,880
Inter segment assets	66,792	2,228	39,955	149,010	38,894	(296,879	)	—

Total assets	112,652	13,714	94,989	188,844	41,560	(296,879	)	154,880

External liabilities	45,830	12,352	31,191	53,661	1,594	—		144,628
Inter segment liabilities	66,914	479	63,713	133,758	32,015	(296,879	)	—

Total liabilities	112,744	12,831	94,904	187,419	33,609	(296,879	)	144,628

Year ended 31 December 2010 Analysis by operating segment

Capital expenditure	27	3	18	4	38	—		90

Investment in associates and joint ventures	146	—	79	—	—	—		225

External assets	47,715	12,325	52,642	50,949	3,842	—		167,473
Inter segment assets	76,490	1,918	36,765	151,054	47,302	(313,529	)	—

Total assets	124,205	14,243	89,407	202,003	51,144	(313,529	)	167,473

External liabilities	50,467	12,802	26,027	66,693	4,077	—		160,066
Inter segment liabilities	74,415	535	63,591	135,582	39,406	(313,529	)	—

Total liabilities	124,882	13,337	89,618	202,275	43,483	(313,529	)	160,066

9 months ended 31 December 2009 Analysis by operating segment

Capital expenditure	—	2	32	6	20	—		60

Investment in associates and joint ventures	134	—	74	9	—	—		217

External assets	52,999	11,744	53,804	60,101	2,458	—		181,106
Inter segment assets	68,946	1,714	22,202	135,270	47,020	(275,152	)	—

Total assets	121,945	13,458	76,006	195,371	49,478	(275,152	)	181,106

External liabilities	49,109	12,081	18,400	78,562	16,517	—		174,669
Inter segment liabilities	72,401	515	58,298	117,743	26,195	(275,152	)	—

Total liabilities	121,510	12,596	76,698	196,305	42,712	(275,152	)	174,669

The analysis below is on a geographical basis—based on the location of the business unit by where revenues are generated.

Year ended 31 December 2011 Geographical analysis

External revenue	4,638	2,462	130	—		7,230
Inter segment revenue	1,002	757	66	(1,825	)	—

Gross revenue	5,640	3,219	196	(1,825	)	7,230

Capital expenditure	85	18	—	—		103

External assets	94,503	58,632	1,745	—		154,880
Inter segment assets	43,869	16,007	2,905	(62,781	)	—

Total assets	138,372	74,639	4,650	(62,781	)	154,880

External liabilities	110,342	33,068	1,218	—		144,628
Inter segment liabilities	18,004	41,625	3,152	(62,781	)	—

Total liabilities	128,346	74,693	4,370	(62,781	)	144,628

Year ended 31 December 2010 Geographical analysis

External revenue	4,985	2,661	216	—		7,862
Inter segment revenue	974	616	171	(1,761	)	—

Gross revenue	5,959	3,277	387	(1,761	)	7,862

Capital expenditure	72	18	—	—		90

External assets	107,893	56,560	3,020	—		167,473
Inter segment assets	57,983	23,657	3,035	(84,675	)	—

Total assets	165,876	80,217	6,055	(84,675	)	167,473

External liabilities	132,105	25,959	2,002	—		160,066
Inter segment liabilities	27,482	53,411	3,782	(84,675	)	—

Total liabilities	159,587	79,370	5,784	(84,675	)	160,066

9 months ended 31 December 2009 Geographical analysis

External revenues	3,795	2,022	73	—		5,890
Inter segment revenue	1,003	509	226	(1,738	)	—

Gross revenue	4,798	2,531	299	(1,738	)	5,890

Capital expenditure	27	32	1	—		60

External assets	116,259	59,089	5,758	—		181,106
Inter segment assets	57,873	26,684	10,731	(95,288	)	—

Total assets	174,132	85,773	16,489	(95,288	)	181,106

External liabilities	138,292	26,627	9,750	—		174,669
Inter segment liabilities	29,722	59,478	6,089	(95,289	)	—

Total liabilities	168,014	86,105	15,839	(95,289	)	174,669

Included within interest income is €217 million (year ended 31 December 2010: €210 million; nine month period ended 31 December 2009: €161 million) arising on financial assets on which an impairment provision has been recognised. Net interest income also includes a charge of €154 million (year ended 31 December 2010: charge of €411 million; nine month period ended 31 December 2009: charge of €351 million) transferred from the cash flow hedge reserve (see page F-8).

Interest income in the twelve month period ended 31 December 2010 includes a gain of €15 million arising on the re-measurement of a loan note received as consideration for the disposal of a business activity in the nine month period ended 31 December 2009, due to an increase in the expected cash flows.

Included within interest expense for the year ended 31 December 2011 is an amount of €449 million (year ended 31 December 2010: €275 million; nine month period ended 31 December 2009: nil) relating to the cost of the Credit Institutions (Eligible Liabilities Guarantee) Scheme (ELG). The cost of this scheme is classified as interest expense as it is directly attributable and incremental to the issue of specific financial liabilities. Further information on this scheme is outlined in note 56. The cost of the Credit Institutions (Financial Support) Scheme (CIFS) for the year ended 31 December 2010 of €68 million (nine month period ended 31 December 2009: €105 million) is shown in fee and commission expense (note 6). This CIFS scheme expired on 29 September 2010.

Interest expense for the year ended 31 December 2010 includes a charge of €35 million (nine month period ended 31 December 2009: gain of €58 million) in relation to a change in the expected cash flows on certain subordinated liabilities (note 2).

Included in other fees is an amount of €2 million (year ended 31 December 2010: €3 million; nine month period ended 31 December 2009: €3 million) related to trust and other fiduciary fees.

The Government Guarantee fee for the year ended 31 December 2010 and the nine month period ended 31 December 2009 related to the fee paid under the CIFS Scheme, which commenced on 30 September 2008 and expired on 29 September 2010. The cost of the ELG scheme for the year ended 31 December 2011 of €449 million (year ended 31 December 2010: €275 million; nine month period ended 31 December 2009: €nil) is recognised in interest expense (note 4).

Other fee and commission expense of €192 million (year ended 31 December 2010: €189 million; nine month period ended 31 December 2009: €150 million) primarily comprises brokerage fees, sales commissions and other fees to third parties.

Net trading income / (expense) of €19 million (year ended 31 December 2010: net trading income of €225 million; nine month period ended 31 December 2009; net trading expense of €28 million) includes the gains and losses on financial instruments held for trading and those designated at fair value through profit or loss (other than unit linked life assurance assets and investment contract liabilities). It includes the gains and losses arising on the purchase and sale of these instruments, the interest income receivable and expense payable and the fair value movement on these instruments, together with the funding cost of the trading instruments. It also includes €54 million (year ended 31 December 2010: €124 million; nine month period ended 31 December 2009: €20 million) in relation to net gains arising from foreign exchange.

Net trading income / (expense) includes the total fair value movement (including interest receivable and payable) on liabilities that have been designated at fair value through profit or loss. The interest receivable on amortised cost assets which are funded by those liabilities is reported in net interest income. Net trading income also includes the total fair value movements on derivatives that are economic hedges of assets and liabilities which are measured at amortised cost, the net interest receivable or payable on which is also reported within net interest income. The net amount reported within net interest income relating to these amortised cost instruments was €102 million (year ended 31 December 2010: €175 million; nine month period ended 31 December 2009: €71 million).

Net fair value hedge ineffectiveness comprises a net gain from hedging instruments of €56 million (year ended 31 December 2010: net gain of €280 million; nine month period ended 31 December 2009: net loss of €97 million) offsetting a net loss from hedged items of €55 million (year ended 31 December 2010: net loss of €254 million; nine month period ended 31 December 2009: net gain of €104 million).

The net gain from the change in credit spreads relating to the Group's liabilities designated at fair value through profit or loss was €56 million (year ended 31 December 2010: €360 million; nine month period ended 31 December 2009: net loss of €6 million). Of this amount, €42 million (year ended 31 December 2010: €297 million) has been recognised within net trading income, with a further €11 million (year ended 31 December 2010: €58 million) included within insurance contract liabilities and claims paid and €3 million (year ended 31 December 2010: €5 million) included in other operating income. In prior periods, this was all included in net trading income. During the year ended 31 December 2011, subordinated liabilities measured at fair value through profit or loss, with a cumulative fair value gain from changes in credit spreads of €56 million (year ended 31 December 2010: €25 million (nine month period ended 31 December 2009: €nil) were repurchased at fair value as part of the Group's liability management

exercises. As a result, the cumulative impact at 31 December 2011 from the change in credit spreads relating to liabilities recognised on the balance sheet at that date is a net gain of €425 million (year ended 31 December 2010: €425 million; nine month period ended 31 December 2009: €90 million).

Included within net trading income in the year ended 31 December 2010 is a charge of €1 million (nine month period ended 31 December 2009: gain of €9 million) in relation to the revised estimates of future cash flows on certain subordinated liabilities (note 2).

Life assurance investment income, gains and losses comprise the investment return, realised gains and losses and unrealised gains and losses which accrue to the Group on all investment assets held by Bank of Ireland Life, other than those held for the benefit of policyholders whose contracts are considered to be investment contracts.

IFRS requires that Bank of Ireland stock held by the Group, including that held by Bank of Ireland Life for the benefit of policyholders, is reclassified as treasury stock and accounted for as a deduction from equity. Changes in the value of any treasury stock held are recognised in equity at the time of disposal and dividends are not recognised as income or distributions.

The impact on the Group income statement for the year ended 31 December 2011 of applying this accounting treatment is that the loss arising on life assurance investment income, gains and losses of €39 million has been reduced by €1 million which is the change in value of Bank of Ireland stock held under insurance contracts. Other operating income (note 10) has been increased by €1 million which is the change in value of stock held under investment contracts. The combined adjustment is €2 million.

As part of its capital management activities, including the recapitalisation of the Bank (see note 50), the Group has repurchased and /or exchanged certain subordinated liabilities and mortgage-backed securities at significant discounts to their nominal amounts.

The table below summarises the results of the transactions undertaken in February 2011 and March 2011.

The net gain before transaction costs on the repurchase of these subordinated liabilities amounted to €17 million (€17 million after taxation) being the difference between the consideration paid of €57 million (being the fair value of new notes issued of €56 million and cash of €1 million) and the carrying value of the notes repurchased of €74 million.

The gain of €1,497 million arising from the liability management exercises undertaken on the subordinated liabilities pursuant to the 2011 PCAR was related to dated debt securities (gain of €1,032 million) and undated debt securities (gain of €465 million) as set out in the tables below:

		Nominal amount exchanged / repurchased

						Average price (% of nominal amount exchanged)
	Nominal amount prior to debt exchange
Dated debt exchanges Description	Nominal amount prior to debt exchange	Debt for equity offer	Cash offer	Call option^*	Residual nominal amount
€650 million
Fixed / Floating Rate Subordinated Note due 2019	€202m	€178m	€5m	€19m	—	36	%
€600 million
Subordinated Floating Rate Notes 2017	€48m	€32m	€15m	—	€1m	39	%
€750 million
Floating Rate Subordinated Notes 2017	€91m	€87m	—	€4m	—	38	%
US$600 million
Floating Rate Subordinated Notes due 2018	US$185m	US$180m	US$1m	US$4m	—	39	%
Stg£400 million
Fixed / Floating Rate Subordinated Note due 2018	Stg£57m	Stg£57m	—	—	—	40	%
Stg£450 million
Fixed / Floating Rate Subordinated Notes 2020	Stg£272m	Stg£268m	Stg£2m	Stg£2m	—	40	%
Stg£75 million
10³/4% Subordinated Note 2018	Stg£27m	Stg£25m	Stg£1m	Stg£1m	—	37	%
€1,002 million
Fixed Rate Subordinated Notes 2020	€747m	€530m	€11m	—	€206m	40	%
Stg£197 million
Fixed Rate Subordinated Notes 2020	Stg£87m	Stg£61m	Stg£24m	—	Stg£2m	41	%
CAD$400 million
Fixed / Floating Rate Subordinated Notes 2015	CAD$138m	CAD$38m	CAD$1m	—	CAD$99m	39	%
CAD$145 million
Fixed / Floating Rate Subordinated 2018	CAD$90m	CAD$39m	CAD$50.8m	—	CAD$0.2m	42	%

The net gain before transaction costs set out in the table above amounted to €1,032 million (€1,025 million after taxation), being the difference between the fair value of the consideration of €625 million and the carrying value of the securities of €1,657 million.

		Nominal amount exchanged / repurchased

						Average price (% of nominal amount exchanged)
	Nominal amount prior to debt exchange
Dated debt exchanges Description	Nominal amount prior to debt exchange	Debt for equity offer	Cash offer	Call option^*	Residual nominal amount
€600 million
7.40% Guaranteed step-up Callable Perpetual Preferred Securities	€253m	€108m	€113m	—	€32m	34	%
Stg £350 million
6.25% Guaranteed Callable Perpetual Preferred Securities	Stg£40m	Stg£39m	Stg£1m	—	—	20	%
€600 million
Fixed Rate / Variable rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	€216m	€96m	€54m	€66m	—	11	%
US$800 million
Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	US$61m	US$55m	US$3m	US$3m	—	19	%
US$400 million
Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	US$20m	US$14m	US$2m	US$4m	—	14	%
Stg£500 million
Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	Stg£5m	Stg£4m	Stg£1m	—	—	18	%
Stg£75 million
13.375% Perpetual Subordinated Bonds	Stg£75m	—	Stg£29m	—	Stg£46m	35	%
US$150 million Floating Rate Note (FRN) (accounted for as preference equity**)	US$75m	US$65m	US$10m	—	—	37	%

The net gain before transaction costs set out in the table above amounted to €465 million (€465 million after taxation), being the difference between the fair value of the consideration of €131 million and the carrying value of the notes repurchased of €596 million.

The following table summarises the results of the repurchase of certain residential mortgage-backed securities:

Repurchase of mortgage-backed securities during the year ended 31 December 2011 Description / Issuer	Nominal amount prior to repurchase	Nominal amount repurchased	Residual nominal amount	Average price (% of nominal amount repurchased)

Kildare Securities Limited mortgage-backed
Floating Rate Notes December 2043:
Class A2	US$474m	US$15m	US$459m	88	%
Class A3	€1,062m	€260m	€802m	75	%
Class B	€97m	€61m	€36m	51	%
Class C	€91m	€60m	€31m	42	%
Class D	€27m	€21m	€6m	33	%
Brunel Residential Mortgage Securitisation No. 1 plc
Mortgage-backed Floating Rate Notes January 2039:
Class A4a	€723m	€125m	€598m	92	%
Class A4b	Stg£743m	Stg£301m	Stg£442m	75	%
Class A4c	US$1,111m	US$141m	US$970m	92	%
Class B4a	€98m	€9m	€89m	77	%
Class B4b	Stg£19m	Stg£12m	Stg£7m	75	%
Class C4a	€156m	€28m	€128m	72	%
Class C4b	Stg£23m	Stg£2m	Stg£21m	67	%
Class C4c	US$23m	US$8m	US$15m	72	%
Class D4a	€122m	€69m	€53m	66	%
Class D4b	Stg£21m	Stg£9m	Stg£12m	65	%
Class D4c	US$23m	US$21m	US$2m	64	%
Bank of Ireland Mortgage Bank
ACS 4% 5 July 2013	€2,100m	€8m	€2,092m	89	%
ACS 3.25% 22 June 2015	€2,000m	€20m	€1,980m	77	%

The net gain before transaction costs on the repurchase of these mortgage-backed securities amounted to €307 million (€268 million after taxation) being the difference between the fair value of the consideration of €872 million and the carrying value of the mortgage-backed securities of €1,179 million.

During the year 31 December 2010 the Group undertook a range of liability management exercises on its subordinated liabilities as follows:

The following tables summarise the results of the debt for debt exchanges and the debt for equity offer in the year ended 31 December 2010.

Dated securities Description	Total nominal amount exchanged during year	Average price (% of nominal amount exchanged)

€650 million
Fixed / Floating Subordinated Note due 2019	€448m	65	%
€600 million
Subordinated Floating rate Notes 2017	€552m	67	%
€750 million
Floating Rate Subordinated Notes 2017	€657m	67	%
€1,002 million
Fixed Rate Subordinated Notes 2020	€255m	57	%
Stg£400 million
Fixed / Floating Rate Subordinated Notes 2018	Stg£343m	71	%
Stg£450 million
Fixed / Floating Rate Subordinated Notes 2020	Stg£178m	53	%
Stg£75 million
10³/4% Subordinated Note 2018	Stg£48m	58	%
Stg£197 million
Fixed Rate Subordinated Notes 2020	Stg£110m	57	%
US$600 million
Subordinated Floating Rate Notes due 2018	US$415m	61	%
CAD$400 million
Fixed / Floating Rate Subordinated Notes 2015	CAD$179m	81	%

The net gain after transaction costs amounted to €1,126 million (€1,103 million after taxation) being the difference between the fair value of the new notes issued of €1,934 million and the carrying value of the notes repurchased of €3,073 million, less transaction costs of €13 million.

Undated securities Description	Total nominal amount exchanged during year	Price (% of nominal amount exchanged)

€600 million 7.40% Guaranteed Step-up Callable
Perpetual Preferred Securities	€223m	86	%
Stg£350 million
6.25% Guaranteed Callable Perpetual Preferred Securities	Stg£6m	63	%
€600 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	€134m	60	%
US$800 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	US$339m	73	%
US$400 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	US$180m	72	%
Stg£500 million
Fixed Rate / Variable Rate Guaranteed
Non-voting Non-Cumulative Perpetual Preferred Securities	Stg£32m	58	%
US$150 million Floating Rate Note (FRN)
(accounted for as preference equity*)	US$70m	58	%

The net gain after transaction costs on the debt for equity offer on subordinated liabilities amounted to €276 million (€269 million after taxation) being the difference between the fair value of the consideration of €588 million and the carrying value of the securities of €871 million less transaction costs of €7 million.

During the nine month period ended 31 December 2009, the Group repurchased certain subordinated liabilities for cash. The gains arising on these transactions are summarised below:

The following table summarises the results of the repurchase of these subordinated liabilities in the nine month period ended 31 December 2009.

Undated securities Description	Total nominal amount repurchased during the period

€600 million 7.40% Guaranteed Step-up Callable
Perpetual Preferred Securities	€124m	50	%
Stg£350 million
6.25% Guaranteed Callable Perpetual Preferred Securities	Stg£304m	42	%
€600 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	€250m	38	%
US$800 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	US$400m	40	%
US$400 million
Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	US$200m	40	%
Stg£500 million
Fixed Rate / Variable Rate Guaranteed
Non-voting Non-Cumulative Perpetual Preferred Securities	Stg£463m	40	%

The net gain after transaction costs on the repurchase of the subordinated liabilities amounted to €1,037 million (€1,029 million after taxation) being the net of the consideration paid of €683 million and the carrying value of the securities of €1,720 million.

Included within other income is a net charge of €12 million (year ended 31 December 2010: gain of €26 million; nine month period ended 31 December 2009: charge of €62 million) arising on fair value movements on international investment properties and related activities. In addition, other income for the nine month period ended 31 December 2009 included a charge of €74 million arising from an unfavourable court ruling in connection with a European property investment.



Surrenders	(795	)	(597	)	(480	)
Death and critical illness	(148	)	(108	)	(105	)
Annuities	(41	)	(65	)	(34	)
Maturities	(1	)	(3	)	(3	)
Other	(39	)	(35	)	(34	)

Gross claims	(1,024	)	(808	)	(656	)
Reinsurance	53		47		38

Net claims paid	(971	)	(761	)	(618	)

Change in contract liabilities:
Gross	151		(530	)	(1,023	)
Reinsurance	70		23		179

Net change in insurance contract liabilities	221		(507	)	(844	)

Net insurance contract liabilities and claims paid	(750	)	(1,268	)	(1,462	)



Administrative expenses
—Staff costs (see analysis below)	862		1,003		789
—Other administrative expenses	635		645		479
Depreciation
—Intangible assets (note 34)	99		107		75
—Property, plant and equipment (note 36)	37		40		32
(Reversal) / impairment of intangible assets	(4	)	(2	)	6
Revaluation of property	15		10		6

Total other operating expenses	1,644		1,803		1,387

Staff costs are analysed as follows:
Wages and salaries	692		748		569
Social security costs	72		76		61
Retirement benefit costs (defined benefit plans) (note 46)	88		174		147
Retirement benefit costs (defined contribution plans)	2		—		2
Share based payment schemes	—		(6	)	—
Other	8		11		10

Staff costs	862		1,003		789

Retirement benefit costs (defined benefit plans) exclude a gain of €2 million (year ended 31 December 2010: a gain of €733 million; nine month period ended 31 December 2009: €nil) in relation to the impact of amendments to defined benefit pension schemes. This gain has been shown as a separate line item on the income statement and further details are set out in note 46.

Included in Other administrative expenses above is an amount of €69 million (year ended 31 December 2010: €65 million; nine month period ended 31 December 2009: €49 million) in relation to operating lease payments.

In the year ended 31 December 2011 the average number of staff (full time equivalents) was 13,671 (year ended 31 December 2010: 14,284; nine month period ended 31 December 2009: 14,755) categorised as follows in line with the operating segments as stated in note 2.

The decrease in staff numbers in Corporate and Treasury reflects the sales of BIAM and BoISS during the year ended 31 December 2011 and further details are set out in note 19.

The number of staff (full time equivalents) at 31 December 2011 was 13,234 (year ended 31 December 2010: 14,235; nine month period ended 31 December 2009: 14,647).



Audit and assurance services
Statutory audit			2.3	0.9	3.2	4.1	3.8
Assurance services
—Assurance services relating to Capital Raising			1.8	—	1.8	0.8	—
—Other assurance services	(iii	)	2.3	0.5	2.8	3.4	4.3

			6.4	1.4	7.8	8.3	8.1
Other services
Taxation services			0.1	0.1	0.2	0.4	0.3
Other non-audit services	(iv	)	—	0.3	0.3	—	—

Auditors' remuneration			6.5	1.8	8.3	8.7	8.4

The figures in the above table relate to fees paid to PricewaterhouseCoopers (PwC). The Group Audit Committee has reviewed the level of fees and is satisfied that it has not affected the independence of the auditors.

In the 2010 Annual Report, the amount disclosed in respect of impairment charges on financial assets (excluding assets sold or held for sale to NAMA) for the year ended 31 December 2010 was €2,055 million (nine month period ended 31 December 2009: €2,373 million).

At 31 December 2011, the Group did not have any assets held for sale to NAMA (31 December 2010: €804 million, after impairment provisions of €75 million; nine month period ended 31 December 2009: €9,581 million, after impairment provisions of €2,778 million).

In the 2010 Annual Report, the amount disclosed in respect of impairment charges on assets sold or held for sale to NAMA at 31 December 2010 was €229 million (nine month period ended 31 December 2009: €1,684 million).

The gain / (loss) on sale of assets to NAMA which reflects those assets that were sold to NAMA during the year ended 31 December 2011 and the year ended 31 December 2010 is set out below. There were no assets sold to NAMA during the nine month period ended 31 December 2009.

	Year ended 31 December 2011						Year ended 31 December 2010

Gain / (loss) on sale of assets to NAMA	€m			€m			€m			€m
Fair value of consideration⁽¹⁾					246						5,046
Assets transferred
—Loans sold to NAMA (nominal value)		(498	)					(9,340	)
—Derivatives sold to NAMA (fair value)		—						(61	)
—Impairment provisions at date of sale		198			(300	)		2,237			(7,164	)

Other items⁽²⁾					(3	)					(123	)

					(57	)					(2,241	)
Adjustment to consideration in respect of assets transferred during 2010⁽³⁾					90						—

Gain / (loss) on sale of assets to NAMA					33						(2,241	)

At 31 December 2011, the Group did not have any assets held for sale to NAMA (31 December 2010: €804 million, after impairment provisions of €75 million) (note 29).

The Group announced the deleveraging of financial assets with a carrying value of €8.6 billion of which €7.6 billion had been completed and derecognised by 31 December 2011. €0.9 billion of the remaining €1 billion in assets announced has been completed and derecognised since 31 December 2011 with the remaining €0.1 billion expected to settle in the coming months.

An analysis of the deleveraging completed during 2011 (which includes the sale of loan portfolios to third parties together with managed re-financing decisions taken by the Group) is set out below:

The assets of €1.0 billion which the Group has contracted to sell but where the sale had not completed by 31 December 2011 are reported as other assets classified as held for sale as at 31 December 2011 and further information is shown in note 30.

A loan portfolio and certain associated derivatives with a carrying value of €1.5 billion was sold to Kennedy Wilson and its institutional partners. The consideration for these loans was €1.2 billion, giving rise to a loss on disposal after transaction costs of €0.3 billion. The sale was completed in December 2011.

A loan portfolio with a carrying value of €1.4 billion was sold to The Mortgage Works (UK) plc, a wholly owned subsidiary of Nationwide Building Society. The consideration for these loans was €1.3 billion, giving rise to a loss on disposal after transaction costs of €0.1 billion. The sale was completed in December 2011.

During 2011, the Group agreed the sale of Project Finance loans with a total carrying value of €1.3 billion to GE Energy Financial Services, Sumitomo Mitsui Banking Corporation and other third parties. By 31 December 2011, €944 million of these sales had completed and the assets were derecognised. The consideration received for these loans was €833 million, giving rise to a loss on disposal after transaction costs of €111 million.

As a result, as at 31 December 2011, the Group had a remainder of €0.4 billion of loans that were contracted to sell. These loans are reported as other assets classified as held for sale at 31 December 2011 (see note 30).

A loan portfolio with a carrying value of €0.8 billion was sold to Wells Fargo Bank N.A. for a consideration of €0.8 billion. The sale was completed during September 2011.

Other International loans with a carrying value of €2.9 billion were derecognised during 2011, principally through managed refinancing decisions taken by the Group.

The Group 2011 PCAR / PLAR requirements were set down during 2011, therefore there is no comparative information for the year ended 31 December 2010 or the nine month period ended 31 December 2009.

Summarised aggregated financial information for Bank of Ireland's associates and joint ventures is as follows:



Income statement amounts:
Income	191		195		154
Gross Profit	164		164		119
Profit before tax	116		127		84
Profit after tax	90		98		63
Balance sheet amounts:
Current Assets	305		375		357
Non-current assets	341		329		291
Current liabilities	(159	)	(218	)	(210	)
Non-current liabilities	—		(1	)	—

Net assets	487		485		438



Corporate and Treasury division
Bank of Ireland Asset Management (BIAM)	39		—	—
Bank of Ireland Security Services (BoISS)	32		—	—
Paul Capital Investments LLC	—		—	—
Impairment of goodwill in Burdale	(45	)	—	—
Iridian Asset Management LLC	—		—	(10	)
Guggenheim Alternative Asset Management LLC	—		—	7
Retail Ireland division
Foreign Currency Exchange Corporation (FCE) Corporation	8		—	—

Profit / (loss) on disposal of business activities	34		—	(3	)

In line with the commitments given in the EU Restructuring plan, on 22 October 2010 the Group announced the sale of BIAM to State Street Global Advisors for cash consideration of €57 million, subject to certain conditions. On 10 January 2011, all conditions of the sale were satisfied and the sale was completed, with a resulting profit of €39 million.

On 24 February 2011, the Group announced the sale of BoISS to Northern Trust Corporation for cash and deferred consideration. The fair value of the consideration was estimated to be €51 million and the sale was completed on 1 June 2011, with a resulting profit of €32 million.

In line with the commitments given in the EU Restructuring plan, on 21 April 2011 the Group completed the sale of its 50% holding in Paul Capital Investments LLC to the firm's existing management team for consideration of €9 million. The profit was less than €1 million.

The Group incurred a charge of €45 million, being the impairment of the goodwill in Burdale following the announcement on 19 December 2011 of the sale of this business to Wells Fargo International Banking Corporation. The sale completed on 1 February 2012, resulting in a loss of €6 million which will be included in the income statement for the year ended 31 December 2012.

In line with the commitments given in the EU Restructuring plan, on 9 May 2011 the Group announced the sale of FCE Corporation to Wells Fargo Bank N.A. for consideration of €31 million. On 1 August 2011, all conditions were satisfied and the sale was completed with a resulting profit of €8 million.



Current tax
Irish Corporation Tax
—Current year	(25	)	(21	)	(19	)
—Prior year	32		11		5
Double taxation relief	2		2		1
Foreign tax
—Current year	(49	)	(29	)	2
—Prior year	7		(2	)	(1	)

	(33	)	(39	)	(12	)
Deferred tax credit
Origination and reversal of temporary differences (note 45)	263		380		356

Taxation credit	230		341		344

The reconciliation of tax on the loss before taxation at the standard Irish corporation tax rate to the Group's actual tax credit for the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009 is as follows:



Loss before tax multiplied by the standard rate of corporation tax in Ireland of 12.5% (2010: 12.5%; 2009: 12.5%)	24		119		227
Effects of:
Gains arising on repurchase of subordinated liabilities	185		156		121
Foreign earnings subject to different rates of tax	84		51		70
Other adjustments for tax purposes	(4	)	49		(12	)
Previously unrecognised deferred tax assets	—		15		—
Non-deductible goodwill impairment	(13	)	—		—
Share of results of associates and joint ventures shown post tax in the income statement	5		6		3
Elimination of investment return on treasury stock held for the benefit of policyholders	—		2		(1	)
Impact of corporation tax rate change on deferred tax	(18	)	(10	)	—
Non-deductible expenses	(32	)	(15	)	(9	)
Prior year adjustments	10		—		—
Bank of Ireland Life companies—different basis of accounting	(23	)	(32	)	(55	)
Tax exempt profits on disposal of business activities	12		—		—

Taxation credit	230		341		344

The effective taxation rate for the year ended 31 December 2011 is a credit of 121% (year ended 31 December 2010: credit of 36%; nine month period ended 31 December 2009: credit of 19%). Excluding the impact of the gain on liability management exercises, loss on disposal of loan books, gains arising on the movement in credit spreads on the Group's own debt and deposits accounted for at 'fair value through profit or loss', gain on disposal of business activities, gross-up for policyholder tax in the Life business, impact of changes in pension benefits, cost of restructuring programmes, investment return on treasury stock held for policyholders and impact of 'coupon stopper' on subordinated debt the effective taxation rate was 11% compared to a rate of 14% for the year ended 31 December 2010 and a rate of 16% for the nine month period ended 31 December 2009.

	Year ended 31 December 2011									Year ended 31 December 2010									9 months ended 31 December 2009

	Pre tax amount €m			Tax (charge) / credit €m			Net of tax amount €m			Pre tax amount €m			Tax (charge) / credit €m			Net of tax amount €m			Pre tax amount €m			Tax (charge) / credit €m			Net of tax amount €m
Net change in revaluation reserve		(8	)		2			(6	)		(18	)		3			(15	)		(60	)		7			(53	)
Cash flow hedge
Changes in fair value		(1,034	)		234			(800	)		(205	)		100			(105	)		(555	)		136			(419	)
Transfer to income statement		1,380			(266	)		1,114			520			(140	)		380			676			(175	)		501

Net change in cash flow hedge reserve		346			(32	)		314			315			(40	)		275			121			(39	)		82

Available for sale
Changes in fair value		68			(8	)		60			(402	)		48			(354	)		1,110			(137	)		973
Transfer to income statement
—On asset disposal		28			(4	)		24			(15	)		2			(13	)		(55	)		6			(49	)
—Impairment		21			(2	)		19			168			(21	)		147			—			—			—

Net change in reserve		117			(14	)		103			(249	)		29			(220	)		1,055			(131	)		924

Net actuarial (loss) / gain on defined benefit pension funds		(137	)		20			(117	)		465			(74	)		391			(99	)		25			(74	)
Foreign exchange transaction gains		180			—			180			157			—			157			117			—			117

Other comprehensive income for the period		498			(24	)		474			670			(82	)		588			1,134			(138	)		996

The calculation of basic loss per unit of €0.05 (2010: €0.10; 2009: €0.64) ordinary stock is based on the profit / (loss) attributable to ordinary stockholders divided by the weighted average number of units of ordinary stock in issue excluding treasury stock and own stock held for the benefit of life assurance policyholders.



Basic
Profit / (loss) attributable to stockholders	45		(614	)	(1,460	)
Dividends on other equity interests	(7	)	—		(4	)
Dividend on 2009 Preference Stock	(188	)	(231	)	(210	)
Repurchase of capital note (note 49)	41		24		—

Loss attributable to ordinary stockholders	(109	)	(821	)	(1,674	)

Weighted average number of units of stock in issue excluding treasury stock and own stock held for the benefit of life assurance policyholders	15,704		3,811		1,587

Basic loss per share (cent)	(0.7	)	*(21.5	)	*(105.5	)

As set out in note 48, 19,078 million new units of €0.05 ordinary stock were issued in July 2011 at €0.10 per share on the basis of eighteen new units of ordinary stock for every five units held under the terms of the Rights Issue. The actual cum rights price on 11 July 2011, the last day of quotation cum rights, was €0.101 per unit of ordinary stock and the theoretical ex-rights price per unit of €0.05 ordinary stock was therefore €0.1002 per share. The comparative loss per share figures have been calculated by applying a factor of 1.007809 to the average number of units of ordinary stock in issue for the year ended 31 December 2010 and the nine month period ended 31 December 2009 in order to adjust for the bonus element of the Rights Issue.

The diluted loss per share is based on the earnings / loss attributable to ordinary stockholders divided by the weighted average ordinary stock in issue excluding treasury stock and own stock held for the benefit of life assurance policyholders adjusted for the effect of all dilutive potential ordinary stock.



Diluted
Earnings / (loss) attributable to stockholders	45		(614	)	(1,460	)
Dividends on other equity interests	(7	)	—		(4	)
Dividend on 2009 Preference Stock	(188	)	(231	)	(210	)
Repurchase of capital note (note 9)	41		24		—

Loss attributable to ordinary stockholders	(109	)	(821	)	(1,674	)

Weighted average number of units of stock in issue excluding treasury stock and own stock held for the benefit of life assurance policyholders	15,704		3,811		1,587
Effect of all dilutive potential ordinary stock	—		—		—

	15,704		3,811		1,587

Diluted loss per share (cent)	(0.7	)	*(21.5	)	*(105.5	)

Where a dividend on the 2009 Preference Stock is not paid in either cash or units of ordinary stock, that dividend must subsequently be paid in the form of units of ordinary stock before a subsequent dividend on the 2009 Preference Stock or dividend on ordinary stock can be paid. The dividend required for the year ended 31 December 2011 has been deducted in the calculation of basic and diluted loss per share.

For the years ended 31 December 2011 and 31 December 2010 and for the nine month period ended 31 December 2009 there was no difference in the weighted average number of units of stock used for basic and diluted net loss per share as the effect of all potentially dilutive ordinary units of stock outstanding was anti-dilutive.

As at 31 December 2011 there were stock options over 3 million units of ordinary units of stock (31 December 2010: 9 million units of potential ordinary stock; 31 December 2009: 12 million units of potential ordinary stock and warrants issued to NPRFC over 335 million units of stock) which could potentially have a dilutive impact in the future, but which were anti-dilutive in the year ended 31 December 2011, the year ended 31 December 2010 and the nine month period ended 31 December 2009 respectively.

The Group holds a portfolio of bonds for trading purposes with an average rating of A (31 December 2010: BBB+).

The Group's use, objectives and policies on managing the risks that arise in connection with derivatives, including the policies for hedging, are included in the Risk Management Report on pages 232 to 236. The notional amounts of certain types of derivatives do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group's exposure to credit risk. The derivative instruments give rise to assets or liabilities as a result of fluctuations in market rates or prices relative to their terms.

The notional amounts and fair values of derivative instruments held by the Group are set out in the following tables:

			Fair Values

31 December 2011	Contract / notional amount €m		Assets €m		Liabilities €m
*Derivatives held for trading*
Foreign exchange derivatives
Currency forwards		10,417		93		166
Currency swaps		768		36		52
Over the counter currency options		371		3		3

Total foreign exchange derivatives held for trading		11,556		132		221

Interest rate derivatives
Interest rate swaps		177,753		2,837		2,838
Cross currency interest rate swaps		12,586		872		598
Forward rate agreements		3,035		3		2
Over the counter interest rate options		5,441		98		91

Total interest rate derivatives held for trading		198,815		3,810		3,529

Equity contracts and credit derivatives
Equity index-linked contracts held		5,125		130		83
Equity conversion feature in Contingent Capital note		1,000		84		—
Credit derivatives		378		2		2

Total derivative assets / liabilities held for trading		216,874		4,158		3,835

*Derivatives held for hedging*
Derivatives designated as fair value hedges
Interest rate swaps		22,661		672		535
Cross currency interest rate swaps		732		93		3

Total designated as fair value hedges		23,393		765		538

Derivatives designated as cash flow hedges
Interest rate swaps		80,798		1,369		1,325
Cross currency interest rate swaps		15,772		69		320
Currency forwards		19		1		—

Total designated as cash flow hedges		96,589		1,439		1,645

Total derivative assets / liabilities held for hedging		119,982		2,204		2,183

Total derivative assets / liabilities		336,856		6,362		6,018

The fair values and notional amounts of derivative instruments held are set out in the following tables:

			Fair Values

31 December 2010	Contract / notional amount €m		Assets €m		Liabilities €m
*Derivatives held for trading*
Foreign exchange derivatives
Currency forwards		25,564		386		242
Currency swaps		1,051		48		57
Over the counter currency options		1,210		8		8

Total foreign exchange derivatives held for trading		27,825		442		307

Interest rate derivatives
Interest rate swaps		221,716		2,121		2,287
Cross currency interest rate swaps		25,326		969		678
Forward rate agreements		11,420		5		5
Over the counter interest rate options		8,903		80		73

Total interest rate derivatives held for trading		267,365		3,175		3,043

Equity contracts and credit derivatives
Equity index linked contracts held		5,334		134		107
Credit derivatives		420		—		—

Total derivative assets / liabilities held for trading		300,944		3,751		3,457

*Derivatives held for hedging*
Derivatives designated as fair value hedges
Interest rate swaps		22,388		701		556
Cross currency interest rate swaps		1,577		223		1

Total designated as fair value hedges		23,965		924		557

Derivatives designated as cash flow hedges
Interest rate swaps		76,141		1,207		1,431
Currency forwards		23		1		—
Currency swaps		1,836		492		—

Total designated as cash flow hedges		78,000		1,700		1,431

Total derivative assets / liabilities held for hedging		101,965		2,624		1,988

Total derivative assets / liabilities		402,909		6,375		5,445

Derivatives classified as held for trading comprise derivatives entered into with trading intent as well as derivatives entered into with economic hedging intent to which the Group does not apply hedge accounting. Derivatives classified as held for hedging in the table above comprise only those derivatives to which the Group applies hedge accounting.

As set out in its Risk Management Report on page 236, the Group uses netting arrangements and collateral agreements to reduce its exposure to credit losses. Of the derivative assets of €6.4 billion at 31 December 2011 (31 December 2010: €6.4 billion), €3.9 billion (31 December 2010: €3.5 billion) are

available for offset against derivative liabilities under netting arrangements. These transactions do not meet the criteria under IAS 32 to enable the assets to be presented net of the liabilities.

Placements with other banks includes cash collateral of €2.2 billion (31 December 2010: €1.8 billion) placed with derivative counterparties in respect of a net derivative liability position of €2.1 billion (31 December 2010: €2.1 billion).

Net derivative assets of €2.5 billion (31 December 2010: €2.9 billion) are not covered by master netting arrangements or relate to counterparties covered by master netting arrangements with whom a net asset position was held at the balance sheet date. At 31 December 2011 cash collateral of €1.1 billion (31 December 2010: €0.7 billion) was held against these assets and is reported within Deposits from banks (note 38).

The Group designates certain derivatives as hedging instruments in either fair value or cash flow hedge relationships.

Certain interest rate and cross currency interest rate derivatives are designated as hedging instruments. These are primarily used to reduce the interest rate and foreign exchange exposure on the Group's fixed rate debt held and debt issued portfolios.

The Group designates certain interest rate and currency derivatives in cash flow hedge relationships in order to hedge the exposure to variability in future cash flows arising from floating rate assets and liabilities and from foreign currency assets. Movements in the cash flow hedge reserve are shown in the statement of changes in equity (page F-8).

The years in which the hedged cash flows are expected to occur are shown in the table below.

The hedged cash flows are expected to impact the income statement in the following years, excluding any hedge accounting adjustments that may be applied:

The increase in hedged cash flows during the year ended 31 December 2011 is due to the designation in cash flow hedge relationships of cross currency swaps entered into by the Group to hedge foreign currency assets.

During the year ended 31 December 2011 and 31 December 2010, there were no forecast transactions to which the Group has applied hedge accounting which were no longer expected to occur.

A portion of the Group's life assurance business takes the legal form of investment contracts, under which legal title to the underlying asset is held by the Group, but the inherent risks and rewards in the assets are borne by the policyholders. Due to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities due to policyholders and any change in the value of the assets results in an equal change in the value of the amounts due to policyholders. The associated liabilities are included in liabilities to customers under investment contracts and insurance contract liabilities on the balance sheet. At 31 December 2011, such assets amounted to €7,881 million (31 December 2010: €9,074 million).

Placements with other banks includes cash collateral of €2.2 billion (31 December 2010: €1.8 billion) placed with derivative counterparties in relation to net derivative liability positions (note 23).

For the purpose of disclosure of credit risk exposures, loans and advances to banks are included within other financial instruments of €33.9 billion (31 December 2010: €38.6 billion) in the Risk Management Report on page 201.

The Group has entered into transactions to purchase securities with agreement to resell and has accepted collateral that it is permitted to sell or repledge in the absence of default by the owner of the collateral. The fair value of this collateral at 31 December 2011 was €417 million (31 December 2010: €79 million).

An amount of €1,012 million included within mandatory deposits with central banks relates to collateral in respect of notes in circulation (31 December 2010: €967 million).

At 31 December 2011, available for sale financial assets of €7.8 billion (31 December 2010: €12.9 billion) had been pledged to third parties in sale and repurchase agreements. The Group has not derecognised any securities delivered in repurchase agreements.

Included within unlisted debt securities are NAMA subordinated bonds with a fair value of €113 million (31 December 2010: €98 million) and a nominal value of €280 million (31 December 2010: €271 million). These bonds represented 5% of the nominal consideration received for assets sold to NAMA, with the remaining 95% received in the form of NAMA senior bonds (note 27). The subordinated bonds are not

guaranteed by the State, they are not marketable and the payment of interest and repayment of capital is dependent on the performance of NAMA. An impairment charge of €70 million was incurred on the NAMA subordinated bonds during the year ended 31 December 2010.

During the year ended 31 March 2009 the Group reclassified available for sale financial assets with a carrying amount and fair value of €419 million to loans and advances to customers as they were no longer considered to be traded in an active market. At the date of this reclassification, the effective interest rate on reclassified assets ranged from 0.73% to 7.12% with expected recoverable cash flows of €753 million. At the date of this reclassification, the Group had the intention and ability to hold these assets for the foreseeable future or until maturity. No subsequent reclassifications have been made up to 31 December 2011.

Interest income of €75 million (year ended 31 December 2010: €92 million) and an impairment charge of €5 million (year ended 31 December 2010: €24 million) have been recognised in the income statement for the year ended 31 December 2011 in relation to these assets. If the assets had not been reclassified a fair value gain of €5 million (year ended 31 December 2010: €36 million) would have been recognised in other comprehensive income and the impairment charge would have been €5 million (year ended 31 December 2010: €24 million).

The Group received as consideration for the assets transferred to NAMA a combination of Government guaranteed bonds (NAMA senior bonds) issued by NAMA (95% of the nominal consideration) and NAMA subordinated bonds issued by NAMA (5% of the nominal consideration).

The interest rate on the NAMA senior bonds bonds is six month Euribor, set semi-annually on 1 March and 1 September. The contractual maturity of these bonds is 1 March 2012. NAMA may, with the consent of the Group, settle the bonds by issuing new bonds with the same terms and conditions and a maturity date of up to 364 days.

During the year ended 31 December 2011, the Group received bonds with a nominal value of €232 million as consideration for assets transferred to NAMA and bonds with a nominal value of €221 million were redeemed.

At 31 December 2011 and 31 December 2010, all NAMA senior bonds had been pledged to Monetary Authorities in sale and repurchase agreements.

The net reduction in loans and advances to customers reflects deleveraging (note 17), impairment charges (note 14), net redemptions and the impact of foreign exchange movements.

Loans and advances to customers include finance leases and hire purchase receivables, which are analysed as follows:



Gross investment in finance leases:
Not later than 1 year	809		932
Later than 1 year and not later than 5 years	909		1,067
Later than 5 years	6		20

	1,724		2,019
Unearned future finance income on finance leases	(72	)	(97	)

Net investment in finance leases	1,652		1,922

The net investment in finance leases is analysed as follows:
Not later than 1 year	798		913
Later than 1 year and not later than 5 years	850		993
Later than 5 years	4		16

	1,652		1,922

The Group's material leasing arrangements include the provision of instalment credit and leasing finance for both consumer and business customers.

At 31 December 2011, the accumulated allowance for uncollectable minimum lease payments receivable was €61 million (31 December 2010: €65 million).

Loans and advances to customers include balances that have been securitised but not derecognised, comprising both Residential mortgages and commercial loans. In general, the assets, or interests in the assets, are transferred to Special Purposes Entities (SPEs), which then issue securities to third party investors or to other entities within the Group. All of the Group's Securitisation SPEs are consolidated.

Further details on these SPEs, including details of entities that have issued liabilities which continue to be held by the Group and which are capable of being pledged to Monetary Authorities, are set out in note 58.

During the year ended 31 December 2011, the Group completed the transfer of the remaining Eligible Bank Assets to NAMA, such that at 31 December 2011 the Group did not have any assets classified as held for sale to NAMA.

31 December 2011 Movements in assets held for sale to NAMA

Opening balance at 1 January 2011
Loans held for sale (including accrued interest of €4 million)	872		(75	)	797
Derivatives held for sale	7		—		7

	879		(75	)	804

Movements during the year
Sale of assets to NAMA	(498	)	198		(300	)
Changes in eligibility and other items	(381	)	(79	)	(460	)
Impairment charges during the year (note 15)	—		(44	)	(44	)

Closing balance at 31 December 2011	—		—		—

31 December 2010 Movements in assets held for sale to NAMA

Opening balance at 1 January 2010
Loans held for sale (including accrued interest of €27 million)	12,266		(2,778	)	9,488
Derivatives held for sale	93		—		93

	12,359		(2,778	)	9,581

Movements during the year
Sale of assets to NAMA	(9,401	)	2,237		(7,164	)
Changes to scope of NAMA	(2,107	)	692		(1,415	)
Changes in eligibility and other items	28		3		31
Impairment charges during the year (note 15)	—		(229	)	(229	)

Closing balance at 31 December 2010	879		(75	)	804

Of which
Loans held for sale (including accrued interest of €4 million)	872		(75	)	797
Derivatives held for sale	7		—		7

Closing balance at 31 December 2010	879		(75	)	804

During the year ended 31 December 2011, the Group transferred €498 million of assets (before impairment provisions of €198 million) to NAMA (year ended 31 December 2010: €9,401 million of assets (before impairment provisions of €2,237 million)).

In April 2009, the Minister for Finance announced that NAMA would be established with the purpose of strengthening the Irish financial sector and the NAMA legislation was enacted into law in November 2009 with the Bank participating in it from January 2010.

NAMA was given the power to acquire from Participating Institutions, Eligible Bank Assets, i.e. land and development loans and certain associated loans. The geographic distribution of the loans related to exposures both within and outside Ireland. The Eligible Bank Assets included interest rate derivative contracts sold to borrowers by Participating Institutions that related to hedging the interest rate exposure on the loans being acquired.

In acquiring such assets, NAMA applied a valuation methodology which took account of the market value of the Eligible Bank Assets on 30 November 2009 and the long term economic value, on a loan by loan basis. As the loan quality, geographic distribution and type of loans varied from financial institution to financial institution, each loan was valued individually. As a result the aggregate discount applied to gross loan values in determining the consideration paid by NAMA varied from financial institution to financial institution. Participating Institutions were required to accept the valuations set by NAMA, subject only to certain limited rights of objection.

The assets and liabilities were derecognised when substantially all of the risks and rewards were transferred to NAMA, which was the date when ownership of, or the beneficial interest in, the assets was legally transferred to NAMA. Up until the date of derecognition, loans and advances continued to be measured at amortised cost less any incurred impairment provisions and derivatives held for sale to NAMA were measured at fair value through profit or loss.

The Group incurred a loss on disposal of the assets to NAMA arising primarily from the difference between the fair value of the consideration received and the carrying value of the assets disposed of.

The consideration received from NAMA was measured at fair value at initial recognition.

As at 31 December 2010, the Group had €804 million of assets held for sale to NAMA as set out below:

Assets held for sale to NAMA

Land and development loans	153
Associated loans (primarily investment loans)	715

	868
Impairment provisions	(75	)

	793
Derivatives	7
Accrued interest	4

Total assets held for sale to NAMA	804

Analysed by operating segment
Retail Ireland	5
Retail UK	618
Corporate and Treasury	181

Total assets held for sale to NAMA	804

Following on from the 2011 PLAR, at 31 December 2011 the Group considered that it was highly probable that the following loan portfolios totalling €2.4 billion (of which €1.0 billion were contracted to sell as at

31 December 2011) would be disposed of within twelve months and they are classified as assets held for sale:

The loan portfolios continue to be measured on the same basis as prior to their classification as assets held for sale. In particular, loans and advances to customers continue to be measured at amortised cost less any incurred impairment losses. Associated derivatives continue to be measured at fair value through profit or loss.

The Group's loan portfolios and related impairment provisions at 31 December 2011 are classified as follows:

The following tables show the movement in the impairment provisions during the year ended 31 December 2011 and 31 December 2010.

31 December 2011

Impaired financial assets	1,474		4,043		7,623		338		13,478

Provision at 1 January 2011	725		1,475		2,529		321		5,050
Exchange adjustments	4		11		32		1		48
Charge against income statement	470		497		936		80		1,983
—Loans and advances to customers	469		497		893		80		1,939
—Assets sold to NAMA	1		—		43		—		44
Recoveries	(2	)	1		(2	)	10		7
Amounts written off	(49	)	(254	)	(166	)	(147	)	(616	)
Release of provision on sale of assets to NAMA	(4	)	—		(194	)	—		(198	)
Release of provision on loan book disposals	—		(25	)	15		—		(10	)
Other movements	15		18		55		13		101

Provision at 31 December 2011	1,159		1,723		3,205		278		6,365

The provision at 31 December 2011 is analysed as follows:
Loans and advances to customers	1,159		1,702		3,205		278		6,344
Loans classified as held for sale	—		21		—		—		21

Provision at 31 December 2011	1,159		1,723		3,205		278		6,365

31 December 2010

Impaired financial assets	1,077		3,657		6,279		371		11,384

Provision at 1 January 2010	359		1,152		3,884		380		5,775
Exchange adjustments	4		(5	)	29		1		29
Charge against income statement	417		623		949		127		2,116
—Loans and advances to customers	404		609		719		127		1,859
—Assets sold to NAMA	13		14		230		—		257
Recoveries	1		2		(2	)	4		5
Amounts written off	(44	)	(287	)	(201	)	(202	)	(734	)
Release of provision on sale of assets to NAMA	(20	)	(22	)	(2,195	)	—		(2,237	)
Other movements	8		12		65		11		96

Provision at 31 December 2010	725		1,475		2,529		321		5,050

The provision at 31 December 2010 is analysed as follows:
Loans and advances to customers	725		1,475		2,454		321		4,975
Loans held for sale to NAMA	—		—		75		—		75

Provision at 31 December 2010	725		1,475		2,529		321		5,050

Provisions include specific and 'incurred but not reported' (IBNR) provisions. IBNR provisions are recognised on all categories of loans for losses not specifically identified but which experience and observable data indicate are present in the portfolio at the date of assessment.

In presenting details of the associates of the Group, the exemption permitted by Regulation 10 of the European Communities (Credit Institutions: Accounts) Regulations, 1992 has been availed of and the Group will annex a full listing of associates to its annual return to the Companies Registration Office.



At beginning of year	199		194
Exchange adjustments	6		6
Share of results after tax (note 18)	40		44
—First Rate Exchange Services	37		37
—Property unit trust	3		7
Dividends received	(52	)	(35	)
Reclassified to other assets held for sale—Paul Capital Investments LLC	—		(10	)
Reclassification	52		—
—From investment properties	44		—
—From other financial assets at fair value through profit or loss	8		—

At end of year	245		199

The joint ventures are First Rate Exchange Services Holdings Limited, Enterprise 2000 Fund and a property unit trust.



Cost
At 1 January 2011	44		182		833		150		1,165
Exchange adjustments	(1	)	1		5		4		10
Reclassifications	(43	)	—		4		—		4
Additions	—		—		66		6		72
Disposals / write-offs	—		(12	)	(3	)	—		(15	)

At 31 December 2011	—		171		905		160		1,236

Accumulated amortisation
At 1 January 2011	—		(148	)	(545	)	(64	)	(757	)
Exchange adjustments	—		(1	)	(3	)	(2	)	(6	)
Reclassifications	—		—		—		—		—
Disposals / write-offs	—		12		3		—		15
Reversal of impairment (note 12)	—		—		—		4		4
Charge for the year (note 12)	—		(10	)	(80	)	(9	)	(99	)

At 31 December 2011	—		(147	)	(625	)	(71	)	(843	)

Net Book Value at 31 December 2011	—		24		280		89		393

At 1 January 2011, all goodwill on the Group's balance sheet related to Burdale. This goodwill was reclassified to other assets held for sale during the year ended 31 December 2011 as Burdale met the criteria to be classified as held for sale during the year.

Goodwill relating to disposal groups classified as held for sale is measured as set out in the Group's accounting policy on other assets and liabilities classified as held for sale, on page F-31. The disposal group is measured at the lower of its carrying amounts or fair value less costs to sell.

The Group incurred a charge of €45 million, being the impairment in full of the Burdale goodwill, following the announcement of the sale of Burdale on 19 December 2011 (see notes 19 and 30).

Other intangible assets are reviewed if events or circumstances indicate that impairment may have occurred, by comparing the carrying value of the intangible asset to its recoverable amount. An impairment charge arises if the carrying value exceeds the recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use, where the value in use is the present value of the future cash flows expected to be derived from the asset.

The calculation of the recoverable amounts for each cash generating unit is based upon a value in use calculation that discounts expected pre-tax cash flows at an interest rate appropriate to the cash generating unit. The determination of both require the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasted cash flows are available and to assumptions underpinning the sustainability of those cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows reflect management's view of future performance.

The values assigned to key assumptions reflect past experience, performance of the business to date and management judgement. The recoverable amount calculations performed for the significant amounts of other intangibles are sensitive to changes in cash flow forecasts, which are based on internal management

information for a period of up to five years, after which a growth factor appropriate for the business is applied.



Cost
At 1 January 2010	48		270		833		132		1,235
Exchange adjustments	3		4		4		3		11
Reclassification to other assets held for sale	(7	)	(1	)	—		—		(1	)
Additions	—		—		35		15		50
Disposals / write-offs	—		(91	)	(39	)	—		(130	)

At 31 December 2010	44		182		833		150		1,165

Accumulated amortisation
At 1 January 2010	—		(226	)	(497	)	(53	)	(776	)
Exchange adjustments	—		(3	)	(2	)	(2	)	(7	)
Reclassification to other assets held for sale	—		1		—		—		1
Disposals / write-offs	—		91		39		—		130
Reversal of impairment (note 12)	—		—		—		2		2
Charge for the year (note 12)	—		(11	)	(85	)	(11	)	(107	)

At 31 December 2010	—		(148	)	(545	)	(64	)	(757	)

Net Book Value at 31 December 2010	44		34		288		86		408

During the year ended 31 December 2010, Foreign Currency Exchange Corporation (FCE Corporation) was reclassified to other assets classified as held for sale (note 30).

No impairment was identified in the year ended 31 December 2010 in relation to Burdale.

Of the €1,204 million (31 December 2010: €1,304 million) €875 million (31 December 2010: €980 million) is held on behalf of Bank of Ireland Life policyholders.

Investment properties are carried at fair value as determined by external qualified property surveyors appropriate to the variety of properties held. Fair values have been calculated using both current trends in the market and recent transactions for similar properties. The downward revaluation in the current year is primarily driven by a decrease in the fair value of Irish and international investment property.

Rental income from investment property amounted to €94 million for the year ended 31 December 2011 (year ended 31 December 2010: €97 million). Expenses directly attributable to investment property generating rental income amounted to €18 million for the year ended 31 December 2011 (year ended 31 December 2010: €18 million). There were no expenses directly attributable to investment property not generating rental income for the year ended 31 December 2011 or the year ended 31 December 2010.



Cost or valuation
At 1 January 2011	177		151		543		7		18		896
Exchange adjustments	1		1		3		—		—		5
Additions	—		1		4		3		23		31
Disposals	(4	)	(3	)	(35	)	(5	)	—		(47	)
Revaluation
—Recognised in the income statement	(15	)	—		—		—		—		(15	)
—Recognised in other comprehensive income	(8	)	—		—		—		—		(8	)
Reclassifications	—		14		7		—		(25	)	(4	)

At 31 December 2011	151		164		522		5		16		858

Accumulated depreciation
At 1 January 2011	—		(83	)	(434	)	(7	)	—		(524	)
Exchange adjustments	—		(1	)	(2	)	—		—		(3	)
Disposals	—		3		34		5		—		42
Reclassifications	—		(2	)	2		—		—		—
Charge for the year (note 12)	—		(12	)	(24	)	(1	)	—		(37	)

At 31 December 2011	—		(95	)	(424	)	(3	)	—		(522	)

Net book value at 31 December 2011	151		69		98		2		16		336

Property, plant and equipment at 31 December 2011 held at fair value was €151 million (31 December 2010: €177 million). The historical cost of property, plant and equipment held at fair value at 31 December 2011 was €92 million (31 December 2010: €91 million). The net book value of property, plant and

equipment at 31 December 2011 held at cost less accumulated depreciation and impairment amounted to €185 million (31 December 2010: €195 million).



Cost or valuation
At 1 January 2010	207		148		642		7		11		1,015
Exchange adjustments	—		1		5		—		—		6
Additions	—		4		15		—		22		41
Disposals	(2	)	(8	)	(126	)	—		—		(136	)
Revaluation
—Recognised in the income statement	(10	)	—		—		—		—		(10	)
—Recognised in other comprehensive income	(18	)	—		—		—		—		(18	)
Reclassifications	—		6		7		—		(15	)	(2	)

At 31 December 2010	177		151		543		7		18		896

Accumulated depreciation
At 1 January 2010	—		(76	)	(528	)	(7	)	—		(611	)
Exchange adjustments	—		—		(1	)	—		—		(1	)
Disposals	—		6		122		—		—		128
Charge for the year (note 12)	—		(13	)	(27	)	—		—		(40	)

At 31 December 2010	—		(83	)	(434	)	(7	)	—		(524	)

Net book value at 31 December 2010	177		68		109		—		18		372

A revaluation of Group property was carried out as at 31 December 2011. All freehold and long leasehold (50 years or more unexpired) commercial properties were valued by Lisney as external valuers, who also reviewed the valuation of all other property carried out by the Bank's professionally qualified staff. Valuations were made on the basis of open market value.

The table below shows future capital expenditure in relation to both property, plant and equipment and intangible assets.

The Group leases a number of branch and office premises to carry out its business. The commercial leases typically are 25 to 35 year operating leases with 5-yearly rent reviews. The majority of the rent reviews are on an upwards only basis. Some leases also include break options. The Group also holds a number of short term leases for less than 10 years and a number of long term leases at market rent with less than 110 years unexpired. On expiry of long term leases greater than 5 years the Group has rights of renewal in the majority of the leases.

Minimum future rentals are the rentals payable under operating leases up to the next available break option where this exists or to expiry date of the lease. Both the required break option notice period and the amount of any penalty rent have been included in the amounts payable below.

The Group has entered into a small number of sub-leases as lessor which represent properties and components of properties surplus to the Group's own requirements.

Included in the operating lease rental receivable is an amount of €10 million in relation to sub-lease rental (year ended 31 December 2010: €12 million).

The Group leases computer equipment under finance lease agreements. The leases range from 1 to 5 years, contain no material contingent rents or restrictions imposed by lease agreements and contain standard terms of renewal.

The net carrying amount of the assets held under finance leases at 31 December 2011 was €2 million (31 December 2010: €nil).



Reinsurance asset	708		638
Value in force of life assurance business (note 59)	519		538
Interest receivable	525		541
Sundry and other debtors	352		396
Accounts receivable and prepayments	166		178

Other assets	2,270		2,291

Other assets are analysed as follows:
Within 1 year	974		1,115
After 1 year	1,296		1,176

	2,270		2,291

The movement in the reinsurance asset is noted below:
At beginning of year	638		615
New business	120		119
Changes in business	(50	)	(96	)

At the end of the year	708		638

Deposits from banks includes cash collateral of €1.1 billion (31 December 2010: €0.7 billion) received from derivative counterparties in relation to net derivative asset positions (note 23).

The Group has reduced its usage of liquidity facilities provided by Monetary Authorities to €22 billion (net) (31 December 2010: €23 billion (net)) and reduced exceptional liquidity assistance provided by the Central Bank of Ireland to €nil (31 December 2010: €8 billion). €15 billion (31 December 2010: €31 billion) rolls over on a short term basis (up to three months).

Deposit accounts where a period of notice (typically 21 or 40 days) is required to make a withdrawal are classified within term deposits and other products. An analysis of the contractual maturity profile of customer accounts is set out in note 63.

At 31 December 2011, the Group's largest 20 customer deposits amounted to 2% (31 December 2010: 4%) of customer accounts. Information on the contractual maturities of customer accounts is set out on pages 224 and 225 in the Risk Management Report.

At 31 December 2010, current accounts of €0.8 billion were presented net against related loans and advances to customers in accordance with IAS 32. At 31 December 2011, these balances no longer meet the criteria for net presentation and accordingly are presented gross.

Term deposits and other products include a number of term accounts that contain easy access features. These allow the customer to access a portion or all of their deposit notwithstanding that this repayment could result in financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the 'demand' category in note 63.

The movement in gross life insurance contract liabilities can be analysed as follows:

Bank of Ireland Life (BoI Life) writes the following life assurance contracts that contain insurance risk:

These contracts provide the policyholder with insurance in the event of death, critical illness or permanent disability (principally mortality and morbidity risk).

These contracts provide the policyholder with an income until death (principally longevity and market risk).

These contracts include both policies primarily providing life assurance protection and policies providing investment but with a level of insurance risk deemed to be significant (principally mortality and market risk).

Insurance contract liabilities, which consist of both unit linked and non-unit linked liabilities, are calculated in accordance with the Insurance Regulations. Unit linked liabilities reflect the value of the underlying funds in which the policyholder is invested. Non-unit linked liabilities are calculated using either a gross premium or net premium method of valuation.

41 LIABILITIES TO CUSTOMERS UNDER INVESTMENT AND INSURANCE CONTRACTS (Continued)

The assumptions are also set out in accordance with the guidelines within the Insurance Regulations and contain a margin for adverse development. The key assumptions used in the valuation of insurance contract liabilities are:

The company has a very limited range of options and guarantees in its business portfolio as the bulk of the business is unit linked without investment guarantees. Where investment guarantees do exist they are either hedged with an outside party or matched through appropriate investment assets.

Uncertainties associated with insurance contract cash flows and risk management activities

For life assurance contracts where death is the insured risk, the most significant factors that could adversely affect the frequency and severity of claims are the incidence of disease and general changes in lifestyle. Where the insured risk is longevity, advances in medical care is the key factor that increases longevity. The Group manages its exposures to insurance risks through a combination of applying strict underwriting criteria, asset and liability matching, transferring risk to reinsurers and the establishment of prudent insurance contract liabilities.

Reinsurance programmes are in place to restrict the amount of cover on any single life. The Group uses a panel of highly rated reinsurance companies to diversify credit risk.

The Group holds technical reserves to meet its liabilities to policyholders based on prudent actuarial assumptions. In addition, the Central Bank requires the Group's life assurance operation to hold shareholder equity that exceeds a statutory margin, the required minimum regulatory solvency margin. The table below sets out the shareholder equity held by the Group's life assurance business compared to the required minimum regulatory solvency margin as at 31 December 2011 and 31 December 2010.

	Notes

Undated loan capital
Bank of Ireland UK Holdings plc
€600 million 7.40% Guaranteed Step-up Callable Perpetual Preferred Securities	a, b	32	255
Bank of Ireland
Stg£75 million 13³/8% Perpetual Subordinated Bonds	c	91	144
Bristol & West plc
Stg£32.6 million 8¹/8% Non-Cumulative Preference Shares	d	39	38
Bank of Ireland UK Holdings plc
Stg£350 million 6.25% Guaranteed Callable Perpetual Preferred Securities	f, g	—	48
BoI Capital Funding (No 1) LP
€600 million Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	h, i	—	213
BoI Capital Funding (No 2) LP
US$800 million Fixed Rate / Variable Rate Guaranteed Non-voting
Non-Cumulative Perpetual Preferred Securities	i, j	—	50
BoI Capital Funding (No 3) LP
US$400 million Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	i, k	—	15
BoI Capital Funding (No 4) LP
Stg£500 million Fixed Rate / Variable Rate Guaranteed Non-voting Non-Cumulative Perpetual Preferred Securities	i, l	—	6

		162	769

Dated loan capital
€600 million Subordinated Floating Rate Notes 2017		1	48
€750 million Floating Rate Subordinated Notes 2017		—	93
Stg£400 million Fixed / Floating Rate Subordinated Notes 2018		—	67
US$600 million Subordinated Floating Rate Notes due 2018		—	138
Stg£75 million 10³/4% Subordinated Bonds 2018		—	37
€650 million Fixed / Floating Rate Subordinated Notes 2019		—	215
Stg£450 million Dated Callable Step-up Fixed / Floating Rate Subordinated Notes 2020		—	354
€1,002 million 10% Fixed Rate Subordinated Notes 2020		225	757
Stg£197 million 10% Fixed Rate Subordinated Notes 2020		2	105
CAD$400 million Fixed / Floating Rate Subordinated Notes 2015		27	83
CAD$145 million Fixed / Floating Rate Subordinated Notes 2018		—	109
€1,000 million 10% Convertible Contingent Capital Note 2016	e	1,009	—

		1,264	2,006

		1,426	2,775

The principal terms and conditions of the subordinated liabilities which were in issue by the Group at 31 December 2011 are set out below.

Other liabilities at 31 December 2011 and at 31 December 2010 are due within one year.

The Bank is authorised to issue bank notes in Northern Ireland under the Bankers (Ireland) Act, 1845 and the Bankers (Northern Ireland) Act, 1928.

The Group has recognised provisions in relation to restructuring costs, onerous contracts and litigation. Such provisions are sensitive to a variety of factors, which vary depending on their nature. The estimation of the amounts of such provisions is judgemental because the relevant payments are due in the future and the quantity and probability of such payments is uncertain.

The methodology and the assumptions used in the calculation of provisions are reviewed regularly and, at a minimum, at each reporting date.

The Group continues to maintain its focus on cost management and is implementing a range of initiatives to further reduce costs. The Group holds a provision of €3 million (31 December 2010: €32 million) in respect of restructuring activities.

Partly as a result of the Group's restructuring of its operations, the Group is a lessee in a number of non-cancellable leases over properties that it no longer occupies. The present value of future lease payments on these properties, less any rental income receivable from sub-leasing, has been provided for.

This provision relates to leases on properties ranging between one and fourteen years. It is expected that €4 million of this provision will be used within the next twelve months.

This provision includes certain legal claims brought against the Group by third parties.



The movement on the deferred tax account is as follows:
At beginning of year	1,037		731
Income statement credit for year (note 20)	263		380
Available for sale financial assets—credit / (charge) to other comprehensive income	(14	)	29
Cash flow hedges—charge to other comprehensive income	(32	)	(40	)
Revaluation / reclassification of property during the year	2		3
Pension	20		(74	)
Other movements	17		8

At end of year	1,293		1,037

Deferred tax assets and liabilities are attributable to the following items:
Deferred tax assets
Pensions and other post retirement benefits	62		63
Provision for loan impairment	14		12
Accelerated capital allowances on equipment used by the Group	4		—
Available for sale reserve	100		115
Unutilised tax losses	1,195		898
Cash flow hedge reserve	7		39
Other temporary differences	6		17

Deferred tax assets	1,388		1,144

Deferred tax liabilities
Accelerated capital allowances:
—on finance leases	(16	)	(20	)
—on equipment used by the Group	—		(4	)
Property revaluation surplus	(11	)	(16	)
Life companies	(46	)	(55	)
Other temporary differences	(22	)	(12	)

Deferred tax liabilities	(95	)	(107	)

Represented on the balance sheet as follows:
Deferred tax assets	1,381		1,128
Deferred tax liabilities	(88	)	(91	)

	1,293		1,037

The amount of the deferred tax asset expected to be recovered within one year is €23 million. The amount of deferred tax liability expected to be settled within one year is €3 million.

In accordance with IAS 12, in presenting the deferred tax balances above the Group offsets deferred tax assets and liabilities where:

Deferred tax liabilities have not been recognised for tax that may be payable if earnings of certain overseas subsidiaries were remitted to Ireland as the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the forseeable future. Unremitted earnings for overseas subsidiaries totalled €171 million (31 December 2010: €375 million).

The deferred tax asset of €1,381 million (31 December 2010: €1,128 million) shown on the balance sheet is after netting by jurisdiction (€1,388 million before netting by jurisdiction, 31 December 2010: €1,144 million). This includes an amount of €1,195 million at 31 December 2011 (31 December 2010: €898 million) in respect of operating losses which are available to relieve future profits from tax. This deferred tax asset has been recognised on the basis that it is probable it will be recovered as the Directors are satisfied that it is probable that the Group will have sufficient future taxable profits against which the deferred tax can be utilised to the extent it has not already reversed.

Under current Irish and UK tax legislation there is no time restriction on the utilisation of trading losses. There is, however, a restriction on the utilisation of Irish tax losses carried forward by a financial institution participating in NAMA. This significantly lengthens the period over which the deferred tax asset will reverse by restricting by 50% the amount of profits in any year against which the carried forward trading losses can be utilised. The balance continues to be available for indefinite carry forward and there is no time limit, under existing Irish and UK legislation, on the utilisation of these losses.

The UK Finance Act 2011 reduced the main rate of corporation tax to 26% from 1 April 2011 (and not 27% as previously announced). In addition it enacted a reduced main rate of corporation tax of 25% to be effective from 1 April 2012. The effect of the change enacted in the UK Finance Act 2011 has been to reduce the deferred tax asset at 31 December 2011 by €18 million. The proposed reductions in the main rate of corporation tax by 1% per annum to 23% by 1 April 2014 are to be enacted separately each year. The overall effect of the future reductions from 25% to 23% would be to reduce the deferred tax asset at 31 December 2011 by an additional €36 million.

Deferred tax assets have not been recognised in respect of US tax losses of €71 million (31 December 2010: €69 million) and US temporary differences of €3 million (31 December 2010: €3 million). €23 million (31 December 2010: €23 million) of the tax losses expire in the period 2020 to 2028 with €48 million due to expire in 2029. There is no expiry date on the tax credits. Deferred tax assets have not been recognised in respect of these losses due to an annual limitation on use.

The deferred tax credit in the income statement comprises the following temporary differences:

The Group operates a number of defined benefit and defined contribution schemes in Ireland and overseas. The defined benefit schemes are funded and the assets of the schemes are held in separate trustee administered funds. In determining the level of contributions required to be made to each scheme and the relevant charge to the income statement the Group has been advised by independent actuaries, Towers Watson.

The most significant defined benefit scheme in the Group is the Bank of Ireland Staff Pensions Fund (BSPF) which accounts for approximately 64% of the pension deficit on the consolidated Group balance sheet. The BSPF was closed to new members from 1 October 2006, with the exception of a number of new entry-level employees (who joined from 1 October 2006 to 21 November 2007), who were offered a one-off option to join the scheme. All new employees in the Group from 21 November 2007 are eligible to become members of the Bank of Ireland Group Pensions Fund (BIGPF) or the Bank of Ireland Group UK Pension Fund. The BIGPF is a hybrid scheme which includes elements of both a defined benefit and a defined contribution scheme.

Retirement benefits under the BSPF and a majority of the other defined benefit plans are calculated by reference to pensionable service and pensionable salary at normal retirement date.

The last formal valuation of the BSPF, using the Attained Age method, was carried out as at 31 March 2010. The Attained Age method measures liabilities taking account of the projected future levels of pensionable earnings at the time of commencement of benefits i.e. at normal retirement date.

The valuation disclosed that the fair value of scheme assets represented 85% of the benefits that had accrued to members after allowing for expected future increases in earnings and pensions and after taking account of the impact of the changes in pension benefits set out below. The actuary recommended that the contribution rate increase to 29.1% of salaries (inclusive of employee contributions) from 16.7% previously, in the funding programme following the conclusion of the valuation. The next formal valuation is expected to be made as at 31 March 2013. The BSPF is also currently in deficit as per the statutory funding standard and as a result the Trustees and the Bank will be submitting a funding proposal to the

Pensions Board to address this deficit within the required timescales which are expected to be issued by the Pensions Board in the near future.

The actuarial valuations are available for inspection to the members of the schemes but are not available for public inspection.

The Irish Finance Act (No.2) Act 2011 introduced a stamp duty levy of 0.6% on the market value of assets under management in Irish pension funds, for the years 2011 to 2014 (inclusive). The levy is based on scheme assets as at 30 June in each year or as at the end of the preceding scheme financial year. No decision has yet been taken as to who will ultimately bear this levy. Accounting standards require that a charge for the 0.6% levy for 2011, amounting to €20 million, be included in the financial statements for the year ended 31 December 2011 in the form of a reduction in scheme assets. The charge of €20 million has been recognised within Other Comprehensive Income for the year ended 31 December 2011 as it did not form part of the expected return on assets for 2011, which was determined at the start of the year. Payments of €20 million in respect of the levy were made to the Irish Revenue Commissioners during the year.

The accounting will be updated to reflect the final decision as to who will ultimately bear the levy once it is taken.

During 2011 and 2010, the Group completed a review to address the IAS 19 pension deficit in the defined benefit pension schemes sponsored by the Group. Following this review the Group proposed a number of amendments to these schemes. By 31 December 2011, the relevant amendments had been implemented, in respect of substantially all of the Group's defined benefit pension schemes including the BSPF.

The income statement impact of the amendments in the year ended 31 December 2011 was a gain of €2 million. A gain of €733 million was recognised in the year ended 31 December 2010, consisting of a curtailment gain of €413 million and negative past service cost of €324 million, relating to amendments to future increases in pensionable salaries and future discretionary pension increases respectively, net of directly related expenses.

As part of the Group pensions review the Group indicated that it would be prepared to pay additional deficit-related contributions of up to €750 million over a five to seven year period if the benefit restructuring changes were accepted and implemented. The precise amounts and timing of these payments is at the Group's discretion. In this regard, the Group agreed the level of payments with the trustees of the individual defined benefit schemes and paid additional contributions of €116 million during 2011 (year ended 31 December 2010: €68 million) and it expects to pay additional deficit-related contributions of €117 million in 2012.

The financial assumptions used in measuring the Group's defined benefit pension liability under IAS 19 are set out in the table below.

Financial assumptions

Irish schemes
Inflation rate	2.00	2.00
Discount rate	5.30	5.50
Rate of general increase in salaries	*2.50	*2.50
Rate of increase in pensions in payments	*1.90	*1.90
Rate of increase to deferred pensions	1.90	2.00
UK schemes
Consumer Price Inflation	2.10	3.00
Retail Price Inflation	3.00	3.50
Discount rate	4.90	5.50
Rate of general increase in salaries	*3.50	*4.00
Rate of increase in pensions in payments	*2.80	*3.34
Rate of increase to deferred pensions	2.10	3.00

The mortality assumptions adopted for Irish pension arrangements are based on the results of the Society of Actuaries in Ireland mortality investigations.

The expected long term rates of return and market value of assets of the material defined benefit schemes on a combined basis as at 31 December 2011 and 31 December 2010 were as follows:

	31 December 2011 Expected long term rates of return									31 December 2010 Expected long term rates of return

	RoI %		UK %		Fund %		Market Value €m			RoI %		UK %		Fund %		Market Value €m
Equities		7.50		7.50		53.7		2,396			7.25		8.00		55.1		2,274
Debt securities		4.32		3.77		38.6		1,723			4.44		4.52		34.3		1,415
Property		6.00		6.00		6.1		271			6.00		6.00		6.4		263
Cash and other		2.30		3.00		1.6		73			2.60		4.10		4.2		174
Total market value of schemes' assets								4,463									4,126
Actuarial value of liabilities of funded schemes								(4,867	)								(4,540	)

Aggregate deficit in funded schemes								(404	)								(414	)
Unfunded schemes								(9	)								(9	)

Net defined benefit pension deficit								(413	)								(423	)
Defined contribution schemes								(1	)								(1	)

								(414	)								(424	)

This is shown in the balance sheet as:
Retirement benefit obligations								422									435
Retirement benefit asset								(8	)								(11	)

								414									424

The expected rates of return on individual asset classes is estimated using current and projected economic and market factors at the measurement date, based on the global asset model employed by the independent actuaries. The overall expected return on scheme assets is based upon the weighted average of the assumed returns on the major asset classes. The expected long term rate of return on the total of the Group schemes' assets as at 31 December 2011 is 5.60% (31 December 2010: 6.06%).

The expected returns on the debt securities are derived from gilt yields and corporate bond yields. Approximately 73% (31 December 2010: 64%) of the value of debt securities is held in a Liability Driven Investment portfolio.

The retirement benefit schemes' assets include Bank of Ireland stock amounting to €2 million (31 December 2010: €2 million) and property occupied by Bank of Ireland Group companies to the value of €24 million (31 December 2010: €25 million).

The following table sets out the components of the cost of the defined benefit schemes for the years ended 31 December 2011 and 31 December 2010.

Movement in defined benefit obligations during the year

Defined benefit obligations at beginning of year	4,549		5,365
Current service cost	95		128
Actual member contributions	14		14
Past service cost	—		(324	)
Interest cost	247		279
Actuarial loss / (gain) on scheme liabilities	82		(410	)
Benefits paid	(138	)	(137	)
Curtailments	(5	)	(413	)
Currency loss	32		47

Defined benefit obligation at end of year	4,876		4,549

History of experience gains and losses

Actuarial (loss) / gain on scheme assets:
Amount	(37	)	86		574		(1,176	)	(823	)
Percentage of scheme assets	0.8	%	2.1	%	15.4	%	(39.2	)%	(20.7	)%
Experience gain / (loss) on scheme liabilities:
Amount	33		115		33		63		(58	)
Percentage of scheme liabilities	0.7	%	2.5	%	0.6	%	1.4	%	(1.2	)%
Total actuarial (loss) / gain recognised in SOCI⁽¹⁾
Amount	(137	)	465		(99	)	(624	)	(244	)
Percentage of scheme liabilities	2.8	%	10.2	%	(1.8	)%	(13.9	)%	(5.1	)%

Expected employer contributions for the year ended 31 December 2012 are €227 million, inclusive of €117 million of additional contributions related to the Group pensions review set out on page F-115. Expected employee contributions for the year ended 31 December 2012 are €15 million.

Sensitivity analysis for each of the key assumptions used to measure the scheme liabilities at 31 December 2011.

While the table above shows the impact of an individual assumption change, a change in one assumption could impact on other assumptions due to the relationship between assumptions.

The table below gives the contract amounts of contingent liabilities and commitments. The maximum exposure to credit loss under contingent liabilities and commitments is the contractual amount of the

instrument in the event of non-performance by the other party where all counter claims, collateral or security prove worthless.



Contingent liabilities
Acceptances and endorsements	10	35
Guarantees and irrevocable letters of credit	983	1,482
Other contingent liabilities	249	599

	1,242	2,116

Commitments
Documentary credits and short term trade related transactions	178	185
Undrawn note issuance and revolving underwriting facilities	100	100
Undrawn formal standby facilities, credit lines and other commitments to lend:
—revocable or irrevocable with original maturity of 1 year or less	14,017	16,655
—irrevocable with original maturity of over 1 year	5,217	6,601

	19,512	23,541

In common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented, but reimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which have been paid and subsequently rediscounted.

Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the customer's default, the cash requirements of these instruments are expected to be considerably below their nominal amounts.

Other contingent liabilities primarily include performance bonds and are generally short term commitments to third parties which are not directly dependent on the customers' credit worthiness. The Group is party to legal actions arising out of its normal business operations. The Directors believe that adequate provision has been made in respect of these litigations.

Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.

Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions.

Allotted and fully paid

30.109 billion units of €0.05 ordinary stock (31 December 2010: 5.293 billion units of €0.10 ordinary stock)	1,505	529
91.981 billion units of €0.01 deferred stock (31 December 2010: 1.210 billion units of €0.54 deferred stock)	920	654
45.133 million units of €0.05 treasury stock (31 December 2010: 27.7 million units of €0.10 treasury stock)	2	2
1.9 million units of non-cumulative preference stock of Stg£1 each	3	3
3.0 million units of non-cumulative preference stock of €1.27 each	4	4
1.837 billion units of non-cumulative 2009 Preference Stock of €0.01 each	18	18

	2,452	1,210

The weighted average number of units of ordinary stock in issue at 31 December 2011, used in the earnings per share calculation, excludes treasury stock which does not represent ordinary stock in issue. Treasury stock does not rank for dividend. While own stock held for the benefit of life assurance policyholders

legally rank for dividend, in line with accounting standards this dividend does not accrue in the Group financial statements.

	Ordinary Stock					Treasury Stock

Movements in ordinary and treasury stock (units)	31 December 2011			31 December 2010		31 December 2011		31 December 2010
At beginning of year		5,293,719,448			993,001,864		27,702,862		33,223,815
Long term performance stock plan (LTPSP)		—			11,890		—		—
2011 Capital raise—Rights Issue (see note 49)		19,077,889,032			—		—		—
2011 Capital raise—liability management exercise (note 49)		5,755,203,190			—		—		—
2010 Recapitalisation of the Bank and dividend
on 2009 Preference Stock		—			4,295,184,741		—		—
Stock (purchased) / sold and held for the benefit of life assurance policyholders		(17,430,456	)		5,520,953		17,430,456		(5,520,953	)

At end of year		30,109,381,214			5,293,719,448		45,133,318		27,702,862

As part of the 2011 recapitalisation of the Bank (see note 50) the Bank's ordinary stock and deferred stock was renominalised at the Extraordinary General Court held on 11 July 2011. This resulted in the nominal value of each unit of ordinary stock being reduced from €0.10 per unit to €0.05 per unit and the nominal value of each unit of deferred stock being reduced from €0.54 per unit to €0.01 per unit. Each existing unit of deferred stock of €0.54 at the date of renominalisation was subdivded into 54 units of €0.01 each and each existing unit of ordinary stock at the date of renominalisation was subdivided and converted into one unit of ordinary stock of €0.05 and five units of deferred stock of €0.01. The purpose of the issue of deferred stock was to ensure that the reduction in the nominal value of the ordinary stock did not result in a reduction in the capital of the Bank. Each ordinary stockholder's proportionate interest in the issued ordinary stock of Bank of Ireland remained unchanged as a result of the renominalisation.

Aside from the change in nominal value, the rights attaching to €0.05 ordinary stock (including voting and dividend rights and rights on a return of capital) are substantively identical to those of the previous €0.10 ordinary stock. The renominalised deferred stock has no voting or dividend rights and, on a return of capital on a winding up of Bank of Ireland, will have the right to receive the amount paid up thereon only after stockholders have received, in aggregate, any amounts paid up thereon plus €10 million per unit of €0.05 ordinary stock, the purpose of which is to ensure that the units of deferred stock have no economic value.

The deferred stock is not transferable at any time, other than with the prior written consent of the Directors. At the appropriate time, the Bank may redeem or repurchase the deferred stock, make an application to the High Court of Ireland for the deferred stock to be cancelled, or acquire, cancel or seek the surrender of the deferred stock (in each case for no consideration) using such other lawful means as the Directors may determine.

The authorised ordinary stock was increased from 24 billion units at a par value of €0.10 to 90 billion units at a par value of €0.05.

During the year ended 31 December 2011, the total ordinary stock in issue increased from 5,293,719,448 units of nominal value of €0.10 each to 30,109,381,214 units of nominal value of €0.05 each as a result of:

At 31 December 2011, the life assurance company held 23,124,628 units of ordinary stock as own shares (31 December 2010: 5,694,172 units).

All units of ordinary stock in issue carry the same voting rights. All issued stock is fully paid.

The preference stock is non-redeemable. The holders of preference stock are entitled to receive at the discretion of the Bank a non-cumulative preferential dividend, which in the case of the sterling preference stock is payable in sterling, in a gross amount of Stg£1.2625 per unit per annum and in the case of euro preference stock is payable in euro in a gross amount of €1.523686 per unit per annum, in equal semi-annual instalments, in arrears, on 20 February and 20 August in each year.

On a winding up of, or other return of capital by, the Bank (other than on a redemption) the holders of preference stock will be entitled to receive an amount equal to the amount paid up on each unit of the preference stock held (including the premium) out of the surplus assets available for distribution to the holders of ordinary stock.

The preference stockholders are not entitled to vote at any General Court except in certain exceptional circumstances. Such circumstances did not arise during 2011 and consequently the preference stockholders were not entitled to vote at the General Meetings of the Bank.

As at 31 December 2011 and 31 December 2010 1,876,090 units of sterling preference stock and 3,026,598 units of euro preference stock were in issue.

On 31 March 2009, 3.5 billion units of 2009 Preference Stock and warrants were issued to the NPRFC. As part of the recapitalisation of the Bank in the year ended 31 December 2010 (note 50), a total of

1,662,958,696 units of 2009 Preference Stock were converted to ordinary stock and the warrants held by the NPRFC were cancelled.

The terms and conditions attaching to the 2009 Preference Stock are outlined below:

The 2009 Preference Stock entitles the NPRFC to receive a non-cumulative cash dividend at a fixed rate of 10.25% per annum (previously 8% per annum prior to 19 May 2010), payable annually in arrears on 20 February at the discretion of the Bank. If a cash dividend is not paid by the Bank, the Bank shall issue units of ordinary stock to the NPRFC to be settled on a day determined by the Bank, in its sole discretion, provided that this must occur no later than the day on which the Bank subsequently redeems or repurchases or pays a dividend on the 2009 Preference Stock or any class of capital stock. The number of units of ordinary stock that the Bank would be required to issue in the event of non-payment of a cash dividend is calculated by dividing the amount of the unpaid dividend by the Thirty Day Average Price⁽¹⁾.

If the dividend on the 2009 Preference Stock is not paid in any particular year, the Bank is precluded from paying any dividend on ordinary stock until the Bank resumes the payment of dividends on the 2009 Preference Stock in cash. The Bank will also be precluded from paying any dividend on ordinary stock where the payment of such a dividend would reduce the distributable reserves of the Bank to such an extent that the Bank would be unable to pay the next dividend due for payment on the 2009 Preference Stock.

The repayment of the capital paid up (inclusive of premium) on the 2009 Preference Stock ranks pari passu with the repayment of the paid up nominal value (excluding premium) of the ordinary stock on a winding up or other return of capital of the Bank.

The 2009 Preference Stock ranks ahead of ordinary stock as regards dividends and the repayment of premium on the ordinary stock on a winding up or other return of capital of the Bank. It ranks pari passu as regards dividends with other stock or securities which constitute Core tier 1 capital of the Bank (other than ordinary stock and other than dividends to Non-controlling Interests).

The 2009 Preference Stock is transferable in minimum lots of 50,000 units. If transferred to a person who is not a Government Entity⁽¹⁾, it will cease to carry any voting rights or the right to appoint Directors to the Court referred to below.

The 2009 Preference Stock may be repurchased at the option of the Bank, in whole or in part, at a price per unit equal to the issue price of €1.00 per unit before 31 March 2014 and thereafter at a price per unit of €1.25, provided in either case that the consent of the Central Bank to the repurchase of the 2009 Preference Stock is obtained. The 2009 Preference Stock is not capable of being repurchased if it would breach or cause a breach of Irish banking capital adequacy requirements from time to time applicable to the Bank subject to regulatory approval. The Bank may only redeem the 2009 Preference Stock in accordance with company law, and with the approval of the Central Bank, out of profits available for distribution or the proceeds of a fresh issue of stock or an issue of securities treated by the Central Bank as constituting Core tier 1 capital.

If the ordinary stock to be issued in the event of non-payment of cash dividends on the 2009 Preference Stock is not settled on the dividend payment date to which it relates, the NPRFC is entitled to exercise the voting rights of that as yet unissued ordinary stock from the dividend payment date. Such voting rights will have no effect on the Bank's unfettered discretion in respect of (i) the payment of dividends on the 2009

Preference Stock or any other securities of the Bank ranking pari passu with, or junior to, the 2009 Preference Stock or the issuance of ordinary stock in the event of non-payment of cash dividends on the 2009 Preference Stock; or (ii) the redemption or repurchase of the 2009 Preference Stock or any other securities of the Bank ranking pari passu with, or junior to, the 2009 Preference Stock.

The 2009 Preference Stock held by the NPRFC carries the right to 'top-up' the NPRFC's total voting rights to 25% of the total voting rights on any resolution proposed at a General Court in relation to the appointment or removal of a Director of the Bank or any resolutions to approve a change of control of the Bank (being a change in the holding of more than 50% of the voting stock of the Bank or of substantially all of the Bank's business and assets) where the NPRFC's ordinary voting rights through its holding of Ordinary Stock (or other securities issued in future) falls below this level. This entitlement applies to the NPRFC for so long as it holds any units of 2009 Preference Stock.

As the holder of the units of 2009 Preference Stock the NPRFC currently has the right to directly appoint 25% of the Directors of the Bank (such 25% to include any Directors already appointed by the Minister for Finance pursuant to the CIFS Guarantee Scheme, being a provision that survives the expiry of the CIFS Guarantee Scheme as continued under the terms of the ELG scheme) where the total number of Directors is 15 or less, or four Directors where the total number of Directors is 16, 17 or 18. The tabling of any resolution at a General Court of the Bank to alter the capital structure of the Group requires the prior approval in writing of the Minister for Finance. These rights apply in full for so long as the NPRFC or any Government preference stockholder holds any units of 2009 Preference Stock and they are not reduced in line with any reduction in the number of units of 2009 Preference Stock held.

While the NPRFC or a Government Entity holds the 2009 Preference Stock the implementation of any existing, or the adoption of any proposed, Capital Stock Resolution⁽¹⁾ shall be subject to the prior written consent of the Minister for Finance.

Under this scheme, each year the Court may set aside an element of Group profit before taxation for allocation to the trustees of the scheme to enable them to acquire units of ordinary stock on behalf of the scheme participants.

In addition, if an employee elects for the free stock award, they become eligible to purchase additional stock at market price from gross salary subject to Revenue Commissioners and HM Revenue & Customs rules respectively.

The maximum award permitted under the scheme is 6% of a participant's salary. There have been no awards to employees under the employee stock issue scheme since 2008.

Under this scheme, which has an Irish and UK version in order to conform with the relevant revenue legislation in both jurisdictions, all employees in Ireland and the UK are eligible to participate provided

that they are employed by the Group on the invitation to participate date and they are still in the employ of the Group on the date that the options are granted.

The difference between Irish and UK option prices reflects the maximum discounts permitted under Revenue Commissioners and HM Revenue & Customs rules respectively.

As at 31 December 2011, there are outstanding options under the scheme over 6,712 units of ordinary stock, which are exercisable by February 2012.

The last offer under the Group's SAYE scheme was in 2007. No new options have been created since this offer. These figures represent the option price adjusted for the 2010 Rights Issue.

Options to subscribe for units of ordinary stock are granted under the terms of the current Stock Option Scheme, which was approved by stockholders. Key executives may participate in the current scheme at the discretion of the Remuneration Committee. Under the current scheme, the total value of options granted may not exceed 100% of an executive's salary. The subscription price per unit of stock shall not be less than the market value of the stock at the date of grant.

The exercise of options granted between 2004 and 2007 was conditional upon underlying earnings per share achieving a cumulative growth of at least 5% per annum compound above the increase in the Consumer Price Index over the three year performance period, commencing with the period in which the options are granted. If this performance condition is not achieved, the options lapse.

The performance conditions for options granted in 1996 up to and including 2005 were satisfied. Options may not be transferred or assigned and may be exercised only between the third and tenth anniversaries of their grant. The performance conditions for awards in 2006, 2007 and 2008 were not met and subsequently all options lapsed. There have been no further awards under the ESOS since 2008.

The options below are before the Group's 2010 and 2011 Rights Issues. The Group Remuneration Committee exercised its discretion not to make any technical adjustments to these grants.

Outstanding options under the Stock Option Scheme are exercisable at price ranges above. The weighted average remaining contractual life of the outstanding options under the Stock Option Scheme is less than three years.

The Bank of Ireland Group Long Term Incentive Plan—2004 (LTIP) was approved by the stockholders at the Annual General Court in July 2004. Its predecessor plan, the Long Term Performance Stock Plan—1999 (LTPSP), was approved by the stockholders at the Annual General Court in July 1999. The LTIP links the number of units of stock receivable by participants to the Group's Total Shareholder Return (TSR). TSR represents stock price growth plus dividends.

Each year selected senior executives participating in the plan receive a conditional award of a number of units of ordinary stock. The maximum award for executive Directors and Group Executive Committee members cannot exceed 100% (150% for the Group CEO) of their annual salary at the time of the award.

Provided the Group's Return on Equity (ROE) over the three year performance period is on average at least 20%, then the proportion of these units which actually vest on the third anniversary of the date of the original award is based on the Group's TSR growth relative to a comparator group of financial services companies, as follows:

If the Group's ROE over the three year performance period is on average below 20%, then the award lapses.

Under the LTPSP, a minimum of 80% of the vested stock must be retained for two years from maturity of award. After the two year retention period, an additional award of 20% is made. If the award is retained for an additional five years, a further award of 30% is made.

The weighted average remaining contractual life of the outstanding options under the LTIP Scheme is less than 1 year (the potential matching awards of 30% on the previous LTPSP schemes are excluded from this calculation).

The performance conditions for awards in 2006, 2007 and 2008 were not met and subsequently, all options lapsed. There have been no further awards under the Group LTIP since 2008.

All of the above stock issue and stock option schemes are subject to a range of flow rate controls approved by the stockholders and which conform to current institutional investor guidelines.

initiatives, the principal elements of which were approved at the Extraordinary General Court on 11 July 2011 and 9 September 2011, included the following:

The completion of the above has enabled the Group to satisfy the requirement of the 2011 PCAR to generate €4.2 billion of additional equity capital and €1 billion of Contingent Capital.

The following table summarises the balance sheet impact of the 2011 recapitalisation of the Bank.



Liability management exercises
Gain arising on the liability management exercises (note 9)⁽¹⁾	1,804		—	—		—		1,804
Issue of ordinary stock	—		288	377		—		665
Repurchase of US$150 million Floating Rate Note⁽²⁾	40		—	—		(58	)	(18	)

Impact of liability management exercises	1,844		288	377		(58	)	2,451

Rights issue	—		954	954		—		1,908

	1,844		1,242	1,331		(58	)	4,359

Transaction costs
Liability management exercises
—Recognised in the income statement⁽¹⁾	(32	)	—	—		—		(32	)
— Transferred from retained earnings to stock premium	16		—	(16	)	—		—
Rights issue	—		—	(114	)	—		(114	)
Taxation	(45	)	—	—		—		(45	)

2011 recapitalisation of the Bank, net of transaction costs and taxation	1,783		1,242	1,201		(58	)	4,168

During 2011, the Group undertook a number of liability management exercises which generated €2,451 million of additional equity capital.

In June 2011, the Group invited certain subordinated bondholders to exchange their bonds for cash or units of ordinary stock. This resulted in subordinated bonds, with a nominal value of €1,924 million, being

tendered in exchange for 5,755,203,190 units of ordinary stock at a price of €0.1156 per unit and €13 million of cash. In addition, the Group was granted the right to insert a call option (which it subsequently exercised), to compulsorily acquire certain subordinated bonds with a nominal value of €101 million for cash at 0.001% of their nominal value.

In September 2011 and December 2011, the Group announced that it had repurchased certain subordinated bonds with a nominal value of €205 million. In December 2011, the Group announced that it had repurchased certain Residential mortgage-backed securities with a total nominal value of €1,148 million issued by Kildare Securities Limited and Brunel Residential Mortgage Securitisation No.1 plc. Further details are set out in note 9.

(ii) A Rights Issue underwritten by the State with a significant investment by institutional investors

In July 2011 the Group successfully completed an 18 for 5 Rights Issue of 19,077,889,032 units of ordinary stock at a Rights Issue price of €0.10 per unit of ordinary stock, which raised gross proceeds of €1,908 million. The results of the Rights Issue were as follows:

Following the completion of the Rights Issue, the State sold 10,510,960,763 units of ordinary stock to a group of institutional investors comprising Fairfax Financial Holdings, WL Ross, Capital Research (part of The Capital Group), Fidelity Investments and Kennedy Wilson. The institutional investors all manage their stockholdings independently. The sale completed on 17 October 2011, following which the State's stockholding in the Bank represents 15.1% of the issued ordinary stock.

To satisfy the requirement under the 2011 PCAR, the Group issued a Contingent Capital note to the State in July 2011. The nominal value of this note is €1 billion and the cash proceeds received (net of a fee paid to the State) amounted to €985 million. The note has a term of five years and an annual coupon of 10%, which can be increased to a market rate capped at 18% if the State sells the note to a third party. If the Core tier 1 capital ratio of the Group (as calculated under the terms of the instrument) falls below 8.25%, the note automatically converts to units of ordinary stock. The conversion price at which the note would convert is the volume-weighted average price (VWAP) of the ordinary stock over the 30 days prior to conversion, subject to a minimum conversion price of €0.05 per unit. Further details are set out in note 42.

During the year ended 31 December 2010, the Bank increased its capital by way of the placing of ordinary stock with institutional investors (the Institutional Placing), the placing of ordinary stock with the NPRFC (the NPRFC Placing), a Rights Issue and debt for equity offers. The proceeds of the Institutional Placing and the Rights Issue were underwritten. The proposals which were approved by stockholders on 19 May 2010 consisted of:

The following table shows the impact in the year ended 31 December 2010 of the capital raising initiatives and the dividend on the 2009 Preference Stock (which was paid in ordinary stock) on ordinary stock, deferred stock, 2009 Preference Stock and stock premium.

	Ordinary Stock					Deferred Stock				2009 Preference Stock						Stock Premium

	Number		€m			Number		€m		Number			€m			€m
Government
Dividend on 2009 Preference Stock paid in units of ordinary stock⁽¹⁾		184,394,378		118			—		—		—			—			(118	)
NPRFC placing⁽²⁾		575,555,556		58			—		—		(1,036,000,000	)		(11	)		(47	)
NPRFC rights⁽²⁾		1,139,924,901		114			—		—		(626,958,696	)		(6	)		(108	)
Conversion of 2009 Preference Stock				172										(17	)		(155	)
Other
Institutional placing⁽³⁾		326,797,386		32			—		—		—			—			467
Rights issue⁽³⁾		981,992,918		98			—		—		—			—			442
Debt for equity offers⁽⁴⁾		1,086,519,602		108			—		—		—			—			500
Issue of ordinary stock		—		238			—		—		—			—			1,409
Transaction costs charged to stock premium		—		—			—		—		—			—			(121	)
Loss on cancellation of warrants		—		—			—		—		—			—			(381	)
Renominalisation of share capital		—		(654	)		1,210,621,289		654		—			—			—

		4,295,184,741		(126	)		1,210,621,289		654		(1,662,958,696	)		(17	)		634

The table below analyses the carrying amounts of the financial assets and financial liabilities by accounting treatment and by balance sheet heading.

	At fair value through profit or loss

	At fair value through profit or loss						At fair value through Other Comprehensive income (OCI)
	Derivatives designated as fair value hedging instruments €m						At fair value through Other Comprehensive income (OCI)				Loans and advances / held at amortised cost €m
31 December 2011	Derivatives designated as fair value hedging instruments €m		Held for trading €m		Designated upon initial recognition €m		Available for sale €m		Cash flow hedge derivatives €m		Loans and advances / held at amortised cost €m		Insurance contracts €m		Total €m
Financial assets
Cash and balances at central banks		—		—		—		—		—		8,181		—		8,181
Items in the course of collection from other banks		—		—		—		—		—		443		—		443
Trading securities		—		6		—		—		—		—		—		6
Derivative financial instruments		765		4,158		—		—		1,439		—		—		6,362
Other financial assets at fair value through profit or loss		—		—		8,914		—		—		—		—		8,914
Loans and advances to banks		—		—		—		—		—		8,059		—		8,059
Available for sale financial assets		—		—		—		10,262		—		—		—		10,262
NAMA senior bonds		—		—		—		—		—		5,016		—		5,016
Loans and advances to customers		—		—		—		—		—		99,314		—		99,314
Assets held for sale to NAMA		—		—		—		—		—		—		—		—
Other assets classified as held for sale		—		—		—		—		—		2,446		—		2,446
Interest in associates		—		—		31		—		—		—		—		31

Total financial assets		765		4,164		8,945		10,262		1,439		123,459		—		149,034

Financial liabilities
Deposits from banks		—		—		132		—		—		31,402		—		31,534
Customer accounts		—		—		1,785		—		—		68,721		—		70,506
Items in the course of transmission to other banks		—		—		—		—		—		271		—		271
Derivative financial instruments		538		3,835		—		—		1,645		—		—		6,018
Debt securities in issue		—		—		457		—		—		18,667		—		19,124
Liabilities to customers under investment contracts		—		—		4,954		—		—		—		—		4,954
Insurance contract liabilities		—		—		—		—		—		—		7,037		7,037
Subordinated liabilities		—		—		27		—		—		1,399		—		1,426
Other short positions		—		4		—		—		—		—		—		4

Total financial liabilities		538		3,839		7,355		—		1,645		120,460		7,037		140,874

51 MEASUREMENT BASIS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Continued)

	At fair value through profit or loss

	At fair value through profit or loss						At fair value through other comprehensive income
	Derivatives designated as fair value hedging instruments €m						At fair value through other comprehensive income				Loans and advances / Held at amortised cost €m
31 December 2010	Derivatives designated as fair value hedging instruments €m		Held for trading €m		Designated upon initial recognition €m		Available for sale €m		Cash flow hedge derivatives €m		Loans and advances / Held at amortised cost €m		Insurance contracts €m		Total €m
Financial assets
Cash and balances at central banks		—		—		—		—		—		1,014		—		1,014
Items in the course of collection from other banks		—		—		—		—		—		491		—		491
Trading securities		—		151		—		—		—		—		—		151
Derivative financial instruments		924		3,751		—		—		1,700		—		—		6,375
Other financial assets at fair value through profit or loss		—		—		10,045		—		—		—		—		10,045
Loans and advances to banks		—		—		—		—		—		7,458		—		7,458
Available for sale financial assets		—		—		—		15,576		—		—		—		15,576
NAMA senior bonds		—		—		—		—		—		5,075		—		5,075
Loans and advances to customers		—		—		—		—		—		114,457		—		114,457
Assets held for sale to NAMA		—		7		—		—		—		797		—		804
Interest in associates		—		—		26		—		—		—		—		26

Total financial assets		924		3,909		10,071		15,576		1,700		129,292		—		161,472

Financial liabilities
Deposits from banks		—		—		412		—		—		40,663		—		41,075
Customer accounts		—		—		1,471		—		—		63,972		—		65,443
Items in the course of transmission to other banks		—		—		—		—		—		293		—		293
Derivative financial instruments		557		3,457		—		—		1,431		—		—		5,445
Debt securities in issue		—		—		545		—		—		28,148		—		28,693
Liabilities to customers under investment contracts		—		—		5,271		—		—		—		—		5,271
Insurance contract liabilities		—		—		—		—		—		—		7,188		7,188
Subordinated liabilities		—		—		83		—		—		2,692		—		2,775

Total financial liabilities		557		3,457		7,782		—		1,431		135,768		7,188		156,183

51 MEASUREMENT BASIS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (Continued)

The fair value and contractual amount due on maturity of financial liabilities designated at fair value upon initial recognition are shown on the table below.

For financial assets and financial liabilities which are recognised and subsequently measured at fair value through profit or loss or through other comprehensive income, a description of the methods and assumptions used to calculate those fair values is set out in note 52.

The Group's accounting policy on valuation of financial instruments is set out on page F-24, while pages F-42 and F-43 give details on the critical accounting estimates and judgements made by management in relation to the fair value of financial instruments. The fair value of a financial instrument is defined as the amount for which an asset could be exchanged, or a liability settled, in an arm's length transaction between knowledgeable willing parties.

Where possible, the Group calculates fair value using observable market prices. Where market prices are not available, fair values are determined using valuation techniques which may include discounted cash flow models or comparisons to instruments with characteristics either identical or similar to those of the instruments held by the Group or at recent arm's length market transactions.

These techniques are subjective in nature and involve assumptions which are based upon management's view of market conditions at the period end which may not necessarily be indicative of any subsequent fair value. Furthermore, minor changes in the assumptions used could have a significant impact on the resulting estimated fair values, and, as a result, readers of these financial statements are advised to use caution when using this data to evaluate the Group's financial position.

The concept of fair value assumes realisation of financial instruments by way of a sale. However, in many cases, particularly in respect of loans and advances to customers, the Group intends to realise assets through collection over time. As such, the fair values calculated do not represent the value of the Group as a going concern at 31 December 2011 or 31 December 2010.

(a) Financial assets and financial liabilities recognised and subsequently measured at fair value

All financial instruments are initially recognised at fair value. The Group subsequently measures trading securities, other financial assets and financial liabilities designated at fair value through profit or loss, derivatives and available for sale financial assets at fair value in the balance sheet. These instruments are shown as either at fair value through profit or loss (FVTPL) or at fair value through Other Comprehensive Income (OCI) in note 51 on the measurement basis of financial assets and financial liabilities. A description of the methods and assumptions used to calculate fair values of these assets and liabilities is set out below.

These instruments are valued using observable market prices, directly from a recognised pricing source or an independent broker or investment bank.

These consist of assets designated at fair value through profit or loss, which are predominantly held for the benefit of unit linked policyholders, with any changes in valuation accruing to the policyholders. These assets consist principally of bonds, equities and unit trusts, which are traded on listed exchanges, are actively traded and have readily available prices. Substantially all of these assets are valued using valuation techniques which use observable market data.

The Group's derivative financial instruments are valued using valuation techniques commonly used by market participants. These consist of discounted cash flow and options pricing models, which typically incorporate observable market data, principally interest rates, basis spreads, foreign exchange rates, equity prices and counterparty credit.

Certain derivatives are valued using unobservable inputs relating to counterparty credit which are significant to their valuation. The effect of using reasonably possible alternative assumptions in the valuation of these derivatives would be to increase their fair value by up to €20 million or decrease their fair value by up to €20 million, with a corresponding impact on the income statement.

In addition a small number of derivative financial instruments are valued using significant unobservable inputs other than counterparty credit. However, changing one or more assumptions used in the valuation of these derivatives would not have a significant impact as they are entered into to hedge the exposure arising on certain customer accounts (see below), leaving the Group with no net valuation risk due to the unobservable inputs.

The Group has no assets held for sale to NAMA at 31 December 2011. In relation to derivatives held for sale to NAMA at 31 December 2010, counterparty credit was not considered observable and was significant to their valuation.

Investments in associates which are venture capital investments are valued in accordance with the 'International Private Equity and Venture Capital Valuation Guidelines'. This requires the use of various inputs such as discounted cash flow analysis and comparison with the earnings multiples of listed comparative companies amongst others. Although the valuation of unquoted equity instruments is subjective by nature, the relevant methodologies are commonly applied by other market participants and have been consistently applied over time. Using reasonably possible alternative assumptions would not have a material impact on the value of these assets.

For available for sale financial assets for which an active market exists, fair value has been determined directly from observable market prices or yields through a recognised pricing source or an independent broker, price-provider or investment bank.

A small number of assets have been valued using vendor prices, which are not considered to represent observable market data. The effect of using reasonably possible alternative assumptions would be to decrease their fair value by up to €2 million or to increase their fair value by up to €12 million, with a corresponding impact on the statement of other comprehensive income.

NAMA subordinated debt does not trade in an active market for which observable market data is available. Its fair value has been estimated using a discounted cash flow valuation technique incorporating observable yields on bonds trading in active markets. A 0.50% increase / (decrease) in the discount rate used to value the debt would result in an decrease of €4 million (increase of €4 million) in its fair value, with a corresponding impact on other comprehensive income.

These instruments comprise debt securities in issue and subordinated liabilities with a fair value of €484 million (31 December 2010: €628 million) which are measured at fair value through profit or loss, the fair value of which is based on valuation techniques incorporating significant unobservable market data. The significant unobservable input is the Group's credit spread, the estimation of which is judgemental in current market circumstances. The Group estimates this spread by reference to recent transactions in the same instrument or in similar instruments issued by the Group. In addition the Group considers the credit spread applicable to Irish Government bonds. A 1% increase / (decrease) in the estimated credit spread at 31 December 2011 would result in a decrease of €26 million / (increase of €26 million) in the fair value of the liabilities, with a corresponding impact on the income statement.

Customer accounts and deposits by banks designated at fair value through profit or loss consist of deposits which contain an embedded derivative (typically an equity option). These instruments are typically valued using valuation techniques which use observable market data. The Group incorporates the effect of changes in its own credit spread when valuing these instruments. The Group estimates this spread by reference to recent transactions in the same instrument or in similar instruments issued by the Group.

A small number of customer accounts are valued using additional non-observable inputs. However, changing one or more assumptions used in the valuation of these customer accounts would not have a

significant impact as these customer accounts are hedged with offsetting derivatives (see above), leaving the Group with no net valuation risk due to those non-observable inputs.

The accounting policy for these instruments is set out on page F-35. In accordance with the accounting policy, the fair value of liabilities to customers under both insurance and investment unit linked contracts is contractually linked to the fair value of the financial assets within the policyholders' unit linked funds. The value of the unit linked financial liabilities is determined using current unit prices multiplied by the number of units attributed to the contract holders at the balance sheet date. Their value is never less than the amount payable on surrender, discounted for the required notice period where applicable.

(b) Financial assets and liabilities not subsequently measured at fair value

For financial assets and financial liabilities which are not subsequently measured at fair value on the balance sheet, the Group discloses their fair value in a way that permits them to be compared to their carrying amounts. The methods and assumptions used to calculate the fair values of these assets and liabilities are set out below.

The estimated fair value of floating rate placements and overnight placings is their carrying amount. The estimated fair value of fixed interest bearing placements is based on discounted cash flows using prevailing money market interest rates for assets with similar credit risk and remaining maturity.

Loans and advances to customers and other assets classified as held for sale

Loans and advances are carried net of provisions for impairment. The fair value of both fixed and variable rate loans and advances to customers is estimated using valuation techniques which include:

NAMA senior bonds are classified as loans and receivables and are carried net of provisions for impairment. Their fair value has been estimated by using a valuation technique which takes into consideration the Government guarantee, collateral and other support, valuations in the repo market and the yield on Irish Government bonds of similar maturity.

The Group had no assets held for sale to NAMA at 31 December 2011. Assets held for sale to NAMA were measured on the same basis in the balance sheet as prior to their classification as held for sale, in line with the Group's accounting policy for assets held for sale to NAMA, set out on page F-30.

At 31 December 2010, the Group estimated that the discount to gross loan value on the remaining loans held for sale to NAMA would be in a range of 20% to 30%. For the purposes of presenting the fair value of the total portfolio of assets held for sale to NAMA, the Group applied a 25% discount (being the mid point of the Group's expected range) to all such loans.

The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest bearing deposits and other borrowings without quoted market prices is based on discounted cash flows using interest rates for new deposits with similar remaining maturity.

The fair values of these instruments are calculated based on quoted market prices where available. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve appropriate to the Group for the remaining term to maturity. The yield curve used incorporates the effect of changes in the Group's own credit spread.

The following table shows, for the Group's financial assets and financial liabilities that are recognised and subsequently measured at fair value, their classification within a three-level fair value hierarchy.

Level 1 comprises financial assets and financial liabilities valued using quoted market prices in active markets. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

Level 2 comprises financial assets and financial liabilities valued using techniques based significantly on observable market data.

Level 3 comprises financial assets and financial liabilities valued using techniques where the impact of the unobservable market data is significant in determining the fair value of the instrument. Unobservable market data is not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on observable inputs of a similar nature, historic observations on the level of the input or analytical techniques.

31 December 2011

Financial assets held at fair value
Trading securities	6		—		—		6
Derivative financial instruments	—		5,831		531		6,362
Other financial assets at FVTPL	8,270		627		17		8,914
AFS financial assets	9,442		646		174		10,262
Interest in associates	—		—		31		31

	17,718		7,104		753		25,575

As a % of fair value assets	69.3	%	27.8	%	2.9	%	100	%

Financial liabilities held at fair value
Deposits from banks	—		132		—		132
Customer accounts	—		1,774		11		1,785
Derivative financial instruments	—		5,968		50		6,018
Liabilities to customers under investment contracts	—		4,954		—		4,954
Insurance contract liabilities	—		7,037		—		7,037
Debt securities in issue	—		—		457		457
Other short position	4		—		—		4
Subordinated liabilities	—		—		27		27

	4		19,865		545		20,414

As a % of fair value liabilities	—		97.3	%	2.7	%	100	%

31 December 2010

Financial assets held at fair value
Trading securities	151		—		—		151
Derivative financial instruments	—		6,343		32		6,375
Assets held for sale to NAMA—derivatives	—		—		7		7
Other financial assets at FVTPL	9,428		600		17		10,045
AFS financial assets	14,167		1,209		200		15,576
Interest in associates	—		—		26		26

	23,746		8,152		282		32,180

As a % of fair value assets	73.8	%	25.3	%	0.9	%	100	%

Financial liabilities held at fair value
Deposits from banks	—		412		—		412
Customer accounts	—		1,429		42		1,471
Derivative financial instruments	—		5,418		27		5,445
Liabilities to customers under investment contracts	—		5,271		—		5,271
Insurance contract liabilities	—		7,188		—		7,188
Debt securities in issue	—		—		545		545
Subordinated liabilities	—		—		83		83

	—		19,718		697		20,415

As a % of fair value liabilities	—		96.6	%	3.4	%	100	%

31 December 2011

Opening Balance	17	32		7		200		26	282
Total gains or losses in:
Profit or loss
—Net trading expense	—	12		—		—		—	12
—Other income	—	—		—		14		—	14
—Impairment charges	—	—		—		(16	)	—	(16	)
—Share of results of associates	—	—		—		—		—	—
Other comprehensive income	—	—		—		3		—	3
Additions	—	91		—		26		5	122
Disposals	—	—		(7	)	(40	)	—	(47	)
Redemptions	—	—		—		(4	)	—	(4	)
Transfers out of level 3
—from level 3 to level 2	—	(6	)	—		(16	)	—	(22	)
Transfers into level 3
—from level 2 to level 3	—	402		—		7		—	409

Closing balance	17	531		—		174		31	753

Total gains / (losses) for the year included in profit or loss for assets held in level 3 at the end of the reporting year	—	280		—		—		—	280

Other transfers
—from level 1 to level 2	—	—		—		19		—	19

—from level 2 to level 1	—	—		—		—		—	—

The transfer from level 3 to level 2 arose as result of the availability of observable market prices at 31 December 2011 which were unavailable at 31 December 2010 or as a result of unobservable inputs becoming less significant to the fair value measurement of these assets.

The transfer from level 2 to level 3 arose as a result of the unobservable inputs becoming significant to the fair value measurement of these assets.

31 December 2010

Opening Balance	—	36		93		332		23		484
Total gains or losses in:
Profit or loss
—Net trading expense	—	6		(16	)	—		—		(10	)
—Impairment charges	—	—		—		(70	)	—		(70	)
—Share of results of associates	—	—		—		—		5		5
Other Comprehensive income	—	—		—		(6	)	—		(6	)
Additions	17	1		—		182		5		205
Disposals	—	—		(54	)	(145	)	(7	)	(206	)
Redemptions	—	(14	)	(16	)	(4	)	—		(34	)
Transfers out of level 3
—from level 3 to level 2	—	—		—		(89	)	—		(89	)
Transfers into level 3
—from level 2 to level 3	—	3		—		—		—		3

Closing balance	17	32		7		200		26		282

Total gains / (losses) for the year included in profit or loss for assets held in level 3 at the end of the reporting year	—	6		(16	)	(70	)	5		(75	)

Other transfers
—from level 1 to level 2	—	—		—		76		—		76
—from level 2 to level 1	—	—		—		18		—		18

The transfer from level 3 to level 2 arose as a result of an ability to obtain observable market prices at 31 December 2010 which were unavailable at 31 December 2009.

The transfer from level 2 to level 3 arose as a result of the unobservable inputs becoming significant to their fair value measurement.

31 December 2011

Opening Balance	42		27		—	545		83		697
Exchange adjustments	—		—		—	(3	)	—		(3	)
Total gains or losses in:
Profit or loss
—Net trading expense	—		(4	)	—	(3	)	(10	)	(17	)
—Other income	—		—		—	—		(2	)	(2	)
Other Comprehensive income	—		—		—	—		—		—
Additions	—		10		—	—		—		10
Disposals	—		—		—	—		—		—
Redemptions and maturities	—		(4	)	—	(82	)	(44	)	(130	)
Transfers out of level 3
—from level 3 to level 2	(35	)	—		—	—		—		(35	)
Transfers into level 3
—from level 2 to level 3	4		21		—	—		—		25

Closing balance	11		50		—	457		27		545

Total gains / (losses) for the year included in profit or loss for liabilities held at the end of the reporting year	5		(31	)	—	(40	)	—		(66	)

The transfer from level 3 to level 2 arose as a result of an ability to obtain observable market prices at 31 December 2011 which were unavailable at 31 December 2010.

The transfer from level 2 to level 3 arose as a result of the unobservable inputs becoming significant to their fair value measurement.

31 December 2010

Opening Balance	62		20		1		472		229		784
Total gains or losses in:
Profit or loss
—Net trading expense	1		7		—		(124	)	(59	)	(175	)
Other Comprehensive income	—		—		—		—		21		21
Additions	2		6		—		252		—		260
Disposals	—		—		(1	)	—		—		(1	)
Redemptions and maturities	(57	)	—		—		(55	)	(108	)	(220	)
Transfers out of level 3
—from level 3 to level 2	—		(10	)	—		—		—		(10	)
Transfers into level 3
—from level 2 to level 3	34		4		—		—		—		38

Closing balance	42		27		—		545		83		697

Total gains / (losses) for the year included in profit or loss for liabilities held at the end of the reporting year	39		12		—		(124	)	(53	)	(126	)

The transfer from level 3 to level 2 arose as a result of an ability to obtain observable market prices at 31 December 2010 which were unavailable at 31 December 2009.

The transfer from level 2 to level 3 arose as a result of the unobservable inputs becoming less significant to their fair value measurement of these liabilities.

The carrying amount and the fair value of the Group's financial assets and financial liabilities as at 31 December 2011 and 31 December 2010 are set out in the table below.

	31 December 2011						31 December 2010

	Carrying amount €m			Fair values €m			Carrying amount €m		Fair values €m
Financial instruments held for trading
Debt securities⁽¹⁾		6			6			151		151
Derivative financial instruments—trading
Foreign exchange contracts⁽¹⁾		(89	)		(89	)		135		135
Interest rate contracts⁽¹⁾		281			281			132		132
Equity and commodity contracts⁽¹⁾		131			131			27		27
Non-trading financial instruments
Assets
Cash and balances at central banks⁽¹⁾		8,181			8,181			1,014		1,014
Items in course of collection from other banks⁽¹⁾		443			443			491		491
Loans and advances to banks		8,059			7,993			7,458		7,454
Loans and advances to customers (including assets classified as held for sale)		101,747			86,653			114,457		103,172
Assets held for sale to NAMA⁽²⁾		—			—			804		661
Available for sale financial assets⁽¹⁾		10,262			10,262			15,576		15,576
NAMA senior bonds		5,016			5,055			5,075		5,075
Other financial assets at fair value through profit or loss⁽¹⁾		8,914			8,914			10,045		10,045
Liabilities
Deposits from banks		31,534			31,574			41,075		41,047
Customer accounts		70,506			70,495			65,443		65,545
Items in the course of transmission to other banks⁽¹⁾		271			271			293		293
Debt securities in issue		19,124			15,989			28,693		26,060
Liabilities to customers under investment contracts⁽¹⁾		4,954			4,954			5,271		5,271
Insurance contract liabilities⁽¹⁾		7,037			7,037			7,188		7,188
Subordinated liabilities		1,426			1,142			2,775		1,150
Derivative financial instruments—hedging
Interest rate contracts and foreign exchange contracts⁽¹⁾		21			21			636		636

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances:

The Group's exposure to the United Kingdom set out above primarily relates to liquid assets in excess of regulatory liquidity requirements held by Bank of Ireland (UK) plc.

The parent company of the Group is the Governor and Company of the Bank of Ireland (the Bank). In accordance with Section 148(8) of the Companies Act, 1963 and Section 7(1A) of the Companies (Amendment) Act, 1986, the Bank is availing of the exemption of presenting its individual income statement to the Annual General Court and from filing it with the Registrar of Companies. The Bank's profit after tax for the year ended 31 December 2011 determined in accordance with IFRS is €375 million. The profit after tax determined in accordance with IFRS for the year ended 31 December 2010 was €1,248 million.

The Bank is a corporation established in Ireland in 1783 under Royal Charter with a primary listing on the Irish Stock Exchange and a premium listing on the London Stock Exchange.

In the US the Bank's ordinary stock is traded on the New York Stock Exchange in the form of American Depository Shares (ADSs). The Group implemented a ratio change with respect to its American Depository Receipt (ADR) programme, effective from 14 October 2011, where the ratio changed from one ADS representing four units of ordinary stock (1:4), to one ADS representing 40 units of ordinary stock (1:40). Following this change, each ADS represents the right to receive 40 units of ordinary stock and evidenced by American Depository Receipts (ADRs).

A number of banking transactions are entered into between the Bank and its subsidiaries in the normal course of business. These include loans, deposits and foreign currency transactions. The amounts outstanding at the year end date are set out in notes 28 and 39.

The Group provides to and receives from its associates and joint ventures certain banking and financial services, which are not material to the Group, on similar terms to third party transactions. These include loans, deposits and foreign currency transactions. The amounts outstanding at the year end date are set out in notes 28 and 39.

Where appropriate under tax rules, the Group claims from or surrenders tax losses to its associates and joint ventures. In these cases, payments, equal to the value of the losses claimed or surrendered, are made to or received from the associates or joint ventures concerned.

The Group provides a range of normal banking and financial services, which are not material to the Group, to various pension funds operated by the Group for the benefit of its employees (principally to the Bank of Ireland Staff Pensions Fund (BSPF)), which are conducted on similar terms to third party transactions. Details on the Group's contributions to the pension funds are set out in note 46.

The Group occupies a number of premises owned by the Group's pension schemes. The total value of these properties at 31 December 2011 is €24 million (31 December 2010: €25 million). The total rental income paid to the Group's pension schemes during the year ended 31 December 2011 was €2.1 million (year ended 31 December 2010: €2.1 million).

The assets of the Group's pension schemes assets included Bank of Ireland stock amounting to €2 million at 31 December 2011 (31 December 2010: €2 million).

At 31 December 2010, €2,825 million of the BSPF assets were managed by Bank of Ireland Asset Management Limited (BIAM) and Bank of Ireland Securities Services (BoISS) acted as custodian for these assets. As set out in note 19, BIAM was sold to State Street Global Advisors (SSGA) in January 2011 and BoISS was sold to Northern Trust Corporation in June 2011. The pension scheme assets continue to be managed by SSGA and Northern Trust continues to act as custodian for these assets.

At 31 December 2010, €9 million of the BSPF assets were managed by Paul Capital Investments LLC. As set out in note 19, Paul Capital Investments LLC was disposed of by the Group in April 2011.

During the year ended December 2011, fees of €1.4 million (year ended 31 December 2010: €5.1 million) were paid to the Group by the BSPF. The fees during the year ended 31 December 2011 were principally in relation to services carried out by the Group relating to the administration of the pension schemes. In the year ended 31 December 2010, the fees also included amounts paid to BIAM and BoISS in relation to the services described above.

The State, through both the Group's participation in the ELG scheme and the investment by the NPRFC in the 2009 Preference Stock of the Bank, is a related party of the Group.

Details of individually or collectively significant transactions with the State and entities under its control or joint control are set out in note 56.

The following information is presented in accordance with the Companies Act 1990 (as amended by the Companies (Amendment) Act 2009). For the purposes of the Companies Acts disclosures, Directors means the Court of Directors and any past Directors who were Directors during the relevant period.

Where no amount is shown in the tables below, this indicates either a credit balance, a balance of nil, or a balance of less than €500.

Companies Acts disclosure Loans

Directors at 31 December 2011
R Boucher
Mortgage total	206	176	206
Other loans total⁽³⁾	687	660	672
Credit card total	1	2	16

Total	894	838	894

T Considine
Credit card total	1	3	3

Total	1	3	3

J Kennedy
Mortgages total	776	651	776
Credit card total	—	3	3
Current account total	—	—	1

Total	776	654	780

P Kennedy
Mortgages total	5,078	5,046	5,078
Credit card total	3	16	16
Current account total	—	—	2

Total	5,081	5,062	5,096

P Molloy
Other loan total	127	—	127
Credit card total⁽⁴⁾	15	10	15

Total	142	10	142

P Mulvihill
Credit card total	—	—	—
Current account total	—	—	—

Total	—	—	—

Companies Acts disclosure Loans

J Walsh
Credit card total	1	2	4
Current account total	—	8	10

Total	1	10	14

Directors no longer in office at 31 December 2011
J O'Donovan (retired 31 December 2011)
Credit card total⁽⁴⁾	1	3	5
Current account total⁽⁴⁾	—	—	28

Total	1	3	33

D Crowley (retired 15 June 2011)
Mortgages total	496	542	575
Other loan total	10	—	10
Credit cards total^(3),(4)	15	16	20
Current accounts total⁽⁴⁾	—	—	1

Total	521	558	606

P Haran (retired 15 June 2011)
Mortgage total	105	89	105
Credit card total	—	1	6

Total	105	90	111

H A McSharry (retired 15 June 2011)
Mortgages total	92	—	92
Credit card total	1	6	6

Total	93	6	98

D Donovan (retired 15 June 2011), D Holt (retired 15 June 2011), R Hynes (retired 31 December 2011), P Butler and P O'Sullivan had no loans from the Group during the year ended 31 December 2011.

All Directors except T Considine have other transactions with the Bank. The nature of these transactions includes investments, pension funds, deposits, life assurance and current accounts with credit balances. The relevant balances on these accounts are included in the aggregate figure for deposits on page F-157.

Other than as indicated, all loans to Directors are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for similar transactions with other persons unconnected with the Bank and of similar financial standing and do not involve more than the normal risk of collectability.

There are no provisions or expenses in respect of any failure or anticipated failure to repay any of the above loans or interest thereon. There is no interest which having fallen due on the above loans has not been paid.

Companies Acts disclosure Loans

Directors at 31 December 2010
R Boucher
Mortgage total	235	206	235
Other loans total⁽³⁾	708	687	732
Credit card total	3	1	15

Total	946	894	982

T Considine
Credit card total	1	1	3

Total	1	1	3

D Crowley
Mortgages total	614	496	614
Other loan total	18	10	18
Credit cards total^(3),(4)	14	15	26
Current accounts total⁽⁴⁾	—	—	2

Total	646	521	660

D Donovan
Credit card total	—	—	2

Total	—	—	2

P Haran
Mortgage total	120	105	120
Credit card total	2	—	2

Total	122	105	122

J Kennedy
Mortgages total	1,301	776	1,301
Other loan total	98	—	98
Credit card total	—	—	2
Current account total	—	—	4

Total	1,399	776	1,405



H A McSharry
Mortgages total	120	92	120
Credit card total	5	1	8

Total	125	93	128

P Molloy
Other loan total	500	127	500
Credit card total⁽³⁾	7	15	15

Total	507	142	515

J O'Donovan
Credit card total⁽³⁾	2	1	6

Total	2	1	6

J Walsh
Credit card total	1	1	3
Current account total	—	—	28

Total	1	1	31

P Kennedy
Mortgages total	4,666	5,078	5,078
Credit card total	7	3	7
Current account total	—	—	175

Total	4,673	5,081	5,260

Directors no longer in office at 31 December 2010
D McCourt
Mortgage total	348	348	348
Other loans total	45	79	79
Credit card total	3	3	3

Total	396	430	430

T Neill
Credit card total	3	—	3

Total	3	—	3

D Holt, R Hynes and P O'Sullivan had no loans with the Group during the year ended 31 December 2010.

While the above arrangements are on favourable terms the terms are similar to those available to staff generally.

(iii) Loans to connected persons—Central Bank licence condition disclosures

Under its banking licence, the Bank is required to disclose in its annual audited financial statements details of:

Disclosure is subject to certain de minimis exemptions and to exemptions for loans relating to principal private residences where the total of such loans to an individual connected person does not exceed €1 million.

The following information is presented in accordance with this licence condition.

For the purposes of IAS 24: Related Party Disclosures, key management personnel (KMP) comprise the Directors of the Court, the members of the Group Executive Committee (GEC), the Group Secretary and any past KMP who was a KMP during the relevant period. In addition to executive Directors at 31 December 2011, the GEC comprises the Head of Retail (Ireland and UK), the Head of Non-Core, the Group Chief Governance Risk Officer, the Chief Credit and Market Risk Officer, the Head of Group HR and the Head of Group Manufacturing. Key management personnel, including Directors, hold products with Group companies in the ordinary course of business.

Other than as indicated by (4) on pages F-150 and F-151, all loans to non-executive Directors are made in the ordinary course of business on substantially the same terms including interest rates and collateral, as those prevailing at the time for similar transactions with other persons, and do not involve more than the normal risk of collectability. Loans to key management personnel other than non-executive Directors are

made on terms similar to those available to staff generally and / or in the ordinary course of business on normal commercial terms.

The aggregate amounts outstanding, in respect of all loans, quasi-loans and credit transactions between the Bank and its key management personnel, as defined above, together with members of their close families and entities influenced by them are shown in the table below:

(1): Balance includes principal and interest.
(2): These figures include credit card exposures at the maximum statement balance. In all cases key management personnel have not exceeded their approved limits. The maximum approved credit limit on any credit card held by key management personnel is €30,000. The maximum amount outstanding was calculated using the maximum balance on each account. The highest maximum outstanding liability for any member of key management personnel and their close family did not exceed €5.1 million during the year ended 31 December 2011 (31 December 2010: €5.3 million). In some cases with investment type products (i.e. funds based products, life assurance and other policies) the maximum balance amounts were not available, in which case the greater of the balance at the start of the year and the balance at the end of the year has been included as the maximum balance amount. While the closing balance includes interest accrued and interest paid, the maximum balance includes interest paid.
(3): The opening balance includes balances and transactions with KMP who have retired during 2010 and are not therefore related parties during the current year.

Key management personnel have other protection products with the Bank. The nature of these products includes mortgage protection, life assurance and critical illness cover. It also includes general insurance products which are underwritten by a number of external insurance companies and for which the Bank acts as an intermediary only. None of these products has any encashment value at 31 December 2011 or 31 December 2010.

Included in the above figures are loans to key management personnel (other than non-executive Directors) and close family members of KMP on terms similar to those available to staff generally, amounting to €0.825 million, (31 December 2010: €1.673 million).

There are no provisions or expenses in respect of any failure or anticipated failure to repay any of the above loans or interest thereon.

The Bank has a lien amounting to €3,200 (31 December 2010: €nil) over the deposit account of one Director which is in respect of an overdraft facility provided on a current account.

A guarantee amounting to €4,000 at 31 December 2011 (31 December 2010: €880,000) in favour of the Group has been entered into by one KMP and the Group has entered into a guarantee in favour of one Director amounting to €50,000 at 31 December 2011 (31 December 2010: €50,000). The connected person of one Director has entered into guarantees in favour of the Group amounting to €184,000. A guarantee by one Director amounting to €280,000 in favour of the Group was cancelled in June 2011. There were no calls on these guarantees during the year ended 31 December 2011 or 31 December 2010.

The State, through both the Group's participation in the Government Guarantee Schemes and the investment by the NPRFC in the 2009 Preference Stock of the Bank, is a related party of the Group.

During the year ended 31 December 2011, the State's proportionate holding of the ordinary stock of the Bank reduced significantly following the Rights Issue, the debt for equity and cash offers and in particular the sale by the State of a significant number of units of ordinary stock in the Bank to a group of institutional investors and fund managers. See note 49 for further detail on these transactions.

As a result, at 31 December 2011 the State held 15% of the ordinary stock of the Bank (31 December 2010: 36%).

At 31 December 2011 and at 31 December 2010, there were 1,837,041,304 number of units of 2009 Preference Stock in issue all of which were held by the NPRFC.

On 21 February 2011, the Bank paid a cash dividend of €214.5 million on the 2009 Preference Stock to the NPRFC. In February 2010, in accordance with the terms of the instrument, the Bank issued to the NPRFC 184,394,378 units of ordinary stock, being the number of units equal to the aggregate cash amount of the 2010 dividend on the 2009 Preference Stock of €250.4 million divided by the Thirty Day Average Price⁽¹⁾ (which equated to a share price of €1.3582).

The terms and conditions attaching to the 2009 Preference Stock are outlined in note 48.

In July 2011 the Group issued a Contingent Capital note to the State, satisfying the requirement under the 2011 PCAR to issue €1 billion of Contingent Capital. The nominal value of this note is €1 billion and cash proceeds of €985 million were received (net of a fee paid to the State of €15 million). The note has a term of five years and a coupon of 10%, which can be increased to a maximum of 18% if the State sells the note to a third party. For further details see note 42.

Fees paid to the State in connection with the recapitalisation of the Bank (see note 49) amounted to €83 million (year ended 31 December 2010: €52 million).

On 11 January 2010, four Group entities (the Governor and Company of the Bank of Ireland, Bank of Ireland Mortgage Bank, ICS Building Society and Bank of Ireland (IOM) Limited) were accepted into the State's Eligible Liabilities Guarantee Scheme. On 21 July 2010, Bank of Ireland (UK) plc was also accepted into the ELG scheme.

The purpose of the ELG scheme was to update and revise the government guarantee which had previously been provided under the Credit Institutions (Financial Support) Scheme 2008 (the CIFS Scheme), which expired on 29 September 2010.

The ELG scheme provides a guarantee for relevant customer deposits. In November 2011 the Minister for Finance introduced flexibility for covered institutions⁽¹⁾ to issue certain customer deposits in unguaranteed form. At 31 December 2011, no such unguaranteed deposits had been issued by the Group. The guarantee also provides flexibility to issue certain debt securities in both unguaranteed and guaranteed form (up to a maximum maturity of five years).

Dated subordinated debt, covered bonds and other forms of secured funding are not guaranteed under the ELG scheme.

The Irish Government has extended the ELG scheme for a further period of one year to 31 December 2012. The extension is subject to EU state aid approval every six months, which is the maximum period permitted for such approval under the European Commission's policy on guarantee schemes in the financial sector. The EU Commission has approved the extension to 30 June 2012. Debt securities and deposits issued under the ELG scheme prior to 30 June 2012 will be covered to maturity, subject to a maximum maturity of five years.

An approval by the EU Commission of a further extension of the ELG scheme to 31 December 2012 would ensure that debt securities and deposits issued under the ELG scheme prior to 31 December 2012 would be covered up to their maturity, subject to a maximum term of five years.

The following table summarises the fees paid under the ELG and CIFS Schemes during the years ended 31 December 2011 and 2010 and the liabilities covered at each balance sheet date.

Under the European Communities (Deposit Guarantee Schemes) Regulations, 1995 as amended by the State on 20 September 2008, deposits of up to €100,000 per depositor per licensed financial institution regulated by the Central Bank are guaranteed by the State. This Scheme covers current accounts, demand deposit accounts and term deposit accounts. The Scheme is funded by credit institutions lodging funds in a deposit protection account maintained at the Central Bank.

In addition to the deposits covered by these Regulations and by the ELG scheme as set out above, certain other Group deposits are covered by the deposit protection schemes in other jurisdictions, chiefly the UK Financial Services Compensation Scheme (in respect of deposits issued by Bank of Ireland (UK) plc) and the Isle of Man Depositors Compensation Scheme (in respect of deposits issued by Bank of Ireland (I.O.M.) Limited).

On 23 December 2010, the Bank entered into a facility deed (the deed) with the Central Bank, providing for an uncommitted facility to the Group, guaranteed by the Minister for Finance. In entering into the deed, the Bank also entered into a counter indemnity agreement with the Minister for Finance. This agreement indemnifies the Minister for Finance in respect of any payments made by him under the guarantee in favour of the Central Bank in respect of any indebtedness under the deed. It is coterminous with payment of interest and prepayment of principal in full under the deed.

The facility was initially for an amount of €10 billion, with the Central Bank having the option to increase this to an amount determined at its absolute discretion. The facility reached a maximum amount of €14 billion during the year ended 31 December 2011. At 31 December 2011, the amount of the facility was €10 billion, and this was subsequently reduced to €5 billion on 23 January 2012. The facility is currently due to expire on 23 April 2012.

At 31 December 2011 the Group held bonds issued by the State with a carrying value of €4,222 million (31 December 2010 €3,811 million). Further details are set out on pages 203 and 204 in the Risk Management Report.

At 31 December 2011 the Group held bonds issued by NAMA with a carrying value of €5,129 million (31 December 2010 €5,173 million).

On 30 March 2010, the Group, through its wholly-owned subsidiary New Ireland Assurance Company plc, acquired 17 million B shares in NAMAIL, corresponding to one-third of the 51 million B shares issued by NAMAIL. The balance of the B shares were acquired in equal proportion by Irish Life Assurance and major pension and institutional clients of AIB Investment Managers. The cost to the Group of acquiring these B shares was €17 million. NAMAIL has also issued 49 million A shares to NAMA. As a result the Group holds 17% of the total ordinary share capital of NAMAIL. NAMAIL is a holding company and its subsidiaries include the entities to which NAMA Participating Institutions transfer Eligible Bank Assets and which issue the NAMA senior bonds and NAMA subordinated debt as consideration for those assets.

The A shares and B shares generally rank equally, except as otherwise provided in the Articles of Association of NAMAIL. NAMA may appoint up to six Directors to the board of NAMAIL. In total, the B shareholders may also jointly appoint up to six Directors. As holder of the A shares, NAMA has veto rights in relation to: the declaration of dividends; the appointment or removal of Directors; the exercise of voting rights in respect of any subsidiary of NAMAIL and the appointment of a Chairman. In addition NAMA can veto any actions by NAMAIL, which NAMA considers in any manner to be inconsistent with its objectives. A holder of the B shares may not sell the shares without the consent of NAMA.

On a winding-up, the return on B shares is capped at 110% of the capital invested, (€18.7 million in the case of the Group), and the maximum loss that may be suffered is limited to the original amount invested (€17 million in the case of the Group).

A discretionary non-cumulative dividend on the capital invested may be paid on an annual basis and this is limited to the yield on ten year State bonds. A dividend of €1.7 million was received by the Group on 1 April 2011.

(k) Other transactions with the State and entities under its control or joint control

In addition to the matters set out above, the Group enters into other transactions in the normal course of business with the State, its agencies and entities under its control or joint control. These transactions include the provision of banking services, including money market transactions, dealing in government securities and trading in financial instruments issued by certain banks. Other than as set out below, none of these transactions is considered to be individually or collectively significant.

The entities listed below (including their subsidiaries and joint ventures) were under the control of the State at 31 December 2011 and are considered to be related parties of the Group at that date. The Group

held bonds with a carrying value of €93 million (31 December 2010: €416 million) issued by these entities as follows:



Senior bonds
Allied Irish Banks plc (AIB)⁽¹⁾	57	180
Irish Bank Resolution Corporation (IBRC)⁽²⁾	36	89
Irish Life and Permanent (ILP)⁽³⁾	—	96

Total senior bonds	93	365

Subordinated bonds
Allied Irish Banks plc	—	42
Irish Bank Resolution Corporation	—	—
Irish Life and Permanent plc	—	9

Total subordinated bonds	—	51

Total	93	416

There was an impairment charge of €16 million on a holding of ILP subordinated debt in the year ended 31 December 2011 and an impairment charge of €98 million on a holding of AIB subordinated debt in the year ended 31 December 2010.

In addition, at 31 December 2011, the Group had loans to AIB of €70 million (31 December 2010: €34 million) which were included in loans and advances to banks and deposits from IBRC of €9 million (31 December 2010: €80 million which were included in deposits from banks).

At 31 December 2011, the Group held deposits from the National Treasury Management Agency (NTMA) of nil (31 December 2010: €200 million). These deposits were on normal commercial terms. The maximum amount of these deposits during the year was €3.2 billion.

Any resolution proposed at a General Court of the Bank to alter the capital stock of the Bank by way of: (a) an increase in the capital stock of the Bank, the reissue of treasury stock or the allotment of any unissued capital stock of the Bank save for the issue of additional preference stock pursuant to the rights attaching to existing preference stock or the issue of capital stock to fund a repurchase or redemption of

the 2009 Preference Stock; or (b) the redemption, consolidation, conversion or sub-division of the capital stock of the Bank save for the repurchase or redemption of the 2009 Preference Stock; or (c) any other changes in the capital structure of the Bank;

A resolution of those Stockholders who are entitled to so vote for the approval of any agreement or transaction (including a merger) whereby, or in consequence of which, control of the Bank, or substantially all of the Bank's business, is or may be acquired by any person or persons (excluding any government concert party) acting in concert and which for the avoidance of doubt shall include any resolution to approve a scheme of arrangement pursuant to section 201 of the Companies Act 1963 pursuant to which a takeover of the Bank (within the meaning of the Irish Takeover Panel Act 1997 Takeover Rules (as amended, replaced or substituted from time to time) would be effected or approved or a merger or division of the Bank pursuant to European Communities (Mergers And Divisions of Companies) Regulations, 1987 (Statutory Instrument 137 of 1987) or a merger of the Bank pursuant to European Communities (Cross-Border Mergers) Regulations 2008 (Statutory Instrument 157 of 2008);

A credit institution or a subsidiary of a credit institution: (a) that stands specified by order by the Minister under section 6(1) of the Credit Institutions (Financial Support) Act 2008; and (b) that has joined this Scheme in accordance with paragraph 5 of the Schedule to S.I. No. 411 of 2008;

(i) the NTMA, the NPRFC, the NPRF, the Minister for Finance or any Minister or Department of the Government, in each case holding 2009 Preference Stock, but excludes any other holder of 2009 Preference Stock provided however this shall not include any occupational pension scheme approved by the Revenue Commissioners and registered with the Pension Board; and (ii) any custodian or nominee holding 2009 Preference Stock on behalf of the NPRFC, the Minister for Finance, any Minister or Department of the Government provided however that where such custodian or nominee holds 2009 Preference Stock for any other person, such holding shall be not be taken into account for the purpose of determining the voting rights of the Stockholder;

(i) 100% of the average daily closing price of the ordinary stock on the Irish Stock Exchange over the 30 dealing days immediately preceding the original scheduled dividend declaration date, (in the event that the ordinary stock issued in the event of non-payment of dividends on the 2009 Preference Stock is settled on the dividend payment date to which it relates); or (ii) 95% of the average daily closing price of the ordinary

stock on the Irish Stock Exchange over the 30 dealing days immediately preceding the original scheduled dividend declaration date (in the event that the ordinary stock, issued in the event of non-payment of dividends on the 2009 Preference Stock, is settled after the dividend payment date to which it relates).

Name	Principal activity	Country of incorporation	Statutory year end

Bank of Ireland International Finance Limited⁽¹⁾	International asset financing	Ireland	31 December
Bank of Ireland (I.O.M.) Limited	Retail banking	Isle of Man	31 December
Bank of Ireland Life Holdings Limited⁽¹⁾	Life assurance and pensions	Ireland	31 December
Bank of Ireland Mortgage Bank⁽¹⁾	Mortgage lending and mortgage covered securities	Ireland	31 December
Bank of Ireland (UK) plc⁽¹⁾	Retail financial services	England and Wales	31 December
First Rate Exchange Services Holdings Limited⁽²⁾	Foreign exchange	England and Wales	31 March
ICS Building Society⁽¹⁾	Building society	Ireland	31 December
Midasgrange Limited (t/a Post Office Financial Services, POFS)⁽³⁾	Retail financial services	England and Wales	31 March

All the Group undertakings are included in the consolidated accounts. Unless stated otherwise, the Group owns 100% of the equity of the principal Group undertakings and 100% of the voting shares of all these undertakings and in the case of ICS Building Society, 100% of the investment shares.

In presenting details of the principal subsidiary undertakings, the exemption permitted by Regulation 10 of the European Communities (Credit Institutions: Accounts) Regulations, 1992 has been availed of and the Bank will annex a full listing of Group undertakings to its annual return to the Companies Registation Office.

BoIMB's principal activities are the issuance of Irish Residential mortgages and mortgage covered securities in accordance with the Asset Covered Securities Act 2001 and the Asset Covered Securities (Amendment) Act 2007. Such loans may be made directly by the Bank or may be purchased from Bank of Ireland and other members of the Group or third parties.

At 31 December 2011, the total amount outstanding in respect of mortgage covered securities issued was €12.2 billion (31 December 2010: €10.2 billion). At 31 December 2011, the total amount of principal outstanding in the mortgage covered pool including mortgage assets and cash was €19.6 billion (31 December 2010: €14.7 billion).

From time to time, BoIMB issues other debt securities comprising the BoIMB's obligation to the Central Bank under the terms of the Mortgage Backed Promissory Note (MBPN) programme. At 31 December 2011 BoIMB had no such debt securities in issue (31 December 2010: €3.6 billion).

There are certain regulatory restrictions on the ability of subsidiaries to transfer funds to the parent company in the form of cash dividends, loans or advances. Subject to this, there are no further significant restrictions on any of the parent company's subsidiaries in paying dividends or repaying loans and advances. All regulated banking and insurance subsidiaries are required to maintain capital at levels agreed with the regulators; this may impact those subsidiaries' ability to make distributions.

The Group has a number of subsidiaries where it does not own more than half of the voting power in the company but which are consolidated. Details of these subsidiaries are listed below.

		31 December 2011				31 December 2010

Activity	Company	Gross assets millions		Notes in issue millions		Gross assets millions		Notes in issue millions
Acquiring mortgage loans and other financial assets and issuing mortgage-backed securities.	Brunel⁽¹⁾		Stg£2,633		Stg£2,470		Stg£2,887		Stg£2,806
	Bowbells plc⁽²⁾		Stg£7,170		Stg£5,119		Stg£7,701		Stg£5,699
	Colston No 1 PLC⁽²⁾		Stg£3,509		Stg£2,904		Stg£3,867		Stg£3,158
	Colston No 2 PLC⁽²⁾		Stg£1,996		Stg£1,665		Stg£2,288		Stg£1,892
	Colston No 3 PLC⁽³⁾		—		—		Stg£2,763		Stg£2,222
	Colston No 4 PLC⁽²⁾		Stg£1,849		Stg£1,476		Stg£2,106		Stg£1,642
	Kildare Securities Limited⁽⁴⁾		€1,760		€1,647		€1,799		€1,721
	Melepard CDO 1 Limited⁽²⁾		£933		€933		€1,208		€1,208
	Morrigan CMBS I Limited⁽³⁾		—		—		€1,214		€1,210
	Pirus Securities Limited⁽²⁾		€1,977		€1,564		€2,039		€1,627
Acquiring other financial assets and issuing debt securities.	Avondale Securities⁽⁵⁾		€584		€293		€713		€318
Acquiring a pool of acquisition finance loans assets which it has issued a series of loan notes to finance.	Partholon CDO 1 plc⁽⁶⁾		€247		€242		€360		€390

The assets of these entities are consolidated in the Group's financial statements and are collateral for the obligations of the companies above. The creditors of these entities have no recourse to the Group.

The Group recognises as an asset the value of the in force assurance business in respect of insurance contracts. The value of the in force asset, has been calculated in accordance with the achieved profits embedded value methodology in the Statement of Recommended Practice issued by the Association of British Insurers which came into force in 2002. The value of the in force asset, which is presented gross of attributable tax, represents the present value of future profits expected to arise from these contracts as at the balance sheet date. It is determined by projecting future surpluses and other cash flows arising from insurance contracts and discounting at an appropriate rate. The useful life of the asset is based on the length of the underlying individual policies upon which the asset is calculated. This useful life is expected to be 6.4 years as at 31 December 2011 (31 December 2010: 6.8 years).

The key economic assumptions used in the calculation of the value of the in force business are set out below:

The process used in determining the key economic and experience assumptions is set out below:


Risk discount rate:		The risk discount rate is the rate used to discount the future surpluses that will arise on insurance business in the long term funds. The interest rates used to calculate policyholder liabilities are derived in accordance with the guidelines in the Insurance Regulations. Margins for risk are allowed for in the derived interest rates. In line with December 2010 the Euro Swap curve is used as a benchmark for an international mix of fixed interest assets as opposed to the previously used Irish Government benchmark bond. The risk discount rate applied to future cash flows at December 2011 is 7% (31 December 2010: 7.75%).
Unit growth rate:		The unit growth rate is the assumed rate of return on the unit linked assets before taxation and management fees in future years. The growth rate reflects the mix of assets held. The unit growth assumption was decreased from 5.75% at 31 December 2010 to 4.75% at 31 December 2011.
Shareholder tax rate:		The current rate of corporation tax is assumed to be maintained over the term of the business. Deferred tax is allowed for on the release of retained surplus in the life business.
Mortality and morbidity:		Mortality and morbidity assumptions, which include allowances for improvements in longevity for annuitants, are set by reference to the Group's actual experience and / or relevant industry data.
Persistency:		Persistency rates refer to the rate of policy termination for insurance policies. These rates are based on historical experience and management's views on future experience.
Maintenance expenses:		Allowance is made for future policy costs by reference to current and expected future costs. Explicit allowance is made for future expense inflation.

The table below indicates the standalone impact of changes in the key assumptions on profit.

While the table above shows the impact of an individual assumption change, a change in one assumption could impact on other assumptions due to the relationship between assumptions.

On 15 July 2010 the European Commission approved the terms of the Group's 2010 EU Restructuring Plan which is required in the context of a review by the European Commission following the Group's receipt the State aid.

Following the March 2011 PCAR / PLAR review, the Group submitted its 2011 EU Restructuring Plan to the European Commission, which was subsequently approved on 20 December 2011.

The key amendments to the approved 2010 EU Restructuring Plan reflected in the 2011 EU Restructuring Plan are as follows:

Directors' remuneration for the year ended 31 December 2011 (all figures in €000s)



Governor
P Molloy	^394					394			394
Deputy Governor
D Holt	+à63	+à51				114			114
(retired 15 June 2011)
P O'Sullivan	++68	36				104			104
(appointed Deputy Governor
15 June 2011)
Executive Directors
R Boucher	690			34	174	898	(67	)	831
D Crowley	**261			**51		312	**(33	)	279
(retired 15 June 2011)D
D Donovan	**303			**125		428	**(30	)	398
(retired 15 June 2011)D
J O'DonovanD	**550			**185		735	**(55	)	680
(retired 31 December 2011)
Non-executive Directors
P Butler
(appointed 23 December 2011)		**2				2			2
T Considine		90				90			90
P Haran		**45				45			45
(retired 15 June 2011)
R Hynes		**98				98			98
(retired 31 December 2011)
J Kennedy		110				110			110
HA McSharry*		**47				47			47
(retired 15 June 2011)
P Mulvihill		**2				2			2
(appointed 23 December 2011)
J Walsh		79				79			79
P Kennedy*		78				78			78

Totals	2,329	638	—	395	174	3,536	(185	)	3,351

Ex-gratia payments paid to former Directors / dependents						286			286

**: From date of appointment or to date of retirement as a Director, as indicated.
D: D Crowley and D Donovan retired as Executive Directors of the Group on 15 June 2011, and J O'Donovan on 31 December 2011. They remain Bank of Ireland employees.
°: P Kennedy was appointed to the Group Remuneration Committee and the Court Risk Committee with effect from 11 January 2011.
*: HA McSharry continues her Trustee role of the Bank of Ireland Staff Pensions Fund.

Notes:

(1)

The Chief Executive Officer, R Boucher, has, with effect from 1 May 2009, waived a portion of his salary (€67,000 for the year ended 31 December 2011). The salary shown in the table is the gross amount before that waiver.

The other Executive Directors have waived payment of at least 10% of their salary with effect from 1 May 2009. The amounts shown in column (1) are before that waiver. The amounts waived during the year ended 31 December 2011 are D Crowley €33,138, D Donovan €30,250 and J O'Donovan €55,000. Both figures for D Crowley and D Donovan were to date of retirement from the Court.

The voluntary waiver has been extended until 31 December 2012 for R Boucher.

The Governor and Deputy Governor, as non-Executive Officers of the Bank, are remunerated by way of non-pensionable salary. In addition, D Holt received a fee for his role as Chairman of Bank of Ireland (UK) plc—see note 2 below.

(2)

Fees are paid to non-executive Directors (other than the Governor and Deputy Governor) and a basic fee of €63,000 per annum applies. Additional fees are paid to Committee Chairmen and for Committee membership. On 1 February 2009, all non-executive Directors agreed to reduce their fees by 25%. These reductions applied throughout 2011. The basic fee of €63,000 is the reduced fee. This reduced fee will also be applied throughout 2012.

In addition to the above, D Holt had been appointed Chairman of Bank of Ireland (UK) plc with effect from 2 March 2010 and received a separate fee for this role (Pro rata Stg£42,500, equivalent €50,880 for the year ended 31 December 2011) to date of retirement as Deputy Governor. He remains in his role as Chairman of Bank of Ireland (UK) plc.

(3)

No bonuses were awarded in respect of the year ended 31 December 2011.

(4)

The figures include car allowances and, where applicable, benefits in kind and a taxable cash allowance in lieu of pension foregone for those Executive Directors whose contractual pension promise would exceed the pensions cap introduced by the Finance Act 2006. No amount is payable in respect of a taxable cash allowance in lieu of pension benefit foregone by R Boucher.

(5)

In the case of D Crowley, D Donovan and J O'Donovan, their pension benefits are currently limited to specified personal pension fund thresholds. Their future pension accrual is therefore limited to the amount by which their personal pension fund threshold is increased under legislation.

The amount shown for R Boucher relates to the Bank's pension funding contribution in respect of the pension benefit he accrued in line with his contractual entitlement during 2011.

All pension amounts at (4) and (5) have been determined by Towers Watson, the Group's actuary, and approved by the Group Remuneration Committee.

(6)

Amounts of salary waived are as set out in note 1 above.

Directors' remuneration for the year ended 31 December 2010 (all figures in €000s)



Governor
P Molloy	^394						394				394
Deputy Governor
D Holt	à126	+à84					210				210
Executive Directors
R Boucher	690			34	#(1,026	)	(302	)	(67	)	(369	)
D Crowley	570			109			679		(72	)	607
D Donovan	660			278			938		(66	)	872
J O'Donovan	550			192			742		(55	)	687
Non-executive Directors
T Considine		90					90				90
P Haran		90					90				90
R Hynes		*100					100				100
J Kennedy		*126					126				126
D McCourt		**37					37				37
(retired 19 May 2010)
HA McSharry		89					89				89
T Neill		**36					36				36
(retired 19 May 2010)
P O'Sullivan		79					79				79
J Walsh		79					79				79
P Kennedy		**31					31				31
(appointed 6 July 2010)

Totals	2,990	841	—	613	(1,026	)	3,418		(260	)	3,158

Ex-gratia payments paid to former Directors / dependents							321				321

**: From date of appointment or to date of retirement as a Director, as indicated

Notes:

(1)

The Chief Executive Officer, R Boucher, has, with effect from 1 May 2009, waived a portion of his salary (€67,000 for the year ended 31 December 2010). The salary shown in the table is the gross amount before that waiver.

The other Executive Directors have waived payment of at least 10% of their salary with effect from 1 May 2009. The amounts shown in column (1) are before that waiver. The amounts waived during the year ended 31 December 2010 are D Crowley €72,300, D Donovan €66,000 and J O'Donovan €55,000.

The Governor and Deputy Governor, as non-Executive Officers of the Bank are remunerated by way of non-pensionable salary. In addition, D Holt receives a fee for his role as Chairman of Bank of Ireland (UK) plc—see note 2 below.

(2)

Fees are paid to non-executive Directors (other than Governor and Deputy Governor) and a basic fee of €63,000 per annum applies. Additional fees are paid to Committee Chairmen and for Committee membership. On 1 February 2009, all non-executive Directors agreed to reduce their fees by 25%. These reductions applied throughout 2010. The basic fee of €63,000 is the reduced fee.

In addition to the above, D Holt was appointed Chairman of Bank of Ireland (UK) plc with effect from 2 March 2010 and received a separate fee for this role (Stg£70,525).

(3)

No bonuses were awarded in respect of the year ended 31 December 2010.

(4)

The figures include car allowances and where applicable, club subscriptions, benefits in kind and a taxable cash allowance in lieu of pension foregone for those Executive Directors whose contractual pension promise would exceed the pensions cap introduced by the Finance Act 2006. No amount is payable in respect of a taxable cash allowance in lieu of pension foregone for R Boucher with effect from 1 May 2009.

(5)

In the case of J O'Donovan, D Donovan and D Crowley, their pension benefits are currently limited to specified personal pension fund thresholds. Their future pension accrual is therefore limited to the amount by which their personal pension fund threshold is increased under legislation. In prior years, a release back to the fund of previously funded benefits arose on an annual basis for D Donovan and D Crowley. However, following their acceptance of the Pension Review changes detailed on page F-115, this release back to the fund of previously funded benefits has now ceased.

The amount included for R Boucher primarily relates to the waiver of the contractual option allowing him to retire at age 55 on a pension without actuarial reduction.

All pension amounts at (4) and (5) have been determined by Towers Watson, the Group's actuary, and approved by the Group Remuneration Committee.

(6)

Amount of salary waived are as set out in note 1 above.

The vesting of options granted in 2008 was conditional upon underlying earnings per share achieving a cumulative growth of at least 5% per annum compounded above the increase in the Consumer Price Index over the three year performance period – see note 48 on page F-122.

Options granted in 2008 matured on 3 June 2011 and did not vest as the performance conditions were not achieved.

This confirms the strong link between returns to stockholders and the remuneration of executives.

Options granted in 2001 vested in May 2004 and participants had a period of seven years from 2004 within which to exercise these options. All unexercised options under this grant lapsed in May 2011.

	Date of grant	Earliest exercise date	Expiry date	Exercise price €

R Boucher	26 Jul 2004	26 Jul 2007	26 Jul 2014	€	10.76	26,000		26,000
	21 Jun 2005	21 Jun 2008	21 Jun 2015	€	12.85	23,000		23,000
	3 Jun 2008	3 Jun 2011	3 Jun 2018	€	8.10	71,600	71,600	—

	TOTAL					120,600	71,600	49,000

D Crowley*	21 May 2001	21 May 2004	21 May 2011	€	11.05	25,000	25,000	—
	24 Jun 2002	24 Jun 2005	24 Jun 2012	€	12.50	25,000		25,000
	18 Jun 2003	18 Jun 2006	18 Jun 2013	€	10.77	50,000		50,000
	26 Jul 2004	26 Jul 2007	26 Jul 2014	€	10.76	35,000		35,000
	21 Jun 2005	21 Jun 2008	21 Jun 2015	€	12.85	32,500		32,500
	3 Jun 2008	3 Jun 2011	3 Jun 2018	€	8.10	68,800	68,800	—

	TOTAL					236,300	93,800	142,500

D Donovan*	24 Jun 2002	24 Jun 2005	24 Jun 2012	€	12.50	30,000		30,000
	18 Jun 2003	18 Jun 2006	18 Jun 2013	€	10.77	50,000		50,000
	26 Jul 2004	26 Jul 2007	26 Jul 2014	€	10.76	35,000		35,000
	21 Jun 2005	21 Jun 2008	21 Jun 2015	€	12.85	32,500		32,500
	3 Jun 2008	3 Jun 2011	3 Jun 2018	€	8.10	81,450	81,450	—

	TOTAL					228,950	81,450	147,500

J O'Donovan**	24 Jun 2002	24 Jun 2005	24 Jun 2012	€	12.50	25,000		25,000
	18 Jun 2003	18 Jun 2006	18 Jun 2013	€	10.77	50,000		50,000
	26 Jul 2004	26 Jul 2007	26 Jul 2014	€	10.76	35,000		35,000
	21 Jun 2005	21 Jun 2008	21 Jun 2015	€	12.85	32,500		32,500
	3 Jun 2008	3 Jun 2011	3 Jun 2018	€	8.10	67,900	67,900	—

	TOTAL					210,400	67,900	142,500

Secretary
H Nolan	21 May 2001	21 May 2004	21 May 2011	€	11.05	10,000	10,000	—
	18 Jun 2003	18 Jun 2006	18 Jun 2013	€	10.77	10,000		10,000
	26 Jul 2004	26 Jul 2007	26 Jul 2014	€	10.76	12,000		12,000
	21 Jun 2005	21 Jun 2008	21 Jun 2015	€	12.85	11,000		11,000
	3 Jun 2008	3 Jun 2011	3 Jun 2018	€	8.10	16,400	16,400	—

	TOTAL					59,400	26,400	33,000

Under the terms of the Sharesave Scheme offered in 2007, options were granted in December of that year to all eligible Group employees who elected to participate. Option prices were set at a discount of 25% of the then market price as permitted by the Rules in Ireland and at a discount of 20% of the then market price as permitted by the Rules in the UK. Under the terms of the 2007 Sharesave offer, participants could save for three years.

Conditional awards of units of ordinary stock were made to Group Senior Executives annually since 2004 under the terms of the LTIP.

These awards do not vest in the Executives unless demanding performance criteria are achieved (see description of LTIP in note 48 on pages F-128 to F-129). Prior to the introduction of the LTIP in 2004, conditional awards of units of ordinary stock were made under the Long Term Performance Stock Plan (LTPSP).

The performance conditions attached to the award of conditional units of stock made in June 2008 under the LTIP were not met in June 2011 and the awards granted under the scheme lapsed.

The Group Remuneration Committee decided that no award be made to Executive Directors under the LTIP in 2011.

Participants in the 2001 LTPSP awards were entitled to receive a 30% matching award on their retained units during 2011. All participants waived this entitlement and no matching awards were made.

The conditional awards of units of ordinary stock previously made to date to the Executive Directors and the Group Secretary are as follows:

	Date of award								Original Maturity date	Maturity date*

R Boucher	3 Jun 08	71,600	—	—	71,600	—	—	—	3 Jun 11

	Total	71,600	—	—	71,600	—	—	—

D Crowleyà	21 May 01	—	—	9,496	2,373	—	9,496	—	21 May 04	21 May 11
	24 Jun 02	—	—	7,070	—	1,767	—	1,767	24 Jun 05	24 Jun 12
	3 Jun 08	68,800	—	—	68,800	—	—	—	3 Jun 11

	Total	68,800	—	16,566	71,173	1,767	9,496	1,767

D Donovanà	21 May 01	—	—	7,067	1,766	—	7,067	—	21 May 04	21 May 11
	24 Jun 02	—	—	4,714	—	1,178	—	1,178	24 Jun 05	24 Jun 12
	3 Jun 08	81,450	—		81,450	—	—	—	3 Jun 11

	Total	81,450	—	11,781	83,216	1,178	7,067	1,178

J O'Donovanàà	24 Jun 02	—	—	6,034	—	1,508	—	1,508	24 Jun 05	24 Jun 12
	3 Jun 08	67,900	—	—	67,900	—	—	—	3 Jun 11

	Total	67,900	—	6,034	67,900	1,508	—	1,508

Secretary H Nolan	3 Jun 08	12,300	—	—	12,300	—	—	—	3 Jun 11

	Total	12,300	—	—	12,300	—	—	—

Set out below are details of the change in accrued pension benefits for the Directors during the year ended 31 December 2011.

Column (a) above represents the inflation-adjusted increase in each individual's accrued pension benefit during the year. Increases are shown after the opening position has been adjusted for statutory revaluation, and comprise allowance for additional pensionable service, increases in pensionable earnings and any agreed adjustment in the individual's pension accrual. This is in line with the requirements of the Listing Rules and the related actuarial professional guidance.

Column (b) is the additional / (reduced) capital value, less each Director's contributions, of Column (a) which could arise if the pension were to be transferred to another pension plan on the Director leaving the Group and is calculated using factors supplied by the actuary in accordance with actuarial guidance notes ASP PEN-2, and is based on leaving service pension benefits becoming payable at normal retirement date, age 60.

Column (c) is the aggregate pension benefits payable at normal retirement age based on each Director's pensionable service with the Group at 31 December 2011.

*: These individuals retired as Directors with effect from 15 June 2011. Their pension benefits increase prior to retirement in line with the increase (if any) in fund thresholds announced in the Finance Act each year. In their case the additional (inflation-adjusted) pension accrued in the period is nil, as there was no increase in statutory revaluation or the fund threshold between 1 January 2011 and their date of resignation.
**: J O'Donovan retired as a Director with effect from 31 December 2011. His pension service accrual ceased at 31 December 2010, and thereafter his pension benefit increases prior to retirement in line with the increase (if any) in fund thresholds announced in the Finance Act each year. In his case the additional (inflation-adjusted) pension accrued in the period is negative, as an increase in statutory revaluation was declared as at 31 December 2011, but no increase in the fund threshold was declared (meaning his accrued pension benefit did not change).

In addition to their interests in the ordinary stock through their holding of stock options and the conditional awards of stock under the LTPSP and LTIP as set out above, the interests of the Directors and Secretary in office at 31 December 2011, and of their spouses and minor children, in the stocks issued by the Bank are set out below:



DIRECTORS
R Boucher	380,957	82,817
P Butler***	—	—
T Considine	57,500	12,500
R Hynesà	175,000	62,500
J Kennedy	92,713	20,155
P Kennedy	254,642	55,357
P Molloy	2,794,170	2,094,170
P Mulvihill	5,000	**5,000
J O'Donovanà	227,940	227,814
P O'Sullivan	115,000	25,000
J Walsh	123,427	26,832
SECRETARY
H Nolan	80,043	54,707

Apart from the interests set out above and in the previous section, the Directors and Secretary and their spouses and minor children had no other interests in the stock / securities of the Bank or its Group undertakings at 31 December 2011. Other than the change in P Butler's stockholding outlined above, there have been no changes in the stockholdings of the above Directors and Secretary between 31 December 2011 and 20 March 2012.

The disclosures required under IFRS relating to financial risks and capital resources have been included within the Risk Management Report in Item 11 'Quantitative and Qualitative Disclosures about Market Risk.' The relevant disclosures related to Credit Risk, Liquidity Risk, Market Risk, Life Insurance Risk and Capital Management have been described as those which form an integral part of the audited financial statements.

This move has been to improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication.

The tables below summarise the maturity profile of the Group's financial liabilities (excluding those arising from insurance and investment contracts in Bank of Ireland Life and those arising on derivative financial instruments) at 31 December 2011 and 31 December 2010 based on contractual undiscounted repayment obligations. Customer accounts include a number of term accounts that contain access features. These allow the customer to access a portion or all of their deposit notwithstanding that this repayment could result in financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the 'demand' category in the table below. The comparative information has been reclassified on this basis which involved reclassifying a total amount of €16 billion into the demand category from the following categories: €3 billion from up to 3 months, €10 billion from 3-12 months and €3 billion from 1-5 years.

The Group does not manage liquidity risk on the basis of contractual maturity. Instead the Group manages liquidity risk based on expected cash flows. The balances will not agree directly to the consolidated balance sheet as the table incorporates all cash flows, on an undiscounted basis, related to both principal and interest payments.

Unit linked investment liabilities and unit linked insurance liabilities with a carrying value of €4,954 million and €7,037 million respectively (31 December 2010: €5,271 million and €7,188 million respectively) are excluded from this analysis as their repayment is linked directly to the financial assets backing these contracts.

As set out in note 23, derivatives held for trading comprise derivatives entered into with trading intent as well as derivatives entered with economic hedging intent to which the Group does not apply hedge accounting. Derivatives held with hedging intent also include all derivatives to which the Group applies hedge accounting.

The table below summarises the maturity profile of the Group's derivative liabilities. The Group manages liquidity risk based on expected cash flows, therefore the undiscounted cash flows payable on derivatives liabilities held with hedging intent are classified according to their contractual maturity, while derivatives held with trading intent have been included at fair value in the 'demand' time bucket.

Derivative financial instruments

Derivatives held with hedging intent
Gross settled derivative liabilities—outflows	—	3,114		8,511		6,530		1,027		19,182
Gross settled derivative liabilities—inflows	—	(3,057	)	(8,135	)	(6,060	)	(748	)	(18,000	)

Gross settled derivative liabilities—net flows	—	57		376		470		279		1,182
Net settled derivative liabilities	—	179		713		1,947		336		3,175

Total derivatives held with hedging intent	—	236		1,089		2,417		615		4,357
Derivative liabilities held with trading intent	1,970	—		—		—		—		1,970

Total derivative cash flows	1,970	236		1,089		2,417		615		6,327

Derivative financial instruments

Derivatives held with hedging intent
Gross settled derivative liabilities—outflows	—	1,689		1,433		5,900		1,615		10,637
Gross settled derivative liabilities—inflows	—	(1,557	)	(1,288	)	(5,447	)	(1,454	)	(9,746	)

Gross settled derivative liabilities—net flows	—	132		145		453		161		891
Net settled derivative liabilities	—	600		1,373		2,177		453		4,603

Total derivatives held with hedging intent	—	732		1,518		2,630		614		5,494
Derivative liabilities held with trading intent	1,879	—		—		—		—		1,879

Total derivative cash flows	1,879	732		1,518		2,630		614		7,373

On 1 February 2012, the sale of Burdale completed. For further information see note 30.

During January and February 2012, the sale of €0.3 billion of Project Finance loans was completed and the assets derecognised. The Group agreed the sale of these assets during 2011. For further information, see note 30 to the Consolidated Financial Statements.

On 20 February 2012, the Group paid dividends on its euro and sterling preference stock of €3.4 million and a dividend of €188.3 million in respect of the 2009 Preference Stock held by the NPRFC.

In March 2012, the Group participated in the second ECB three year LTRO when it converted c. €4.8 billion of mainly shorter term funding to three year funding with a maturity of February 2015.

Proposed securities repurchase transaction with Irish Bank Resolution Corporation (IBRC)

The Group announced on 29 March 2012 that the Group, IBRC and the State have reached a conditional agreement to conduct a securities repurchase transaction ("Repo") whereby the Group will purchase long term Irish Government Bonds from IBRC for a purchase price of approximately €3.06 billion in cash. The Repo will be governed by a Global Master Repurchase Agreement which will incorporate standard market terms including daily cash margining with respect to changes in the value of the Bonds. All IBRC's payment obligations to the Group with respect to the Repo including the cash margining are covered by a guarantee from the Minister for Finance of IBRC's exposures for transactions of this nature. The transaction can be financed by the Group through standard ECB money market operations using the bonds which are Eurosystem eligible. Under the terms of the Repo, IBRC will have an obligation to

repurchase the bonds from the Group for approximately €3.06 billion in cash not later than 364 days after the effective date. The margin for the Group over ECB funding which would apply to this transaction is 135bps. As the transaction is considered to be a related party transaction under the Listing Rules, it will be subject to independent stockholder approval.

The Court of Directors approved the financial statements for inclusion in Form 20-F on 29 March 2012.

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 31 December 2011
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Year ended 31 December 2011

	(dollars per €)
Dollar/euro rates:
End of period		1.2973	1.3269	1.4332	1.3261	1.5805
Average⁽¹⁾		1.4002	1.3216	1.4223	1.4103	1.4316
High		1.4875	1.4536	1.5100	1.6010	1.5805
Low		1.2926	1.1959	1.2903	1.2446	1.3295
End of period rate used by the Group⁽²⁾		1.2939	1.3362	1.4406	1.3308	1.5812
Average rate used by the Group⁽²⁾		1.3920	1.3258	1.4248	1.4321	1.4328

	Year ended 31 December 2011

	(Stg£ per €)
Sterling/euro rates:
End of period rate used by the Group⁽²⁾		0.8353	0.8607	0.8881	0.9308	0.7958
Average rate used by the Group⁽²⁾		0.8679	0.8579	0.8851	0.8333	0.7116

Core tier 1 capital generated

Gain on liability management exercises conducted as part of the 2011 recapitalisation of the Bank⁽²⁾	1,786
Equity issued as part of Debt for Equity Offers	665
Proceeds from the Rights Issue	1,908

		4,359
Less:
Fees and other costs		(146	)

Core tier 1 capital generated⁽³⁾		4,213

Tier 2 capital generated

Contingent Capital note (nominal value)	1,000
Less placing fee	(15	)

Tier 2 capital generated⁽³⁾			985


Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class —Ordinary stock (nominal value of €0.05 each) —American Depositary Shares, each representing 40 units of Ordinary Stock (nominal value of €0.05 each)		Name of each exchange on which registered The New York Stock Exchange** The New York Stock Exchange


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o


US GAAP o		International Financial Reporting Standards as issued by the International Accounting Standards Board ý		Other o

Item	Caption	Page

	Presentation of information	3
	Forward looking information	3
	Definitions	4
	Reporting currency	5
	Exchange rates	5
	Part I
1	Identity of Directors, Senior Management & Advisors (not applicable)	7
2	Offer Statistics & Expected Timetable (not applicable)	7
3	Key Information	7
	Selected financial data	7
	Risk factors	12
4	Information on the Company	21
	General	21
	Business overview	22
	Corporate structure	22
	Principal capital expenditures and divestitures	24
	Material subsidiaries	26
	Description of property	26
	Competition	27
	Supervision and regulation	28
	Economic conditions affecting the Group	47
4A	Unresolved Staff Comments	48
5	Operating & Financial Review and Prospects	48
	Overview	48
	Critical accounting estimates and judgements	52
	Liquidity and capital resources	53
	Analysis of results of operations	53
	Average balance sheet and interest rates	109
	Description of assets and liabilities	112
6	Directors, Senior Management and Employees	128
	Directors and senior management	128
	Remuneration of Directors and Officers	135
	Corporate governance statement	139
	Court appointed executive committees	151
	Employees	152
	Stock options	153
7	Major Stockholders and Related Party Transactions	155
	Control of registrant	155
	Related party transactions	155
	Description of US stockholders	156

Item	Caption	Page

8	Financial Information	156
	Dividend policy	156
	Legal proceedings	157
	Significant changes	159
	Prospective accounting changes/Impact of new accounting policies	160
9	The Offer and Listing	160
	Nature of trading market	160
10	Additional Information	161
	Charter and Bye-Laws	161
	Exchange controls and other limitations affecting security holders	170
	Taxation	171
	Documents available through the SEC	173
	Relations with stockholders	173
11	Quantitative and Qualitative Disclosures about Market Risk	175
12	Description of Securities other than Equity Securities	254
	Appendix to Part I—Definitions and Abbreviations	256
	Part II
13	Defaults, Dividend Arrearages & Delinquencies (not applicable)	260
14	Material Modifications to the Rights of Security Holders & Use of Proceeds	260
15	Controls and Procedures	260
16	A. Audit Committee Financial Expert	261
	B. Code of Ethics	261
	C. Principal Accountant Fees and Services	261
	D. Exemptions from the Listing Standards for Audit Committees (not applicable)	261
	E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	261
	F. Change in Registrant's Certifying Accountants (not applicable)	261
	G. Corporate Governance	261
	H. Mine Safety Disclosures	261
	Part III
17	Financial Statements (not applicable)	262
18	Financial Statements	262
19	Exhibits	262

	Year ended 31 December 2011

	(in Percentages %)
Capital		Basel II	Basel II	Basel II	Basel II	Basel I
Core tier 1 ratio		15.1	9.7	8.9	9.5	5.7
Core tier 1 ratio (PCAR/EBA stress test basis)⁽¹⁶⁾		14.3	—	—	—	—
Tier 1 capital ratio		14.4	9.7	9.8	12.0	8.1
Total capital ratio		14.7	11.0	13.4	15.2	11.1



Net interest income (IFRS)	1,534		2,219		2,170
Impact of IFRS classifications	(102	)	(175	)	(71	)

	1,432		2,044		2,099



Liabilities designated at fair value through profit or loss
Trading expense	42	38	25
Insurance contract liabilities and claims paid	40	10	5
Derivatives not designated under hedge accounting
Trading expense	20	127	41

	102	175	71



Average interest earning assets	142		160		172

Group net interest margin—annualised (Group net yield) (%)	1.08	%	1.39	%	1.68	%



Ireland
European interbank offered rate:
One month Euribor	1.02	%	0.78	%	0.45	%
Three month Euribor	1.36	%	1.01	%	0.70	%
United Kingdom
London interbank offered rate:
One month	0.77	%	0.59	%	0.52	%
Three month	1.08	%	0.76	%	0.61	%
United States
Prime Rate	3.25	%	3.25	%	3.25	%

Operating expenses

Staff costs (excluding pension costs)	772	836		640
Pension costs	88	(559	)	149
Other costs	782	793		606

Total Operating expenses	1,642	1,070		1,395

Average staff numbers (full time equivalents)	13,671	14,284		14,755

Impairment charges on available for sale (AFS) financial assets

Allied Irish Banks plc subordinated bonds	—	98	—
NAMA subordinated bonds	—	70	—
Irish Life and Permanent plc subordinated bonds	16	—	—
Other	5	—	2

Impairment charges on available for sale (AFS) financial assets	21	168	2

Year ended 31 December 2011

Retail UK division
UK Investment Property loan portfolio	1.2	1.5	(0.3	)
UK Mortgage loan portfolio	1.3	1.4	(0.1	)
Corporate and Treasury division
Project Finance loan portfolios	0.8	0.9	(0.1	)
US Investment Property loan portfolio	0.8	0.8	—
Other international loans	2.9	3.0	(0.1	)

Total	7.0	7.6	(0.6	)

	31 December 2011						31 December 2010

Composition by division Loans and advances to customers	€bn			%			€bn			%
Retail Ireland		49			45	%		50			42	%
Retail UK		44			41	%		49			41	%
Retail UK (Stg£bn equivalent)		37			—			42			—
Corporate and Treasury		15			14	%		20			17	%

Loans and advances to customers (before impairment provisions)		108			100	%		119			100	%
Impairment provisions		(6	)		—			(5	)		—

Loans and advances to customers (after impairment provisions)		102			—			114			—

	31 December 2010

Composition by division Assets held for sale to NAMA	€bn			%
Retail Ireland		—			—
Retail UK		0.7			78	%
Retail UK (Stg£bn equivalent)		0.6			—
Corporate and Treasury		0.2			22	%
Assets held for sale to NAMA (before impairment provisions)		0.9			100	%
Impairment provisions		(0.1	)		—

Assets held for sale to NAMA (after impairment provisions)		0.8			—

	31 December 2010

Composition by portfolio Assets held for sale to NAMA	€bn			%
Land and development		0.2			22	%
Associated (principally investment property)		0.7			78	%
Assets held for sale to NAMA (before impairment provisions)		0.9			100	%
Impairment provisions		(0.1	)		—

Assets held for sale to NAMA (after impairment provisions)		0.8			—

Movement in assets sold or held for sale to NAMA

Balance at 31 December 2010	0.9		(0.1	)	0.8
Sale of assets to NAMA	(0.5	)	0.2		(0.3	)
Change in eligibility criteria, net	(0.4	)	(0.1	)	(0.5	)

Balance at 31 December 2011	—		—		—

Liquid assets

Cash at other banks	8	7
Cash and balances at Central Banks	8	3
Government bonds	5	4
—Ireland	4	3
—UK	1	1
NAMA senior bonds	5	5
Covered bonds	4	4
Senior bank bonds	1	7

	31	30

Movement in subordinated liabilities

Balance at 31 December 2010	2,775
Exchange or repurchase of subordinated liabilities	(2,258	)
Other (call option)	(100	)

	417
Contingent Capital note (table 14)	1,009

Balance at 31 December 2011	1,426

Issue of Contingent Capital note

Nominal value	1,000
Fee paid on issue	(15	)

Net cash proceeds received	985
Capital contribution⁽¹⁾	(116	)

Value of Contingent Capital note on issue date	869



This is presented in the balance sheet on page F-6 as:
Subordinated liability	(960	)	(49	)	(1,009	)
Embedded derivative asset	91		(8	)	83

	(869	)	(57	)	(926	)

Other assets and other liabilities

Other assets	22	22
—Bank of Ireland Life assets	12	13
—Derivative financial instruments	6	6
—Deferred tax asset	1	1
—Other assets	3	2
Other liabilities	22	22
—Bank of Ireland Life liabilities	12	13
—Derivative financial instruments	6	5
—Other liabilities	4	4

Risk Weighted Assets (RWA)—Basel II

Credit risk	61.5	71.4
Market risk	1.1	1.9
Operational risk	4.5	5.7

Total RWA	67.1	79.0

	31 December 2011					31 December 2010

Key Capital Ratios	€bn		% of RWA			€bn		% of RWA
Core tier 1		10.1		15.1	%		7.7		9.7	%
Core tier 1 (PCAR/EBA stress test basis)⁽¹⁾		9.6		14.3	%		—		—
Tier 1		9.7		14.4	%		7.7		9.7	%
Total capital		9.9		14.7	%		8.7		11.0	%

Gain on liability management exercises pursuant to 2011 PCAR

Debt for equity offer	1,177	—	1,177
Cash offer	219	307	526
Call option	101	—	101

	1,497	307	1,804

Transaction costs			(32	)

Gain on liability management exercises pursuant to 2011 PCAR			1,772

Assets sold to NAMA

Impairment charges on assets sold to NAMA	(9	)	(100	)
Gain/(loss) on sale of assets to NAMA	1	⁽²⁾	(675	)

Bank of Ireland Life: Income statement (IFRS performance)

Operating income	174		178		125
Operating expenses	(101	)	(103	)	(82	)

Operating profit	73		75		43

Investment variance	(28	)	9		23
Economic assumption changes	(19	)	(14	)	3

Underlying profit before tax	26		70		69

Assets sold to NAMA

Impairment charges on assets sold to NAMA	(23	)	(25	)
Loss on sale of assets to NAMA	(6	)	(346	)

Net interest income

Net interest income	742		885		(16	%)
IFRS income classifications	(102	)	(165	)	(38	%)

Net interest income (after IFRS income classifications)	640		720		(11	%)

Net other income

Net other income	44	43	2	%
IFRS income classifications	102	165	(38	%)

Net other income (after IFRS income classifications)	146	208	(30	%)