NEW YORK — Allied Irish Banks PLC said Tuesday that it plans to sell its 22.5% stake in M&T Bank Corp. by year-end to fulfill the capital requirements of its Irish regulators.

The Dublin bank got 27.6 million shares of M&T when M&T, of Buffalo, N.Y., acquired Allfirst Financial Inc. of Baltimore from AIB in 2003. Since then, the two banks have described their relationship as one of mutual interest, though AIB has repeatedly been rumored to be interested in selling its stake.

On Tuesday, M&T closed down 1.47% to $79.76. Shares fell a further 2.16% in after-market trading.

M&T has been surviving the financial crisis well. Even before the mortgage meltdown, its stock was trading at a premium to the regional bank group, in part because Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) has long held a significant stake; it currently owns about 6%.

AIB late Tuesday outlined its plans to meet capital requirements imposed by Irish regulators. The bank said regulators are requiring it to raise about $10 billion, the bulk of it in core tier 1 capital.

In an internal memorandum, AIB's Group Managing Director Colm Doherty said the sale of its stake in M&T is disappointing. "This plan involves a number of actions but a major part of it will involve the sale of our UK and Polish businesses, and our stake in M&T," he said.

"I know that this is extremely disappointing news especially to those of you who have been with AIB for many years and have worked so long and hard during that time to build it into a successful international organization. Seeing much of what you have worked for being sold is I know very difficult," Doherty said.

A spokesman for M&T said, "We are aware of the plan that AIB announced today, and we will continue working together with AIB under the terms of our agreement to achieve an orderly transfer that is in the best interest of all stakeholders."

"We are grateful for the productive, strategic and mutually beneficial relationship we have with AIB, and regret the circumstances that prevent our relationship from continuing further," he said.

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