Written Answers - Banks Recapitalisation

Wednesday, 18 April 2012

Dáil Éireann Debate
Vol. 761 No. 3

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  177.  Deputy Noel Grealish  Information on Noel Grealish  Zoom on Noel Grealish   asked the Minister for Finance  Information on Michael Noonan  Zoom on Michael Noonan   the status of the additional €24 billion needed for Irish banks as a result of the stress tests in early 2011; if the funding has been paid to any Irish bank and if so, the percentage that is being used to provide write-downs for personal and commercial debt and the percentage for boosting reserves at the banks; if he intends to formulate an adequate credit policy which will give a clear direction to the banks on personal and commercial debt; and if he will make a statement on the matter. [18719/12]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan  Zoom on Michael Noonan  The bank recapitalisation commitments made by the State to date are set out in the following table:

€bn AIB/EBS BoI IL&P IBRC (Anglo/INBS) Total
€bn €bn €bn €bn €bn
Government preference Shares (2009) — NPRF 3.5 3.5* 7.0
Capital contributions (with Promissory Notes as consideration) /Special Investment Shares (2010) — Exchequer ** 0.9 30.7 31.6
Ordinary Share Capital (2009) — Exchequer 4.0 4.0
Ordinary Share Capital (2010) — NPRF 3.7 3.7
Total pre-PCAR 2011 (A) 8.1 3.5 0 34.7 46.3
PCAR 2011:
Capital from Exchequer*** 3.9 2.7 6.5
NPRF Capital 8.8 1.2 10.0
Total PCAR (B) 12.7 1.2 2.7 16.5
Total Cost of Recap for State (A) + (B) 20.7 4.7 2.7 34.7 62.8

*€1.7bn of BoI’s government preference shares were converted to equity in May/June 2010 (€1.8bn still left in existence). The government also received €0.5bn from the warrants relating to BoI’s preference shares (excluded from table above).

**The IBRC amount is made up of a total capital contribution for Anglo/INBS of €30.6bn and a special investment share of €0.1bn (INBS). The Anglo/INBS capital contribution impacted in full on the GGB in 2010. The consideration for the Anglo/INBS capital contribution was €30.6bn of promissory notes. These Promissory Notes are an amount due from the State to IBRC. Each year, on 31 March, €3.06bn is paid by the Exchequer to Anglo/INBS as part of the scheduled repayments of the promissory notes. The first such repayment was made on 31 March 2010.

***The Exchequer cost of the 2011 BoI recap is shown net of share sale to private investors (Completed in October, 2011)

As the Deputy will be aware, the banks were required to raise a total of €24 billion as a result of the Central Bank’s 2011 Prudential Capital Assessment Review (PCAR). However, primarily as a result of successful private equity contributions, asset sales and burden sharing with bondholders the Government only had to inject €16.5 billion into the relevant institutions.

In addition, the State is committed to acquiring Irish Life for €1.3 billion to complete the recapitalisation of Irish Life and Permanent. It is expected that the proceeds of an onward sale of Irish Life in due course will reduce the amount the State has committed to the bank recapitalisation.

In relation to personnel and commercial debt, there is on-going and detailed engagement between my Department and the covered institutions. The current and projected capital requirements of the institutions form part of this engagement and these are monitored and assessed on an on-going basis. The PCAR carried out in 2011 by the Central Bank independently assessed the capital requirements having regard, among other things, to the asset quality and the potential impact of such asset value/quality in base and stressed case scenarios.

However, the Banks’ policy in relation to credit decisions is a matter for the management and board of the institution. I have no role in the day-to-day commercial and operational decisions of the banks, which include these matters. These decisions are taken by the board and management of the institutions. Notwithstanding the fact that the State is a significant shareholder in the institutions, the banks are run on a commercial arm’s length basis as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF.

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