Martin Mansergh (Tipperary South, Fianna Fail)

I thank Deputies for their contributions on Second Stage of this important legislation.

The comprehensive restructuring of the business system is a key pillar of the financial support programme with the IMF and EU, approval of which was passed earlier this morning. It is the first important step in putting in place an extensive special resolution regime that will provide for a comprehensive framework to facilitate the orderly management and resolution of distressed credit institutions. In that context the Bill includes the powers to appoint a special manager to a relevant institution, which would only arise in limited and exceptional circumstances, to achieve the objectives of the legislation.

Under the EU-IMF programme, there is a commitment providing for a comprehensive special resolution regime to be published by the end of February 2011 which would include the full suite of SRR powers based on international best practice and the evolving EU framework. Once this Bill is enacted, the powers available to the Minister would enable the substantial and significant restructuring actions envisaged in the support programme to be progressed and the provisions will facilitate the disposal of non-core assets to support the achievement of funding targets set by the Central Bank of Ireland, while allowing the Minister to provide credit enhancement that could help to support progressive reduction in the balance sheets of the domestic credit institutions through, for example, the securitisation of bank assets.

The restructuring of Anglo Irish Bank and Irish Nationwide Building Society is set out in the programme agreement and is consistent with EU state aid requirements, providing scope for appropriate burden sharing for subordinated debt and providing the Minister with the power, if necessary, to effect a recapitalisation of AIB prior to the end of the year to meet regulatory capital requirements set by the Central Bank of Ireland.

As the Minister outlined in his speech, it is imperative that he has the necessary powers to undertake these actions as soon as possible. There was much comment in the debate about the need for senior bond holders to accept their share of the burden of this crisis. When those who deplore the gradual erosion of the deposit base of the Irish banking system come to reflect on it, they will see the substantial contribution made to that process by the unhelpful level of domestic noise about this matter. The Minister dealt with this issue earlier in the debate on the IMF-EU support programme. There is simply no way this country, where the banks are so dependent on international investors, can unilaterally renege on senior bondholders against the wishes of the European Central Bank. People talk about burning the bond holders but they will burn the people of this country, those on social welfare, public servants and anyone dependent on the public purse. It is grossly irresponsible to suggest that can be done unilaterally. In any country where such experiments have taken place, the central banks stood behind the affected banks throughout the resolution of the resulting crisis. Those who think we could unilaterally renege on senior bondholders against the wishes of the ECB are not living in the real world.

Deputies are aware that discussions are ongoing at EU and international level on the mechanisms that may be available in future to share the fiscal costs of bank resolution with senior creditors of banks other than depositors. This work, however, remains preliminary and many important legal, financial and commercial hurdles must be cleared before there is any prospect of it becoming accepted market practice. It is important to draw attention to that because this debate in Ireland is not taking place in isolation from developments with our EU partners. For all these reasons, and those discussed at length in this House and elsewhere, the scope for burden sharing going beyond subordinated debt is a matter not currently available to us. When the new Government is formed, the parties in that Government will rapidly find out those realities, if they do not realise them already.

It is not the case that SRRs are widespread, it is only in recent weeks that countries such as Denmark and Germany have brought such legislation before their parliaments. The legislation before the House now is an important first step in the development of a comprehensive SRR and the Government is committed in the IMF-EU programme to having such an extensive regime by the end of February 2011. It is worth noting that at EU level, an EU directive on the issue is not due to be published until June 2011 by the Commissioner for Internal Market and Services.

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