John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 76: To ask the Minister for Finance, with regard to the bailout of Irish banks by the Government, where has the initial bailout money gone; where is the money that is now being given to banks coming from; the amount of money that has been or will be given to each of the Irish banks from the Government; on whose recommendation did the Government decide to bailout the banks and are there conditions placed on banks for the use of bailout money; and if so, who is monitoring the banks to make sure they comply with the conditions. [40661/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

As the Deputy is aware the provision of State funds to the financial institutions is to ensure that those institutions have sufficient capital to meet regulatory requirements. The capital injections were, for the greater part, required to cover losses, or loss provisions, on the loan books of those institutions. The capital has been provided by the Exchequer or the National Pension Reserve Fund (NPRF) by way of Promissory Notes or cash in respect of preference shares, ordinary or contingent capital instruments. The bank recapitalisation commitments made by the State to date are set out in the table. Please note that these figures only represent the capital committed to recapitalising these institutions and they do not take account of revenues received directly or indirectly from the banks. It should also be noted that the total cost of the recapitalisations would have been significantly higher were it not for the burden sharing achieved with holders of subordinated debt in each of the institutions.

No State capital was provided to any financial institution without a detailed examination of the capital requirement. External consultants were engaged to assess loan losses and capital requirements on an institution by institution basis. The Department, the Central Bank/Financial Regulator and/or the NTMA then advised the Minister in this regard.

There are extensive terms and conditions applying to banks in receipt of State Aid. These conditions arise in the first instance from the requirements of the CIFS Act. Under this Act and the Credit Institutions (Eligible Liabilities Guarantee) Scheme the State provided a guarantee of deposits and debt of the covered institutions. Further terms and conditions apply, on a case by case basis, in relation to the provision of capital by the State. The conditions, in this regard are set out in Subscription and Placement Agreements and the relationship between the State and IBRC is prescribed in legislation and in a Relationship Framework. This latter document, drawn up by the Minister, sets out the respective roles and responsibilities of the parties. Relationship Frameworks are currently being reviewed in the case of IBRC and developed for the other covered institutions. Furthermore, the provision of State Aid, is in every instance, subject to EU Commission approval under State Aid and Competition Authority Rules. In this context the institutions that need State Aid are required to submit a restructuring plan to the Commission indicating in specific terms how the institution proposes to address its problems and the timeframe within which this is to be achieved. As part of the approval process the Commission will detail terms and conditions in relation to the proposed restructuring including restrictions to ensure compliance with Competition Rules. Finally, the overall national strategy to stabilise and restructure the financial services sector is an integral part of the Programme of Financial Support with our international partners. There are specific time based targets associated with this strategy. Progress on these targets is reported on a regular basis.

A number of bodies including the Department of Finance, the Central Bank and Financial Regulator and the EU Commission are directly involved in monitoring the performance and compliance of the various institutions on an on-going basis.