Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

What I propose is that a restriction that applies uniquely to Bank of Ireland and AIB and to no other bank in the European Union will be removed, so that the Irish banks are not at a disadvantage. If I recall correctly, when the NAMA legislation was initiated, there was no such provision in the text as published by the Minister. However, in the course of the debate, the Minister accepted an amendment to impose this restriction. That helped ease the passage of the legislation and was justified at the time because there was significant anger in regard to the banks. Many of the arguments made now by Deputy Boyd Barrett were made at the time and there was good reason for imposing this restriction then. However, circumstances have changed since.

In response to Deputy Doherty's question, the capital adequacy rules changed after the restriction on losses was enacted and it is reasonable to take account of changed circumstances in making broad assessments of the merits of provisions such as this. If we were to keep the restriction, the use of tax credits against historic losses for core tier one capital provisioning would be time-restricted. In other words, the time for using them would run out and we would not have the full use of them. The other big difference is that we effectively own AIB now - 99% of it - and we have 15% of Bank of Ireland. Therefore, we have a vested interest in the profitability of the banks. One of the best ways to recover our money is that if the banks become valuable, we can sell our shares in the banks and redeem or extract the money that was put in by taxpayers.

For example, three quarters of the deferred tax assets we are talking about here, which is €3.4 billion of the €4.5 billion involved, are sitting in AIB. There is a large offsetting valuation benefit due to the State's 99.8% equity stake in the institution. While we could have one view as revenue collectors, if there is a more rapid write-off of losses against potential profit, then, as an investor, the State has a huge interest in increasing the value of the shares it owns in the banks. There is a disproportionate amount in AIB. Of the €4.5 billion of tax credits for historic losses, €3.4 billion are in AIB. This provision will enhance the value of the State's shareholding in AIB. We also have an equity stake worth €1.2 billion in Bank of Ireland and preference shares of €1.8 billion in value. This will benefit in value from this change.

There is a very restricted market for AIB so I would not take much notice of share values attributed to that bank at the moment, but the quoted share values on the stock exchange for Bank of Ireland are genuine prices in an active market. If we look at the share value and if we look at what we have extracted from Bank of Ireland already, more has come back to the taxpayer in value than was originally put in on behalf of the taxpayer. If the value of the State's investment in AIB can be correspondingly enhanced as it trades towards profitability, and we remove restrictions such as this, there is a good chance that over the years, significant amounts of taxpayers' money will be recovered. That is the overall plan. The National Pensions Reserve Fund does the valuation of our investments in the banks, and it marked the investment in the Bank of Ireland and AIB up to €11.5 billion at this stage. It is easier to give a more precise value to our holdings in Bank of Ireland, because we know the preference shares at par are worth €1.8 billion, and there is a coupon on them as well. If the preference shares were being sold, we would expect to get a bit more than €1.8 billion. It is publicly quoted and the shares last week were around 28 cent. There is quite an enhancement in value there. AIB is different. AIB's advance towards profitability and effectiveness is about a year behind Bank of Ireland, but it is getting there. It is moving in the right direction.

It was never the intention of Brian Lenihan, when he published the Bill, to have this restriction. The restriction was brought in during the course of the debate, and I can understand why it was brought in, but circumstances have changed since and we are shooting ourselves in the foot if we maintain the restriction. There is no benefit to the taxpayer, to Ireland or to any of our citizens in maintaining this restriction. By removing it, we enhance the value of the portion of the shares that we have in both banks, and so I advise committee members to accept this. There is no hidden agenda. This is purely a matter of pounds, shilling and pence, and when we look at the balance sheet, we find that it helps everyone in the country.