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

It was always debt. The debt was there and even though it was not reckoned within the table of national debt, the markets always added €31 billion onto the Irish debt because they knew this liability was hanging out there. It is only a presentational thing to state it was converted into debt. However, what replaced the promissory note was Irish Government paper and as Deputy O'Donnell rightly observed, the Irish Government paper must be sold back into the market on an agreed schedule or profile. The disadvantage in this regard is that at present, the Exchequer pays a coupon to the Central Bank on the Irish paper it is holding and that coupon then translates into excess profits from the bank, which it then returns to the Exchequer. Consequently, it nets out at less then 1%. As we sell into the markets, the change will be that the coupon must go to the private investor but the bit that has not entered the debate thus far is that because our interest rates have come down so much and because of the way we are positioned now, the nominal value of the €28 billion has increased by approximately 20% and there is a capital gain of approximately €6 billion now.

The Governor and his staff must keep looking at this and asking if we would do better if we sold it more quickly, thereby realising the capital gain. There are statistical issues on capital gains and one could not normally put a windfall like that from the bank into one's Exchequer figures. One would probably have to take it off the top of the debt. On the other hand, the bank commission decided - and there is no law about it - that its protocol is to return 80% of excess profits to the Exchequer while holding a 20% buffer. As that is not in law, the commission could decide next week that it will return 85%. However, I have no involvement in that.