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

When that was conceived of first, it was always envisaged that there would be an exchange of the shares in the banks for money from the ESM and ... that they'd take the shares and they'd give us money and we'd use the money to reduce the debt. And that was the way it was conceived and for a while I would have thought that that was a reasonable solution. If we had activated it after the meeting where it was first indicated in June of 2012, we'd have got about €5 billion - that would have been about the value of the shareholding. But, as time has passed, our banks have got very strong. And, like, I'm not ideological about this. My interest is in recovering the maximum amount of money for the Irish taxpayer and it seems to me now, the way things have developed, and with the slowness of the ESM in activating their legal power to directly recapitalise banks, either on a current basis or on a retroactive basis - because they have entertained no application yet - I'm following the route of selling some of the shares. Now, what's ... what's in question really is AIB. PTSB isn't ready for market yet and we have only 14% of Bank of Ireland and ... it's a useful asset, it's worth about €1.6 billion and it's growing. So I have no plans to sell that at the moment but I'm sure one of my successors will. The policy is we want to restore the Irish banks to the private sector but we're not in a big hurry to do it.

Now, on AIB ... at present, they're restructuring so that if we come around to selling 25% of it - as I suggested we would - then it's structured in a manner that can do that. Now, there are preference shares there that are worth around maybe €1.6 billion, €1.7 billion. There's a dividend which we would expect this year, maybe €300 million, maybe €400 million. These are ballpark figures. The CoCos ... next year they'll have to repay the CoCos anyway. That's the contingent capital that I referred to in my introductory remarks, which would be repayable if the banks didn't need it. That's about €1.6 billion and if you put another €400 million or €300 million in on dividend for next year, that's where the figure that was used in the media of €4 billion comes from. Now, because of the banking union, the new banking regulation unit, the regulator in Frankfurt will decide on the adequacy of the capital levels of AIB. And they may decide that some of the preference share value has to be reinvested as capital, so we're not quite sure where it's going to land. But, you know, my advice is around €3 billion and, if everything arrived, €4 billion but probably somewhere in between. And on the timeline, then, we expect to hear from Frankfurt in the next number of weeks, hopefully before the budget but the Europeans are never impressed by domestic deadlines so they won't rush themselves to get it in before the budget for us, but it's expected in the next couple of weeks. And I'll brief you then, through the finance committee, and we can have a discussion on it because I know there are a lot of people here who are in the finance committee. Excuse me.

The CoCos will be for next year and I have decided that because we're in an election year, that I don't want to be selling 25% of AIB in the middle of an election campaign because with all the different policy options that'll be thrown around, I don't think it would be good for values. So there won't be any sale of AIB until the election is behind us. At the earliest, it would be May, June or maybe later - maybe in the autumn of next year. And that depends on the incoming government but we're making the plans and arrangements to get to that position. So that's the first piece of it. Now the shares then ... we'll sell 25% of it. It was valued ... the last valuation was around €13 billion but I think that might have included the preferences and the CoCos. So if you strip those out and look at a quarter of that, we'll see where we are. But I'd be very confident and my advice is that we will recover fully everything that has been put into AIB, Bank of Ireland and PTSB. And the residual hit on the Irish taxpayer will be €30 billion or so, which will eventually be the loss ... the net loss for Anglo, regardless of the arrangements we made to replace the promissory note.

So that's the position and, in that context then, I'm still keeping the option in place of applying to the ESM for recapitalisation on that basis. I'm doing it in the eventuality that a future government is the victim of some unexpected shock where they need to realise a lot of capital quickly to reduce the debt. If that were to happen, you know ... I think China is very sound at the moment but supposing China rolled over and it was really a major crisis, along the lines of the '29 recession in China, you might find then that the level of our debt is sufficiently high to cause concern in the market, and you might need a ball of money to quickly reduce it. So I'm keeping the option open but, to be totally honest with you, what I expect to happen is that we'll recover our money by selling the shares in AIB without selling them at a lower price - which is the way it would be - to the ESM.

But I'm still keeping the option open of applying to the ESM, because things could change in Europe. Greece has a banking problem at the moment, and while €25 billion has been pencilled in to resolve the Greek banks, it is not quite clear to me how they're doing it yet, whether they'll channel through the sovereign or whether they'll get some of it directly for the ESM, so, so, that's my position, and I'm being fully open with you because I know-----