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

So, it was the Cabinet meeting to which you referred, and this is a letter to my private secretary from the secretary to the Government, which is the way decisions are communicated around Government Departments. So it says:

I am to refer to the memorandum dated 29 March, 2011, submitted by the Minister for Finance concerning Banking Matters and to inform you that, at a meeting held today, the Government [decided]

(1) authorised the Minister for Finance to progress discussions relating to bank restructuring and the Minister's response to the results of the bank stress testing, with the External Authorities - [that is] the [European Union], IMF and ECB - in advance of the release [of] the 31 March of the results of the Prudential Capital Assessment Review (PCAR) carried out by the Central Bank of Ireland.

(2) agree to adopt the strategy recommended by the national authorities to the Minister for Finance for a major reorganisation of the domestic banking system as detailed in the Memorandum, encompassing in particular;-

(i) the creation of two core pillar banks on the basis of the planned future restructuring and deleveraging of AIB and BOI,

(ii) substantial further downsizing of the Irish banking system through the implementation of the banks' [deleveraging] plans agreed with the Central Bank of Ireland,

(iii) an internal split in the banks' loan-books between core and non-core assets,

(iv) the merger of EBS into AIB for financial stability reasons, following the termination of the sales process for EBS and the expected identification of a significant additional capital need for EBS,

(v) the expected sale of the insurance arm of [Irish Life & Permanent] to meet expected capital requirements,

(vi) the strong likelihood of majority State ownership of both [Bank of Ireland] and IL&P to meet expected capital needs,

(vii) significant reform of bank boards and governance arrangements; and

(viii) all of these to be subject to the necessary clearances from, for example, DG Com.

(3) [decision 3 then] noted that discussions are continuing between the Central Bank of Ireland and the external authorities on the draft PCAR results and the current indications are that the final figure will be approximately €21 bn-€24bn in gross terms, with some element (approx. €3bn) being in the form of contingent capital (i.e. to be recouped if [it is] not needed in the relevant timeframe,

(4) [and this is relevant particularly to your question] agreed that measures should be taken in agreement with the EU/IMF/ECB to mitigate the costs of further recapitalisation of banks and this should be announced. Such measures would include burden sharing, private investment and asset sales, and would have regard to the particular position of each institution, and therefore the mix and measures available will vary between institutions,

(5) agreed that discussions will be required at a senior level with the external authorities with a view to securing agreement to this approach and in particular that the timing of any recapitalisation would allow for arrangements to be made in this regard. Indicatively, at least some recapitalisation measures may be required to be delayed until June.

(6) agreed that the Government will announce its intention to take further measures in relation to the governance of the banking system and will strengthen the role of the banking unit [in] the Department of Finance, and further improve its skill base as appropriate,

(7) accepted the request from the European Commission for the Government to affirm its report to the Joint Restructuring Plan for Anglo Irish Bank and Irish Nationwide Building Society [...] submitted to the European Commission at [the] end- [of] January 2011 in compliance with the commitment contained in the EU IMF Programme for Financial Support, and

(8) noted

[...] the Minister's intention to make a statement on Thursday 31 March responding to the PCAR results and announcing his proposals for the restructuring of the domestic banking sector,

(ii) that the deadline for future recapitalisation of the banks to comply with PCAR requirements will be subject to agreement with the Central Bank of Ireland and the external authorities,

[...] that Government approval will be sought separately for the injection of State capital into specific banks to meet PCAR requirements,

(iv) that the EU State aid approval required for the reorganisation of the banking sector will be sought through the submission of Restructuring Plans for each institution to the European Commission by [the] end- [of] April, and

(v) the Minister's' intention to give a preliminary indication to the relevant institutions today of the proposed bank restructuring measures, in order for [the] preparations to commence, on a contingency basis, of the communication required to the market and to customers.

And it's the Ard-Rúnaí an Rialtais that signs it. Now that Government decision was made on foot of a memorandum I took to Government containing all the elements that underpin those decisions and in the course of the discussion, I would have told the Cabinet the exact amount of senior bonds that were available in Anglo Irish Bank for restructuring. But all the way through ... all the way through, as in my statements during the election campaign, as in the Fine Gael manifesto, as in the programme for Government, bond burning or, you know, discounting of bonds, senior bonds, was conditional on the agreement of the external authorities, especially the ECB, and, of course, we were in a programme at the time with strict supervision from the troika.