Mr. Antoine Mac Donncha:

The essence of this aspect of the legislation is to extend the application of Part III of the Central Bank Act 1971 from its current application, whereby it applies to banks only, to also apply to building societies. Only one building society exists in the State, ICS Building Society. The extension will enable the transfer of assets and liabilities from building societies to banks. There is existing legislation analogous to Part III of the 1971 Act which applies to building societies under Part X of the Building Societies Act 1989, however those provisions would enable the transfer of engagements from ICS only to another building society, of which there are none.

In July 2013, Bank of Ireland agreed an amendment to its restructuring plan which had been agreed with the European Commission in respect of the State aid received by Bank of Ireland. This amendment allowed Bank of Ireland to retain its life assurance subsidiary, New Ireland Assurance Company. As part of this amendment Bank of Ireland committed to certain substitution measures which included the sale of the ICS distribution platform together with, at the option of any acquirer, up to €1 billion of mortgages and up to €1 billion of matching deposits. Bank of Ireland has until 30 June 2014 to execute this commitment. Bank of Ireland is not required to sell ICS, rather to offer certain specified assets and liabilities of ICS for sale. To facilitate this potential sale, the State committed to enact appropriate legislation by 31 December 2013. This deadline has not been met but the Department of Finance has continued to liaise with the European Commission to keep it informed of our progress.

The Central Bank Act 1971 can be used by banks as it stands to transfer between each other their assets and liabilities under a scheme of transfer. Part III transfer schemes have been used successfully many times. This legislation is not currently available to a building society but is limited exclusively to banks. The amendments proposed in these heads of Bill would bring building societies within the scope of the existing provisions which apply to banks and enable the transfer of assets and liabilities from ICS to a bank pursuant to that framework. Any transfer of assets and liabilities pursuant to the 1971 Act is subject to the approval of the Minister for Finance after consultation with the Central Bank.

If the Bill is enacted, it is anticipated that ICS would apply, pursuant to Part III of the 1971 Act, to transfer of the bulk of its assets and liabilities to Bank of Ireland. It is further anticipated that an onward transfer of some of those assets and liabilities to a third party could subsequently be effected. The restructuring plan agreed between Bank of Ireland and the European Commission requires that the Commission would approve any purchaser of the ICS platform. The primary purpose of this condition in the restructuring plan is to enhance competition in the mortgage intermediaries market.