Pearse Doherty (Donegal South West, Sinn Fein)
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I move amendment No. 1:

In page 3, between lines 18 and 19, to insert the following:"2.The Minister for Finance shall lay before the Houses of the Oireachtas a report outlining how an application for retroactive recapitalisation of a financial institution would be processed by the Direct Recapitalisation Instrument.".

These amendments had to be altered in the light of a direction from the Ceann Comhairle's office. Amendment No. 1 proposes that the legislation not be given effect until such time as a report is laid before the House outlining how the application for retroactive recapitalisation of the financial institutions will be processed by the direct recapitalisation instrument. Much of what is in the legislation - or, at least, the spirit of the legislation - reflects a change for which Sinn Féin has been calling for a long time, namely, a system whereby the burning of bondholders at senior and junior level will take place before member state or EU moneys are injected into any bank. We are not satisfied with the way the European Union has dealt with this issue in terms of the European Stability Mechanism, ESM, and would have preferred to have seen the European Central Bank, ECB, act as a genuine backstop.

We recognise that there has been progress but it is a case of too little too late for the citizens of this State who endured huge pressure from austerity, unemployment, disruption of families, emigration and so on. There is genuine concern that the issue of retroactive recapitalisation is slipping away and I hope my fears and the fears of many are unwarranted. Many political commentators and economists say retroactive recapitalisation is off the table for Ireland at this point but I hope that is not true. We must listen to other European leaders when they say it is not a realistic opportunity.

The Minister addressed the issue of different options that must be considered when it comes to the money injected by the Irish State into financial institutions. All options should be laid on the table and the most beneficial to Ireland chosen. In June 2012 a commitment was made but is it enshrined in the law of this State in this legislation? There is detail on how the recapitalisation instrument will work for future problems in financial institutions here and in other member states but I am dissatisfied by the fact there is no meat on the bones regarding how a retroactive recapitalisation instrument would work in Ireland on a case-by-case basis. It is mentioned that the board of governors of the European Stability Mechanism, ESM, will draw up the rules in due course and I am concerned by this. Over the past two years there has been a failure to develop the retroactive recapitalisation instrument and there are questions as to how it can be applied to Ireland. What are the rules? Is it a blank canvas? There will be a transfer of assets to the ESM if retroactive recapitalisation is to apply but how will this be costed? Will we apply retroactively the direct instrument rules that will apply in the future? Will we try to forecast the effect on AIB, Bank of Ireland and other financial institutions of a scenario similar to 2008 when they went bust? Will we examine the rules on creditor bail-in, the involvement of the Irish State and so on? We are in limbo on this issue and it is a crucial area.

On their return from the relevant European meeting in June 2012, members of the Government tripped over one another to explain to the media how the instrument was a game-changer and a seismic shift and how it would apply. I am sure the Government now regrets this. I listened back to the Minister's interview - I think it was with Seán O'Rourke on RTE radio - and he spoke of his expectation that this process would be concluded by October 2012. October 2012 has long passed and there is still no meat on the bones of this issue. I understand that events have evolved but I am concerned that it is still unclear how the direct recapitalisation instrument will apply.

On amendment No. 1, it was originally intended that the legislation would not come into effect until it was clarified how the direct recapitalisation instrument will apply to Ireland and whether it could be used as a negotiating tool to ensure the commitment of 2012 is honoured. It is now October 2014. On 22 October 2013 the Taoiseach wrote to President Van Rompuy and mentioned that EU partners rely on the stability of the union and eurozone to anchor fragile recovery. He said the recent stabilisation of sovereign borrowing rates in the union is the product of hard-earned trust and confidence - trust that the banking union will be completed on time and confidence that momentum will be maintained on our shared jobs and growth agenda. The Taoiseach said these political commitments must be implemented and no time should be lost in building on the decisions reached in 2012 and early in 2013. He found it necessary to write this letter and call on the leaders of Europe to implement the decision but we are still some way from implementation. It may be implemented in future but the fact that it has not yet been fleshed out in detail is of concern.

This amendment calls on the Minister for Finance to lay before the Houses of the Oireachtas a report outlining how an application for retroactive recapitalisation of the financial institutions would be processed by the direct recapitalisation instrument. It is not time specific as this can only be done when information is available. This is a crucially important amendment. The Minister for Finance is entrusted to act in the interests of the Irish people and I think this question must be discussed with Opposition parties. We must thrash out this issue as the costs to the Irish State have been immense. There should be a thoughtful process on how this instrument will work and what its value will be if we apply for it. What is its scope and are we better examining other options for the banks? I believe we should apply all pressure possible to ensure the full direct recapitalisation is achieved for our pillar banks.

On amendment No. 2, there has been much discussion in this committee and in the Dáil Chamber in recent times as to whether the Government will apply for retroactive recapitalisation in State banks. This amendment asks the Minister to commit, in deeds and words, to making an application. I assume the Minister will accept this amendment as he informed this committee in recent months that the Government will make an application for retroactive recapitalisation of the capital injected into State banks. This amendment places an onus on the Minister to be true to his word and do what the Irish people expect. He must look at the possibilities presented by an application for retroactive recapitalisation.