Brian Lenihan Jnr (Dublin West, Fianna Fail)

As the Deputy will be aware, on 26 June 2009 the European Commission approved, under EU treaty state aid rules, a recapitalisation of Anglo Irish Bank of €4 billion.

The State investment occurred in the form of ordinary shares to help preserve an adequate level of core tier 1 capital. Part of the recapitalisation was used to buy back at a significant discount certain outstanding subordinated loans Anglo Irish Bank had issued in previous years, to provide further support for the bank's capital position.

As highlighted in the Commission decision, the recapitalisation of Anglo Irish Bank was required as a matter of urgency to preserve the financial stability of the bank, which is of systemic importance. The recapitalisation was accepted by the Commission as appropriate to remedy Anglo Irish Bank's solvency problems at that time, maintain confidence in the Irish financial system overall and remedy a serious economic disturbance that would otherwise have been expected to arise.

The aid was approved as a rescue measure on the basis of a commitment to submit a restructuring plan for the bank by the end of November 2009. The board of Anglo Irish Bank is currently preparing the restructuring plan, which will consider all options for the future of the bank. In advance of the finalisation of the plan and its submission to me, it would not be appropriate for me to comment further on the plan.

As I stated on Second Stage of the NAMA Bill in the Dáil on 16 September last, it is likely that some institutions will require additional capital in order to absorb the losses arising from the transfer of their impaired assets to the agency and in order to maintain appropriate levels of capital. I made it clear that the Government would expect such an institution to explore all available options for raising such capital as it is the Government preference that private market solutions are found and implemented.

However, to the extent that sufficient capital cannot be raised independently or generated internally, the Government remains committed to providing such banks with an appropriate level of capital to continue to meet their requirements. This will be done in a manner consistent with EU state aid rules and the credit needs of the Irish economy. I recently confirmed this position to the Financial Regulator in the case of Anglo Irish Bank to facilitate the regulator in granting that bank derogations from certain regulatory capital requirements.

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