Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am simply pointing out that the Deputy has the research capacity to check this out without having to trouble the Attorney General further on it. The matter is very clear in law. That is the position with regard to senior debt.

With regard to junior or subordinated debt, it is commonly issued on the express terms that it is deferred in the event of an insolvency as against the claims of the depositors and the senior bondholders. It is in a postponed category in an insolvency. That is the reason the word "subordinated" is commonly used in this context - it is subordinate in an insolvency to the claims of the other instruments. As I made clear in the announcement on 30 September, appropriate burden sharing by holders of subordinated debt is a principle with which I agree. The losses in Anglo Irish Bank and Irish Nationwide Building Society are substantial and those bondholders must accept a very sharp discount in the value of their instruments having regard to the events that have happened, the terms upon which they were issued and the fact that these institutions would not be able to survive in the absence of taxpayer support.

My Department, with the Attorney General, is working on resolution and reorganisation legislation which will enable the implementation of measures which can address the issue of burden sharing by subordinated bondholders in institutions that are not listed on the Stock Exchange and which are wholly nationalised by the State. That legislation will be consistent with the requirements for the measures to be recognised as a reorganisation under the relevant EU directive in other member states. I understand that the management in Anglo Irish Bank will be carrying out an exercise to re-purchase the debt at a very substantial discount. That is the current position.

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