Brian Lenihan Jnr (Dublin West, Fianna Fail)

As the Deputy is aware, the European Commission has the right of initiation for legislative proposals within the European Union legal framework. In that context, I welcome the Commission's consultation document, Technical Details of a Possible EU Framework for Bank Recovery and Resolution, published 6 January 2011, which includes an annex examining the issue of debt write-down as an additional resolution tool. The Commission is seeking stakeholders' views on possible mechanisms to write down the debt of a failing bank or to convert it to equity, as a means of restoring the institution's capital position and suggests that this tool would be for cases where the standard resolution tools are not suitable options or other tools would not be sufficient to achieve the objectives of a resolution. My Department will be responding to these issues on my behalf as part of its overall response to the Commission's proposal. It should be noted that this work is still at an early stage, as there is not a clear international consensus as to the specifics of how such bail-in tools would work in practice.

The Basel Committee on Banking Supervision, issued for consultation on 19 August 2010, is a proposal to ensure that all regulatory capital instruments are able to absorb losses in the event that the issuing bank reaches the point of non-viability. The consultation period is complete but the committee has not yet issued its assessment of the comments received.

In terms of my input to the Commission's proposal, it is the case that the crisis management has been the subject of detailed discussion by European Finance Ministers over the past number of years. I welcome the broad direction of the approach taken by the Commission and I have discussed the general direction of Commission policy on this matter with Commissioner Barnier.

In June 2009, the Economics and Finance Council, ECOFIN, called on the Commission to bring forward appropriate proposals to develop a comprehensive cross-border framework to strengthen the EU financial crisis management systems. Extensive discussions have taken place at ECOFIN of the Commission's work in this area including its communication and public consultation on an EU framework for cross-border crisis management in the banking sector which was published on 20 October 2009, its communication on bank resolution funds which was published on 25 May 2010 and its communication on a new EU framework for crisis management in the financial sector which was published on 20 October 2010. As well as these discussions at ministerial level, my Department also participates in the Commission's expert group established to assist the Commission in its development of legislative proposals for a framework for EU crisis management. I look forward to continuing my engagement with the Commission and other member states in the development of EU policy in this area.

I will conclude by making two further points. Future resolution mechanisms will only apply to a future insolvency or failing bank or distressed institution. They will not have application to the problems we in Ireland have already had to face and any proposals by the Commission have to be judged in that context.

Second, the general debate illustrates the fundamental truth of the proposition that if we are to make progress on this issue with regard to our current institutions - we endeavoured to make some progress during the recent EU-IMF discussions - it can only be made on a multilateral European basis.

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