Éamon Ó Cuív (Galway West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Finance the progress that has been made in implementing the banking union agreed at the 29 June 2012 summit of European Heads of State and Government; and if he will make a statement on the matter. [50501/12]

Tommy Broughan (Dublin North East, Labour)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Finance if he will report on European-wide proposals for new legislation on banking supervision and the likely impact of such legislation on the Irish banking sector; and if he will make a statement on the matter. [50269/12]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 7 and 50 together.

The European Council meeting of 29 June last considered a report from the President of the European Council, in co-operation with the Presidents of the Commission, the euro group and the European Central Bank, which set out building blocks for future economic and monetary union. One of these building blocks is an integrated financial framework or banking union, which comprises three elements: an integrated system for the supervision of cross-border banks, a European deposit insurance scheme and a European resolution scheme. The euro area summit on 29 June last called on the Commission to quickly present proposals for the establishment of a single supervisory mechanism which would be considered by the Council as a matter of urgency. Significantly, it was made clear in the statement following the euro area summit that when such a mechanism is in place for banks in the euro area, the ESM could following a regular decision have the possibility to recapitalise banks directly. The statement also committed the euro group to examining the situation of the Irish financial sector with a view to further improving the sustainability of our well-performing adjustment programme.

The Commission presented legislative proposals in September for a single supervisory mechanism conferring powers on the European Central Bank for the supervision of all banks in the euro area, with a mechanism for non-euro countries to join on a voluntary basis. An ad hoc working group of senior officials has met regularly since the proposal was published and good progress has been made. The European Council discussed the single supervisory mechanism at its October meeting in the context of a report from President Van Rompuy on the work being carried out on the future of economic and monetary union. The timetable that was set in the October Council conclusions envisages that agreement on the legislative framework for the single supervisory mechanism will be reached by end of the year. At this week’s ECOFIN meeting, the Presidency gave ministers an update on progress on the single supervisory mechanism. The intention of the Presidency is that agreement on the regulation will be reached at the December meeting of ECOFIN.

Ireland supports in principle the development of a banking union for Europe. We view the single supervisory mechanism as an important element of the integrated financial framework which will break the link between the sovereign and the banking sector. We are seeking to ensure shared supervision is progressed as part of a package which will also address shared risk and mutualisation of debt. The question of the retrospective application of the European Stability Mechanism remains firmly on the table as far as Ireland is concerned. We expect to see more detail on how this can be addressed over the coming months. Any move to a banking union must respect the integrity of the Single Market and be consistent with the principle of free movement of capital throughout the European Union. The establishment of the single supervisory mechanism is a crucial and significant first step to completing the banking union. The banking union will also require further work to develop a common system for deposit guarantees and an integrated crisis management framework. Negotiations on the bank capital requirements under the fourth capital requirements directive should be also concluded, as called for by the Heads of State and Government at the October meeting of the European Council.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

The establishment of a banking union is an important development in itself. It is something we welcome. The key issue for Ireland is that the establishment of the single supervisory mechanism is a prerequisite for any direct recapitalisation of banks. It is a precondition of any deal on Ireland's investment in the main banks here. The Minister recently had a bilateral meeting in Dublin with the German Minister for Finance, Wolfgang Schäuble. Mr. Schäuble indicated that the necessary conditions in which the direct recapitalisation of banks could take place would not be met before 2014. We should be straight with the people by setting out a realistic timeframe. Is it likely that another year or more will pass before a deal is concluded that will allow Ireland to use the European Stability Mechanism to deal with the legacy recapitalisation of AIB, Bank of Ireland and so forth?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Deputy has quoted Wolfgang Schäuble correctly. Mr. Schäuble has suggested that nothing will be in place until early 2014. The President of the European Central Bank, Mario Draghi, has said it will be a 2013 project and will take six to 12 months to put in place. Mr. Schäuble's own Chancellor, Angela Merkel, has said it will happen in the last six months of 2013. I am not criticising anybody for having different views. Negotiations on the nature of common supervision are in progress. There is a very strong drive to put it in place from 1 January next. It will have to be implemented to see whether it is successful. The legal competence for supervision will be located at the European Central Bank in Frankfurt. Some of the supervisory functions will be decentralised to local regulators and local central banks. Common codes of practice are needed to ensure there is a high standard of regulation that is at least as good as what is in place already and preferably better. A rule book must be developed, followed by manuals to allow local regulators to implement the rules. Various protocols will be put in place. All of that work is taking place at present. Other decisions have to be made. Nobody is trying to delay it. An entire corpus of work is needed to get the supervision in place and working effectively.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I ask the Minister, who is involved in the detailed discussions on the roll-out of the banking union, to give his best estimate of the date when it will be up and running and deemed to be effective. It will open the door to the possible use of the ESM to provide a deal for Ireland on banking debt. Will the Minister give us his view on when the necessary conditions for that to happen are likely to be met? At a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform, the Minister made some comments on the issue of whether it is a good idea for the European Stability Mechanism to own stakes in Irish banks. I think it is a legitimate question to ask. Is it still the Government's objective and stated policy to move to a position where the European Stability Mechanism can take direct equity stakes in AIB, Bank of Ireland and so forth?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is difficult to estimate when this supervision will be in place. The 27 countries that are involved in this process fall into three groups. The first group consists of the 17 eurozone countries, which want this to proceed in one way or another with slight variations in policy opinion. The second group consists of EU member states that are outside the eurozone but want to take part in the banking union and share in the supervision. The third group consists of EU member states that are outside the eurozone and do not want to participate in this process. Sweden, which is in the second group, is outside the eurozone but is anxious to be involved in this process because it has a significant international banking sector. The UK, which is in the third group, wishes the eurozone well in its endeavours to put a banking union in place but has made it clear that it does not want to participate in that union. There is a great deal to be done in this process, which has many moving parts. I have mentioned three estimates of when this will be done. I would be fairly confident that it will not be done in the first half of 2013. I would be hopeful that we can maintain the pressure in a way that might lead to Chancellor Merkel's estimate of the second half of 2013 being met.

I do not want to be specific because it is the early stages of negotiation.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

What about the ESM?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

On the ESM issue, the aspect the Deputy is highlighting was not actually the purpose of what I was saying. Everybody was saying that the ESM will have to directly recapitalise the Irish banks as part of the new deal. I was concerned lest people would think the Irish banks are not adequately recapitalised already, which they are. They have very high capital ratios, and that is why people are now prepared to invest in them. When people ask whether Irish banks will be recapitalised directly, they really mean will we get money to compensate us for the fact we recapitalised them and we did it on the back of our own taxpayers, not with European assistance. That is what I was getting at.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

We all understand the difficulty in setting up the SSM and the timeframe. If it is the second half of next year, which it will at least be, that poses an issue because that is when the real discussions will take place in terms of trying to recoup the money we injected into the pillar banks. Does the Minister agree that, at that stage, this State needs to be, if not fully, then very close to being back in the bond markets? Although that is a good position to be in, it poses a difficulty in terms of trying to get money back.

The National Pensions Reserve Fund holds the shares in these pillar banks and there is a value on them at this time. Any payment by the ESM would, therefore, be into the National Pensions Reserve Fund in exchange for the shares it holds in both pillar banks. What would be the intention of the Government when we get this money, whether it is €14 billion, €18 billion or €24 billion? Whatever the figure is, it will be transferred to the National Pensions Reserve Fund, I would guess, in exchange for the shares. Are we going to then raid the National Pensions Reserve Fund or is it simply the case that we would replenish the fund? Has the Minister any idea what he intends to do if the negotiations are successful?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The object of the exercise which led, in the first instance, to the commitment at the Council of Ministers meeting on 29 June last is to examine the sustainability of Irish debt and to take action to make it more sustainable, even though that bit was not in the communiqué. That was then reinforced by the Taoiseach's meeting with Chancellor Merkel and subsequently with President Hollande in Paris, when both of them said more or less the same thing, namely, that Ireland is a special case in this respect because instruments were not in place at the time which are now available for the recapitalisation of banks and Ireland had to take it on its own shoulders. It stands to reason, if the policy is about ensuring the debt is more sustainable, that any benefit we get from it will be taken off the debt.