Barry Cowen (Laois-Offaly, Fianna Fail)
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As we all know, the collapse of the building industry and the banking crisis left many unfinished housing developments through the country. The importance of the placement of appropriate insurance or financial bonds with various local authorities became very obvious.

In such circumstances the bond can be claimed by the local authority and arrangements put in place for remaining outstanding works and services to be completed by that local authority. In most cases this ensures that roads, lighting, footpaths, water management and so forth are done in accordance with the building regulations and the initial planning permission granted for that development.

Last Monday, some members of Kerry County Council were briefed on the progress being made by that local authority on unfinished estates. They were informed that eight bonds had been placed with IBRC. Two had been claimed successfully prior to the recent and sudden liquidation of the bank. The other six now appear to be useless, placed on the list of creditors. I raised a similar situation some weeks ago relating to an estate in Arklow. In that instance, homeowners had been asked by the council to foot the bill in the absence of such a bond. I asked then that the Department of the Environment, Community and Local Government contact Wicklow County Council, take ownership of the issue and show leadership on it. Subsequently, I discovered that the bond in question is now being pursued through the courts, and rightly so. However, that policy indicates that in the absence of an adequate bond, homeowners may be pursued.

The dramatic liquidation of IBRC has had a number of consequences the Government does not appear to have anticipated and planned for effectively. A number of credit unions, for example, had fixed term deposits with the former State-owned bank which might also be lost in the liquidation. Sources within the credit union movement have stated that losses could be as high as €17 million for credit unions across the country. I do not want this burning of credit unions and local authorities to be remembered as the only burning of bondholders that took place. That is the reason I raise this.

Rather than me consulting with each local authority throughout the country, does the Minister know how many local authorities have bonds lodged with IBRC? How much money, potentially, will be lost to the local authorities? Did the Government consider the impact of the liquidation on local authorities and credit unions? What steps is the Minister taking to address this situation before it turns into a crisis that cannot be reversed?

Brian Hayes (Dublin South West, Fine Gael)
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On 7 February last the Oireachtas passed the Irish Bank Resolution Corporation Act 2013, appointing joint special liquidators to IBRC with immediate effect to wind up its business and operations. At this early stage of the special liquidation the liquidators are engaged in intensive processes which involve, inter alia, asserting control over the businesses, processes, systems and personnel of IBRC. The issue of development bonds issued by the bank is one of a number of important issues that they must consider in exercising their statutory duties under the Act.

In general, development bonds have traditionally been required as conditions of planning permission by local authorities. As a condition of planning permission the developer must provide a bond, set out as a planning condition, which is called upon in the event that the developer does not complete the development in accordance with the plans and particulars, the conditions of planning and relevant codes and regulations. I understand that IBRC had in the past issued such bonds to local authorities in respect of loans outstanding to the institution.

Following the enactment of the IBRC Act the special liquidators' primary function is the orderly wind up of IBRC. I am advised development bonds that were previously entered into by IBRC in favour of the various county councils or local authorities remain in place. However, it should be noted that it is likely that any liabilities arising under these arrangements, if called upon, will most likely rank as unsecured claims in the special liquidation. It must be stressed that these bonds are contingent liabilities and will only be called upon where developers breach planning conditions and are not in a position to meet any liability that arises as a result. Any local authority should contact the special liquidators directly in respect of such claims should they arise.

Throughout the liquidation process it has been acknowledged that there are, unfortunately, unavoidable costs associated with the recent agreement relating to the promissory notes. The Deputy has identified two categories of possible creditors that may become unsecured creditors through the liquidation process, but the normal Companies Acts priorities will apply in this liquidation process. Amounts owing by IBRC to a range of creditors, including, contractors, trade creditors and other service providers, are unsecured. The proceeds from the disposal of IBRC's assets will be used to repay creditors in accordance with normal Companies Acts priorities. Consequently preferred creditors will be paid first and then the debt which the National Asset Management Agency, NAMA, will have purchased from the Central Bank will be paid. If there are proceeds available after repayment in full of the NAMA debt, these proceeds will be applied to remaining unsecured creditors.

These costs must be taken in context. We have now rid Ireland of the annual promissory note repayment, reduced the State's cash borrowing requirement by €20 billion over the next ten years, brought the State €1 billion closer to meeting our deficit targets and Anglo Irish Bank and Irish Nationwide Building Society have been consigned to history. That said, the Government is aware of the difficulties the liquidation may cause for all those parties affected, including the local authorities. It must be highlighted that the key objective of the special liquidators is to maximise the value of IBRC's available assets to meet IBRC's liabilities to its creditors. If the renewal of these development bonds is required to protect, maintain or enhance the value of the loan or development, the special liquidators will consider each case on a individual basis and if the powers afforded to them under the IBRC Act permit them to do so. If the special liquidators are permitted to extend bonds they will consider a range of criteria, including the cost-benefit analysis in respect of each bond and the impact on the value of the loan or development of not renewing the arrangement.

Again, it must be stressed that while these are unfortunate consequences of the IBRC liquidation, they must be considered in light of the considerable benefits that have been achieved as part of this arrangement, which represents a major step forward for our financial system. The substantial benefits of this arrangement flow from the exchange of the promissory notes for far more efficient financing from the State's perspective. In real terms, the benefits are considerable when compared with the existing costs associated with the promissory notes.

Barry Cowen (Laois-Offaly, Fianna Fail)
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The Minister confirmed in his response that the development bonds of local authorities are classified as unsecured claims. He also confirmed that the deposits of €17 million of local credit unions throughout the country are unsecured claims. He said that the local authorities should contact the special liquidators of IBRC about any claims they have on their books regarding development estates which remain unfinished.

A report on ghost estates found that there are 1,770 unfinished housing developments throughout the country. According to the progress report from the Department of the Environment, Community and Local Government, over 1,100 of these estates are in a serious problematic condition. The residents of these estates need support to ensure that their homes and environment are brought up to the standard laid out in the original planning permission governing those developments.

The Minister referred to whether the liquidators choose do this or that. First, the Government gave the Minister special powers to make payments with regard to IBRC, outside the realm of the special liquidators. The Minister should be conscious of that in the context not only of local authorities and development bonds but also with regard to credit unions, the staff of IBRC and the commitments that were given to them prior to the liquidation and the lack of enforcement of those commitments since the liquidation. I have strayed from the subject of the Topical Issue in that regard, but it is worth mentioning.

The Taoiseach also stated that emergency recapitalisation funds are available to make up any shortfall. That was with regard to credit unions. Can the Minister give the same commitment or can he acknowledge that this commitment was given, that it was correct and that the House was properly informed, with regard to development bonds, the credit unions and IBRC staff?

This situation will spiral completely out of control. As I said earlier on the Wicklow issue, it became apparent by virtue of the action being taken subsequent to the raising of the issue here that in the event of bonds not being accessed by the local authorities, it is the opinion of the Department that responsibility will lie with homeowners. A great many homeowners will be queuing up to seek clarification. If the Minister of State cannot provide clarity today, I hope it will be forthcoming very shortly.

Brian Hayes (Dublin South West, Fine Gael)
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To suggest this is something new is not honest. It has been well known since the passing of the Act that a number of issues would arise in the special liquidation process. Deputy Barry Cowen has mentioned two: one in connection with credit unions and the other in connection with development levies. The Houses of the Oireachtas have provided powers to the special liquidator to do his job, which is to ensure the orderly winding down of the operations of IBRC in a way that maximises the value of assets worth between €12 billion and €14 billion that still exist within the company. A liquidation process is under way. Deputy Barry Cowen is correct in stating that the creditors in the two categories he mentioned are unsecured, as is well known. I will not comment on any individual case. As I set out in my scripted reply, it is a matter in the first instance for local authorities to make contact with the special liquidator. I will not prejudge the outcome of that process as the issue is worked through. I agree with the Deputy that it would be the irony of ironies were it to transpire that homeowners who purchased homes in these circumstances would have to face the bills where estates are unfinished. The Government will consider this issue, particularly through the Department of the Environment, Community and Local Government, which has a special relationship with local authorities. The first task of the IBRC special liquidator is to resolve the issue.

The Deputy is correct to say that some credit unions could be caught by this, but many credit unions had the foresight to get out of this situation. There may be red faces due to timing or a failure to exit the bank well in advance given the fact that other institutions determined that they should do so. This is a normal liquidation and we should not automatically conclude from Deputy Cowen's remarks that people will be hung out to dry financially. We are aware of the circumstances and will work through the issue with other Departments as we see fit.