Shane Ross (Dublin South, Independent)
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3. To ask the Minister for Finance his timetable for the sale of the Government's stakes in Bank of Ireland and AIB; if he has sought any external advice on the matter; if he is keeping in touch with the public interest directors on the proposed sale; his plans for the proceeds; and if he will make a statement on the matter. [8602/14]

Shane Ross (Dublin South, Independent)
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My question relates to the proposed timetable for the sale of the Government's stakes in Bank of Ireland and AIB. Will the Minister also indicate whether he has sought any external advice on the matter, whether he is keeping in touch with the public interest directors in regard to the proposed sale, and his plans for the proceeds?

Michael Noonan (Limerick City, Fine Gael)
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The State has already executed the successful disposal of some of its investments in the banks. Last year the State completed three transactions, namely, the sale of our CoCo and preference share investments in Bank of Ireland, and our investment in Irish Life. These disposals generated total proceeds of €4.45 billion.

AIB and Bank of Ireland are at different stages in their recovery and this influences the relative attractiveness of each bank to the investor community and its consequent valuation. Bank of Ireland is the more advanced of the two and this provided us with the opportunities we chose to avail of last year. Following the monetisation of the preference shares in December 2013, our remaining investment in Bank of Ireland comprises our 14% equity holding. The market value of this holding, at the current share price of 33 cent, is €1.5 billion. As I stated recently, any decision to sell this stake will be a question of price. Officials in my Department continue to monitor market conditions and advise me in this regard.

With reference to AIB, I am encouraged by the progress the bank is making. Our first priority is to see it return to profitability and address its legacy issues. This should, in time, enable the State to be in a position to exit part of its investment in the bank should we wish to do so. As I said recently, the Government might look to "test the market" before the next election in order to establish a valuation for the bank. Officials within my Department have extensive banking and capital markets experience both from previous roles in the private sector and from work done for the State during the crisis. Hence they are well qualified to assess suitable opportunities and strategies to dispose of the State's remaining bank investments. In addition, these officials meet regularly with internationally renowned investment banks to discuss relevant market intelligence relating both to the Irish banks and international banking developments in general.

My officials also meet with international institutional investors to gauge their interest and investment criteria.  Notwithstanding this, I will consider the need for specialised financial advice when I need additional market-based advice to strategise how to best dispose of our investments arise.

Additional information not given on the floor of the House

I meet regularly with the boards of both banks, including the public interest directors. The agenda for these meetings tends to cover a wide range of issues, including our thoughts in regard to our bank investments.

Finally, it is premature to speculate on the use of the proceeds from any future investment disposals. Notwithstanding this, any decision regarding the use of disposal proceeds will be made in the best interest of the taxpayer.

Shane Ross (Dublin South, Independent)
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I was prompted to ask this question after seeing the Minister being interviewed by Bloomberg in a snowy Dallas. It seemed to me that he was making a pitch to international investors in this interview, pointing out that AIB and Bank of Ireland are for sale and what an attractive proposition they are. The Minister indicated in his reply that Bank of Ireland shares are currently priced at 33 cent. Does he feel under any pressure to sell the State's stakes in the banks? He referred in his reply to the next election. I do not see why that should be a cut-off point.

Michael Noonan (Limerick City, Fine Gael)
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We have a mandate for five years. The timeframe is not election-related.

Shane Ross (Dublin South, Independent)
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We are looking at March 2016, in other words.

Is it not very dangerous to put the two pillar banks, as the Government calls them, out for sale to international predators at a time when we are encouraging, by our policy, a cartel situation? There is a real concern that although we have very few players in this market, the Government at least has some hold over the remaining banks which offers some protection to customers. The danger in selling the stakes to outside bodies is that we could end up with an international instead of a local cartel.

Michael Noonan (Limerick City, Fine Gael)
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Business news channels like Bloomberg give an opportunity to get the Irish story out there and put our message across, which is otherwise difficult to do. I try to affect market sentiment in the interviews I do. The point I wanted to underline is that the State does not have a long-term interest in holding State banks and our intention is to restore them to the private sector in due course. When I was asked when that will be done, I replied that we will test the market in due course.

The message is not so much that we are about to sell the banks; it is that the policy is that we will not continue with State banks in the medium term. We will get private investors in. Of course there are concerns, and the Deputy is right; I would like to have more competition in the banking sector in Ireland. I also think that in Ireland and across Europe, banks will not be able to provide the liquidity that the European economies need. We will have to move more towards an American model, where there are non-bank sources of funding for investment and for expanding the economy.

Shane Ross (Dublin South, Independent)
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I thank the Minister for his response. He has been to Brussels looking for recapitalisation of the banks. Is this sale subject to the subsequent recapitalisation, or will it be done regardless? In other words, if the Minister goes to Europe and says that these banks need recapitalisation badly, or at least need to be compensated under the ESM, will they be sold as recapitalised banks or will they be sold as they are at the moment?

Michael Noonan (Limerick City, Fine Gael)
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First of all, I do not believe the Irish banks require extra capital, but we would like to recover some of the capital that we had already invested in the recapitalisation in March and April 2011. We are pursuing a number of things in parallel, and the movements do not contradict each other. One way to get some of the money that we invested in 2011 back from European sources would be for a European institution to take some of the bank shares, and to give us money in lieu of those shares. That is obviously one model. Whether it is a sale to the private sector or some kind of retroactive recapitalisation, the value of the shares is very important. It is quite clear that as we manage our portfolio, enhancing the value of the shares is important, whichever route we pursue.