Results 47,041-47,060 of 49,836 for speaker:Stephen Donnelly

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Let us take Anglo Irish Bank. If a bank comes along and says it has a loss which needs to be filled of €30 billion, is it 8% and 5% of the €30 billion or is it 8% and 5% of the total liabilities?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: It is a much higher figure in that case. Is there a sense that the first two parts of the cascade will provide a 100% buffer in most cases?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: For absolute clarity, let us just stay with the example of Anglo Irish Bank. Let us say Anglo Irish Bank says it needs €30 billion. Fifteen percent of €30 billion would be €4.5 billion. If I understand Mr. Sheridan correctly, it is much more than €4.5 billion. Anglo’s total liabilities would be taken into account, which might be €300 billion, and...

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: It is not just 8% and 5% of the loss.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: That is critical. Could I ask about the €60 billion? I know we have been through it before. It feels very light. I have got very useful clarity on the 8% and 5%. Let us say they do not stop the problem and we have to move on to the ESM. The note we have says the DRI mechanism can only be used if indirect recapitalisation by the ESM is not possible. Is that correct?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Once we get to the ESM, is it correct that the ESM starts with sovereign liability lending and only when that is not available does one get into the DRI, which is non-sovereign liability lending?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Am I correct in saying that would be rare? One would have to put together quite a specific case, because if I understand the system and what Mr. Ó Brolcháin said correctly, if we have been through the 8% and the 5% but more money is still required as that has not fixed the problem, and we are now onto the ESM, if we lend the sovereign money to lend on to the banks it might cause...

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: That is a pretty high burden of use. I cannot think of any case in which lending to a country could cause such a scenario to unfold. Is there any case in the recent crisis in which that condition would have been satisfied?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: No; it is the opposite case. In our case they said it was not that at all and that they would have to lend to the sovereign. Lending to the sovereign is not what destabilised us. One would have to argue that lending to the sovereign by the ESM would destabilise the sovereign, but in our case it was what stabilised it.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Yes we are, but I cannot think of a single scenario in which that could occur. This is a meeting about the DRI.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Then one could use the DRI.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: If one assumes that Ireland’s GDP is about one seventy-fifth of eurozone GDP - scaling it back to Ireland, where we understand the amount of money required - that would be about €650 million pro rata. The sum of €60 billion might sound like a lot of money, but when one brings it back to an economy that we can all understand, namely Ireland's, it would be about...

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: I thank the officials for their time this evening. Is it still the ESM's intention to decouple banking from sovereign debt or has that changed since the July 2012 statement?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: I appreciate the comprehensive nature of Mr. Ó Brolcháin's answer and I understand it, but I am asking a different question. Has the stated intention of the Eurogroup - perhaps not of the ESM - changed? Has it publicly watered down that statement on decoupling banking from sovereign risk?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Sure, but the stated strategy is to decouple the link.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Herein lies my struggle. Other than the DRI, which is too small and will probably never be used, based on the technical note we have received, the ESM would decouple the link by lending directly to banks for recapitalisation so that the sovereign would play no part. Am I right in believing that, before such a recapitalisation, the ESM's money would come via the sovereign? By definition,...

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: No; I am talking about the remaining €440 billion or €450 billion.

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: By definition, the non-DRI mechanism, which is the main ESM mechanism, links sovereign and banking risk because the lending is via the sovereign. Will that not still be the case?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: Yes, but I want to ensure that I have not missed anything that has changed in the past two years. Is the main lending for the ESM still via the sovereign?

Joint Oireachtas Committee on Finance, Public Expenditure and Reform: General Scheme of European Stability Mechanism (Amendment) Bill 2014: Discussion (24 Sep 2014)

Stephen Donnelly: They can lend on to the banks.