Seán Haughey (Dublin North Central, Fianna Fail)

Senator Twomey's amendment seeks to restrict the scope of financial support that may be provided under the Credit Institutions (Financial Support) Act 2008, as amended by this Bill. The amendment aims to prohibit the extension of financial support that may be provided under the 2008 Act to any form of tier one or tier two risk capital. As the Senator is aware, regulatory capital comprises tier one capital, which is largely equity and reserves, and tier two, which consists of longer-term instruments that have the capacity to absorb losses, such as subordinated debt instruments whereby the lenders' claims on the credit institution are wholly subordinate to those of all non-subordinated creditors. Current EU state aid requirements set down strict guidelines for the material scope of guarantees or the type of liabilities covered and any scheme providing financial support under the Credit Institutions (Financial Support) Act 2008 must receive EU state aid approval. For instance, EU requirements do not allow in principle for guarantees of certain capital such as dated subordinated debt.

While the Minister accepts the reasoning behind the Senator's amendment which conforms to what would be required under current EU state aid rules, he is wary of specifying in primary legislation any restriction in the scope of financial support, in particular one constructed on imprecise, shifting or potentially conflicting definitions of what constitutes certain types of capital. In such circumstances, there is a clear risk that unintended definitional or other legal issues may materialise in future that might prevent the Government from providing appropriate support under the Act to maintain financial stability in the State. The Minister has stressed any new scheme providing a guarantee beyond September 2010 for longer-term liabilities would require Oireachtas approval under the Act, which includes the scope of the liabilities guaranteed. Finally, the Minister stated in the Dáil that dated debt, which is lower tier two capital, will not be part of any such extension and therefore I cannot accept the Senator's amendment.