Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank all Senators for their attendance this evening. It is very late and I appreciate their attendance. As Senators are aware the Government has been engaged in detailed discussions with the European Central Bank to agree a satisfactory solution to the issue of the promissory notes for the State, the European Central Bank and the eurozone. The ECB is considering a proposal from the Government as part of the ongoing discussions. In discussions with the ECB it was envisaged that the first step would be the liquidation of the Irish Bank Resolution Corporation, IBRC, and the sale of its remaining assets to NAMA or other market purchasers.

The Bill has been in preparation for a considerable period and its presentation now was precipitated by the proposal to liquidate IBRC being made public.

This posed an immediate risk to the bank and required immediate action to secure the stability of the bank and the value of its assets of between ¤12 billion and ¤14 billion. On behalf of the State I have vested the powers of the board temporarily in an employee of KPMG, and a KPMG team is now in control of the bank on my behalf. The team moved at approximately 4 p.m. to secure the IBRC premises in Dublin, London and New York.

Questions were raised in the Dáil about the need for urgency in passing this Bill. The reason for urgency is that it is not possible to have a long-drawn-out debate, during which time the value of IBRC and its assets would be eroded, because that would cause significant additional losses for the taxpayer. Anyone who is familiar with even the smallest corner shop going into liquidation will be aware that no company can continue to trade when there is a credible belief that it will go into liquidation. The reality is that no developer would ever make a repayment on his or her loan to IBRC while the bank was in limbo. This would mean that the bank would only be losing money at the expense of the taxpayer and we would eventually have to bring in a liquidator after suffering even further loss of value. The special liquidator gives legal certainty in preventing loss of value in the bank's assets and ensuring an orderly wind-down. I do not think any Senator could give me an example of a company that announced it would be liquidating some time in the future and then did not do so until the interval had passed.

I will now turn to the subject and objectives of the Bill. Once the legislation is passed, joint special liquidators will be appointed to IBRC with immediate effect to wind up its business and operations. It is intended that the net debt owed by IBRC to the Central Bank and its associated floating charge security will be purchased by NAMA, using NAMA bonds, in a way that ensures there is no capital loss for the Central Bank. The ministerial guarantee underpinning the net debt owed to the Central Bank will also be transferred to NAMA. The deposit guarantee scheme and eligible liabilities guarantee scheme will ensure that eligible depositors, bondholders and counterparties will be repaid. There is also a derivatives guarantee in place. As is common in liquidations, all employment contracts in IBRC are immediately terminated.

As indicated, the IBRC debt to the Central Bank, which is intended to be purchased by NAMA, is secured by a floating charge over the assets of IBRC and a ministerial guarantee. Following an independent valuation process, the special liquidators will sell the assets of IBRC which are subject to the floating charge to third parties at or above their independent valuation. Failing that, the special liquidators will sell the assets to NAMA at their valuation price. The proceeds of these sales will be used to repay creditors in accordance with normal Companies Acts priorities, so that preferred creditors, including employees, are paid first and then the IBRC debt to NAMA is paid under the floating charge. To the extent that proceeds are available after repayment in full of the NAMA debt, these proceeds will be applied to remaining unsecured creditors who have not been paid under the guarantee schemes - which, for clarity, do not include the deposit guarantee scheme. These remaining unsecured creditors will include the Minister to the extent that he has paid out under guarantee schemes. Similarly, if the proceeds are not sufficient to pay IBRC's debt to NAMA, the shortfall to NAMA will be met by the existing ministerial guarantee. The remaining subsidiaries will be wound up or sold by the special liquidators to optimise value and once all of its obligations are resolved, IBRC will cease to exist.

I will now go through the sections of the proposed Bill. Section 3 sets out the purposes of the Act. Section 4 provides that the Minister will make a special liquidation order in respect of IBRC. Section 5 provides, among other matters, for the publication of the special liquidation order. Section 6 provides, among other matters, for an immediate stay on all proceedings against IBRC; that no further actions or proceedings can be issued against IBRC without the consent of the High Court; that no action or proceedings for the winding up of IBRC or the appointment of a liquidator or an examiner can be taken, issued, continued or commenced; for the removal of any liquidator or examiner appointed prior to the order; and that the order constitutes notice of termination of employment for each employee with immediate effect.

Section 7 provides for the appointment of the special liquidators. Section 8 limits the power to grant injunctive relief in certain proceedings. Section 9 provides that the Minister will issue instructions and may issue directions to the special liquidators, and requires the special liquidators to comply with such instructions and directions. If the Bill passes successfully through the Seanad and is signed by the President in the early hours of the morning, I will be issuing instructions under that section to the liquidators and I will place copies of those instructions in the Oireachtas Library for the information of Members.

Sections 10 and 11 deal with the application of certain sections of the Companies Acts and Central Bank and Credit Institutions (Resolution) Act 2011 in the context of the winding up. Section 12 provides for the sale or transfer of assets and liabilities in IBRC. Section 13 provides that the Minister may give directions in writing to NAMA in relation to the acquisition by NAMA of the debt of IBRC to the Central Bank; and the purchase of assets of IBRC from the special liquidators. Section 14 provides that the Minister shall direct the special liquidators in respect of the independent valuation of the assets of IBRC prior to sale. Section 17 provides that the Minister may issue securities.

The liquidation of IBRC does not affect other banks. The vast majority of IBRC's deposit accounts moved to AIB and Permanent TSB last year and they are unaffected by today's announcement. The deposit accounts that remain in IBRC are generally associated with a wider ongoing relationship with the bank. It is important to state that all eligible deposits up to ¤100,000 for an individual and ¤200,000 for two individuals holding a joint account in IBRC are protected by the deposit guarantee scheme in operation in the State and eligible deposits beyond this limit are guaranteed under the eligible liabilities guarantee scheme. It is critically important that deposit account holders, mortgage account holders and those indebted to IBRC understand that their situation following the liquidation should generally remain unchanged. Guaranteed deposits will be repaid under the eligible liability guarantee and deposit guarantee schemes. Mortgage account holders and other borrowers with IBRC will remain liable for their debts and should continue to make repayments. If customers of IBRC have concerns they should make contact with the operators of the relevant schemes. Contact numbers are available on the Department of Finance website.

I wish to emphasise that the reason these steps are being taken is entirely distinct from the performance or direction of the board of management of IBRC. It is simply compelling in the larger public interest to take this action now, and the Government has made its decision on that basis alone. I acknowledge, with much appreciation, the significant efforts the directors and staff of IBRC have made in the stabilisation of and maintenance of value in IBRC. I regret the abruptness with which this decision is being communicated to management and staff, but due to the scale, sensitivity and complexity of the economic issues involved, it was necessary in the public interest to keep the matter confidential until now. Unfortunately, as is common in liquidations, all employee contracts will be terminated on the winding-up of IBRC. However, it has been indicated to me that the majority of staff will, if they wish, be rehired for the purposes of the orderly liquidation on such terms and for such duration as may be determined by the special liquidators. Employees will rank, in the normal way, as preferential creditors ahead of NAMA and unsecured creditors in respect of certain amounts owing on a winding-up, including accrued wages, salaries, holiday pay, sick pay, statutory redundancy, pensions contributions and claims for damages arising from accidents. I understand this announcement will come as quite a shock to employees of IBRC and to some of those who do business with the bank. The special liquidators will be instructed to handle that as well as possible in the circumstances.

As I stated previously in the Dáil, I would have preferred to be introducing this Bill in tandem with a finalised agreement with the European Central Bank. However, I understand that the European Central Bank will continue to consider the proposals made by the Governor of the Irish Central Bank in agreement with the Irish Government in Frankfurt tomorrow. I commend this Bill to the House.