Aideen Hayden (Labour) | Oireachtas source

I welcome the Minister of State to the House. I agree with Senators Barrett and Michael D'Arcy on two points. First, as Senator Barrett said, it is too little, too late. The Irish people are paying the price for the failure to have a mechanism like this and we will continue to pay the price of that failure. No amount of legislation is going to change that, as far as I can see. I agree with Senator D'Arcy that one really has to wonder about the amount of money involved. The latest estimate I have seen is that €35 billion will be the ultimate cost to the Irish taxpayer of bailing out our banks, and that is on a good day and assumes we will get AIB back onto the market and do this, that and the other thing. There is a real issue here about whether the size of the fund is adequate.

Banking union, which is what this legislation is effectively about, has three components or pillars. The first pillar is the supervision mechanism, the second pillar, which is what we are here to talk about today, is the resolution mechanism, and, of course, the third pillar is the deposit guarantee scheme. There are 124 banks in the European Union that are subject to regulation by the European Central Bank. Where do we stand at the moment in terms of those 124 banks? How many of those 124 banks have failed to reach the requirements that have been put on them through the Single Supervisory Mechanism, SSM? Of those banks that have failed to reach the targets, do we have any idea what a failure in regard to any of those banks would cost the European Union? That is my first question.

My second question is this. Obviously, this is about creating a common pool of money that will allow for the efficient resolution of the collapse of a financial institution. I am aware there are other mechanisms in place and a recovery planning process for individual banks that fail to reach the standards, and so forth. One issues of concern is that, when a bank is in the recovery stage, it is the bank's funds that pay for the recovery process. How do we take a bank that is failing and ask it to pay for its own recovery process?

The SRF will have an eight-year horizon. It will have a fund of €55 billion and it can borrow from the markets, as I understand it. This is being front-loaded into years one and two - 40% and 20% - and the remaining 40% will be mutualised in instalments over the remaining six years. Does the Minister of State think that an adequate process? Is it a realistic horizon? Why are we front-loading and then allowing it to drift off for another six years? I understand the contributions are going to be adjusted in proportion to the risk profile of each institution and that there will be a common backstop to facilitate borrowings. Will the Minister of State explain this further?

Some questions remain. One debate that is ongoing in Ireland at the moment, and which is very relevant to the Irish people, is the whole issue of Brexit. As we know, the Taoiseach came out very recently, expressing serious concerns over the prospect for Ireland of a British exit from the European Union.As Members are aware, the United Kingdom remains committed to not participating in a banking union for any of its institutions and given its proximity to Ireland - I refer specifically to the City - how does the Minister of State think the United Kingdom's unwillingness to participate in banking union will affect the Irish financial sector in the future? Obviously, there are banks operating in Ireland that are subsidiaries of UK commercial operations. Does the Single Resolution Fund, SRF, have an impact on any of these entities in respect of the future resolution needs and how does the Minister of State believe this will play out for Ireland in practice? There is a general uncertainty about the balance between the national and European sources of funding in the case of a future bank crisis resolution. The Minister of State might go into further detail about the sequence of steps that will take place in the event of a bank or financial institution being obliged to enter into the resolution process.

I will conclude by making the point that the intergovernmental agreement was only established because several member states had expressed serious reservations about the legal status of transferring contributions from national resolution structures to the Single Resolution Mechanism. Is the Minister of State confident the legal concerns have been addressed adequately by this legislation both in Ireland and obviously at a broader European level?