Michael Noonan (Limerick East, Fine Gael)
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Question 37: To ask the Minister for Finance if he has assessed the likelihood of a takeover or transfer of the two major Irish clearing banks which would see them go out of Irish control; and if he will make a statement on the matter. [18362/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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It would not be appropriate for me in my role as Minister for Finance to comment on the likelihood or otherwise of a transfer or takeover of ownership of specific financial institutions in the State. Under national legislation, the Central Bank and Financial Services Authority of Ireland must approve any acquisition which involves a stake of more than 10% in a bank on prudential grounds. In addition, the Minister for Finance must approve mergers involving more than 20% of total banking assets in the State. Various competition rules also apply. Depending on the size and value of any proposed transaction, either EU or Irish merger law would apply.

As the Deputy may be aware, the general issue of the implications of mergers and acquisitions for the development of the Irish banking sector overall over the current decade was one of a number of matters considered by a Department of Finance and Central Bank working group on strategic issues facing the Irish banking sector established by my predecessor which reported in 2000.

The group differentiated between rationalisation of costs and diversification and growth as the two main motives for mergers and acquisitions in the sector. As the financial sector in Ireland is already highly skilled, the group concluded that skills transfer is unlikely to provide a strong basis for a foreign acquisition of a major Irish bank. The view of the group as set out in its report was that while a takeover or merger based on rationalising costs may be a somewhat greater possibility, it was still considered unlikely. The possibility that an Irish bank could be purchased as part of a diversification strategy based on seeking exposure to the Irish economy or access to the EU was also considered by the group. The assessment of the group was that the profitability and diversification of the two main banks outside Ireland would influence developments in relation to this option. A detailed analysis of these issues is available in the full report which is published on my Department's website.