Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context

Question 58: To ask the Minister for Finance his views on recent statements by the President of the European Investment Bank to the effect that giving State guarantees to the banking sector can have a significant impact on the cost of sovereign borrowing; his views on both of these models. [12304/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

The National Treasury Management Agency has successfully issued two new bonds (totalling €10 billion) in 2009 and this week it launched the first of a series of auctions of long-term bonds. The auction was nearly three times oversubscribed. In common with other euro sovereign borrowers benchmarked against Germany, Ireland's cost of borrowing has increased. There are a range of factors that influence the cost of borrowing on the international market — the bank guarantee being one of them. However, it should be noted that Ireland's cost of borrowing has fallen recently from the levels recorded earlier in the year.

I am advised by the NTMA that notwithstanding the uncertain times we are in, they do not envisage any problems on the international markets this year in terms of raising funds.

Michael D Higgins (Galway West, Labour)
Link to this: Individually | In context

Question 59: To ask the Minister for Finance if and when he will table further proposals with respect to the capitalisation and stabilisation of the credit institutions covered by the bank guarantee scheme; and if he will make a statement on the matter. [12329/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

As the Deputy will be aware, the Government has announced detailed proposals for the recapitalisation of Allied Irish Bank and Bank of Ireland. As I have noted previously, the Government's approach to the recapitalisation of these institutions has been structured and considered and based on a detailed assessment of the institutions concerned. This included work undertaken for the Financial Regulator by PricewaterhouseCoopers and Jones Lang LaSalle. Following the completion of the Government's due diligence exercise, which is currently being finalised, the proposals will be put to EGMs of both banks over the coming weeks.

The Government is in ongoing discussions with the other covered institutions including with regard to their respective capital positions and in relation to the review of the guarantee scheme. The Government will be bringing forward proposals to strengthen these institutions as required.

As the Deputy will be aware, the Government is also examining how the guarantee Scheme could be revised, subject to European Commission approval and consistent with EU State aid requirements, to support longer-term bond issuance by the covered institutions. Moreover, in consultation with my advisers, I am examining proposals for dealing with risky assets on the balance sheets of relevant institutions.

Liz McManus (Wicklow, Labour)
Link to this: Individually | In context

Question 60: To ask the Minister for Finance when the fees charged to institutions under the bank guarantee scheme in respect of that guarantee are next to be reviewed; the stakeholders in this review and the process involved; if he will publish the formula used to generate this fee; if recent increases in Ireland's long-term sovereign borrowing costs will be considered in the context of this review process; and if he will make a statement on the matter. [12305/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

There is provision in Paragraph 22 of the Scheme that I may review the guarantee charging model every six months. I expect that the first of these reviews will be completed during April 2009. The review process will require advice from the Central Bank, Financial Regulator and the NTMA.

The thinking behind the Charging Model is set out in some detail in the Annexe to the Scheme. The charge is calculated by reference to the composition of the covered institution's average month-end covered liabilities during the preceding quarter. Each covered institution pays its share in accordance with its risk profile and the guarantee charging model, subject to the estimated cost to the Exchequer being fully recouped.

I acknowledge that Irish bond spreads have widened against the benchmark German bund over recent months. There are complex factors at play, many not specific to Ireland.

However, in regard to Ireland, the fiscal performance is and will continue to be a key issue. In this regard I have outlined at length the necessity to bring public spending and revenue into better balance.