Joe Costello (Dublin Central, Labour)
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Question 211: To ask the Minister for Finance the talks he had engaged in with the EU Commission or Central Bank prior to the supplementary Budget on 7 April; if the EU had given approval or encouragement for the establishment of the National Assets Management Agency; if the EU had given approval for State aid for the initiative; and if he will make a statement on the matter. [15879/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On 25 February 2009, the European Commission provided guidance on the treatment of asset relief measures by member states. The Commission considers that a common European approach is presently needed to deal with the treatment of impaired assets, to make sure that foreseeable losses are disclosed and properly handled and banks can use their capital to resume their normal function of lending to the economy instead of fearing they would need this capital to cushion against possible losses. Guidelines were also issued by the European Central Bank on bank asset support measures.

The National Asset Management Agency (NAMA) initiative announced on 7 April will be developed and implemented within the common EU framework detailed in the European Commission Guidance and guidelines issued by the European Central Bank.

My officials have already started the cooperation with the European Commission to ensure that the design and the implementation of the NAMA proposal will be consistent with EU requirements. The measure will be formally notified to the European Commission under State aid rules in due course.

Joe Costello (Dublin Central, Labour)
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Question 212: To ask the Minister for Finance if funding of the National Assets Management Agency will constitute part of the national debt; if he has consulted with the EU Commission on this matter; and if he will make a statement on the matter. [15880/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In the Supplementary Budget I announced the formation of a National Asset Management Agency (NAMA), which will operate as an independent commercial entity under the aegis of the National Treasury Management Agency (NTMA). As I mentioned in the Supplementary Budget speech, assets will be transferred from the banks to the Agency with the purpose of ensuring that the banks have a clean bill of health, their balance sheets strengthened and uncertainty over bad debts is reduced. This will underpin a sustained flow of credit on a commercial basis to individuals, households and businesses in the real economy.

The assets will be acquired by the issuing of Government Bonds to the banks. While this will result in a significant increase in gross national debt, this will be offset by the value of the assets purchased. The cost of servicing the debt will be met from the income accruing from the purchased assets, and the debt incurred will be repaid from funds raised from the eventual disposal of the assets. Discussions are ongoing with the European Commission in relation to the issues surrounding the establishment of NAMA.