Written answers
Tuesday, 23 June 2009
Department of Finance
Financial Services Regulation
10:00 pm
Joan Burton (Dublin West, Labour)
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Question 151: To ask the Minister for Finance the breakdown of the deposits from banks on the Anglo Irish Bank balance sheet as at 31 March 2009, in particular, the ten largest counterparties under both open market operations and the master loan repurchase agreement; and if he will make a statement on the matter. [24950/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware Anglo Irish Bank is being run on an arms length commercial basis. A breakdown of the deposits from banks is contained in Note 20 to the Interim Accounts for the six months ended 31 March 2009 entitled "Deposits from Banks". It would be inappropriate for me to comment beyond what is published in the accounts, because of the possible commercial sensitivity of the information.
I set out below the relevant note to the accounts for your information.
| 20. | Deposits from banks | 31 March | 30 September | 31 March | ||
| 2009 | 2008 | 2008 | ||||
| €m | €m | €m | ||||
| Repayable on demand | 389 | 691 | 636 | |||
| Sale and repurchase agreements | 27,680 | 12,397 | 5,313 | |||
| Other deposits by banks with agreed maturity dates | 2,409 | 7,365 | 5,682 | |||
| 30,478 | 20,453 | 11,631 | ||||
| Sale and repurchase agreements include €23.5 billion (30 September 2008: €7.6 billion; 31 March 2008: €3.6 billion) of short term borrowings from central banks. These deposits include €13.5 billion (30 September 2008: €7.6 billion; 31 March 2008: €3.6 billion) borrowed under open market operations from central banks and €10.0 billion (30 September 2008: €nil; 31 March 2008: €nil) borrowed under a Master Loan Repurchase Agreement ('MLRA') with the Central Bank and Financial Services Authority of Ireland. The interest rate on this facility is set by the Central Bank and advised at each rollover, and is currently linked to the European Central Bank marginal lending facility rate. Collateral assigned under these agreements is derived from the Bank's customer lending assets (note 17). | ||||||
| During the period the Group increased the level of assets eligible for open market operations, primarily through the establishment of Anglo Irish Mortgage Bank and through the expansion of the Group's covered bond and CMBS programmes. | ||||||
| The decrease in other deposits by banks with agreed maturity dates is attributable to a reduction in interbank activity due to Bank specific concerns. In addition, €1.4 billion of term bilateral loan agreements were repaid following the nationalisation of the Bank as a result of change of control covenants within those loan agreements. | ||||||
Joan Burton (Dublin West, Labour)
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Question 152: To ask the Minister for Finance the breakdown of the debt securities in issue on the Anglo Irish Bank balance sheet as at 31 March 2009, in particular, the ten largest counterparties under both the medium-term note programme and covered bonds; and if he will make a statement on the matter. [24951/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware Anglo Irish Bank is being run on an arms length commercial basis. A breakdown of the debt securities in issue under the various programmes is contained in Note 22 to the Interim Accounts for the six months ended 31 March 2009. As these are tradeable instruments held in clearing systems the Bank has no way of knowing who the end investors are. It would be inappropriate for me to comment beyond what is published in the accounts.
I set out below a copy of the relevant note to the accounts for your information.
| 22. | Debt securities in issue | 31 March | 30 September | 31 March | ||
| 2009 | 2008 | 2008 | ||||
| €m | €m | €m | ||||
| Medium term note programme | 10,225 | 10,622 | 11,247 | |||
| Covered bonds | 1,203 | 1,361 | 1,504 | |||
| Extendible notes | - | 228 | 792 | |||
| Short term programmes: | ||||||
| Commercial paper | 2,465 | 3,488 | 5,889 | |||
| Certificates of deposit | 335 | 1,581 | 2,613 | |||
| 14,228 | 17,280 | 22,045 | ||||
| Bonds issued under the Group's covered bond programme are secured on certain loans and advances to customers (note 17). | ||||||
| Debt securities in issue have decreased by €2.9 billion on a constant currency basis due to the challenging capital market environment. Short term programme balances declined by €2.3 billion and other balances by €0.6 billion. | ||||||
| Medium term note issuance of €2.0 billion in the six month period includes a €1.5 billion public deal issued in December 2008 as well as several other smaller transactions, all of which are government guaranteed and mature by September 2010. Maturities and redemptions during the period were €2.6 billion. | ||||||
| Short term markets were volatile during the period given Bank and country specific factors and a market wide risk aversion towards the banking sector. Balances decreased from €5.1 billion at 30 September 2008 to €2.8 billion at 31 March 2009. |
Joan Burton (Dublin West, Labour)
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Question 153: To ask the Minister for Finance if he will report on recent press reports that a bank (details supplied) is to engage in a debt swap to strengthen its balance sheet by offering a coupon rate of 12.5% on newly issued bonds; how such banks will rank in terms of seniority of liabilities; if they will rank above or below the €3.5 billion in preference shares being injected by the Exchequer and which carry a coupon rate of 8%; if he will explain the coupon differential of some 4.5% between these two liability classes; and if he will make a statement on the matter. [24952/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised that the Exchange Offer, referred to by the Deputy, was proposed by the bank as a means of increasing its core capital (similar to other such proposals) subject to commercial considerations. The bank expects that this exchange will have a positive impact on its Core Tier 1 capital position without significantly impacting its overall capital position. The instruments being issued by the bank as part of its exchange offering with a coupon of 12.5% will rank ahead of the preference shares held by the State. At the time that the preference shares held by the State were structured the coupon was limited to a 7% to 9.3% corridor by the EU.
However, I am further advised that the new instruments are not directly comparable with those held by the State which form part of an integrated deal which includes warrants to subscribe for 25% of the enlarged ordinary share capital of the bank (or 33% of its ordinary share capital prior to the deal being announced). The State's preference shares also include a step-up feature which provides that redemption after the fifth anniversary of the issue must be at 125% of par value, which further adds to the value of the State's interest. In addition, the bank's exchange offering will create a significant level of distributable reserves which will act as a buffer against loan impairments, protecting the interest of the State. Those distributable reserves rank below the preference shares held by the State, as they are available to offset losses incurred by the bank in the normal course of business.
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