Tom Sheahan (Kerry South, Fine Gael)
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Question 347: To ask the Minister for Finance the amount the National Treasury Management Agency has invested in Irish banks; the worth of the initial investment; the value of the NTMA investment in Irish banks; and if he will make a statement on the matter. [38595/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am replying to this question on the basis that the Deputy is referring to the National Pensions Reserve Fund (NPRF) of which the National Treasury Management Agency (NTMA) is currently manager.

In March and May 2009, under the terms of the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act 2009, the National Pensions Reserve Fund Commission invested, at my direction, a total of €7 billion in preference shares issued by Bank of Ireland and Allied Irish Banks (AIB) plc (€3.5 billion in each institution). The investments followed intensive discussions between the Government and Bank of Ireland and AIB with a view to securing the position of these two banks. As a result of these discussions, the Government decided on a comprehensive recapitalisation package to reinforce the stability of the Irish financial system, increase confidence in the banking system in Ireland and facilitate the banks involved in lending to the economy.

The preference share investments pay an annual non-cumulative fixed dividend of 8% payable in cash or, in the case of non-payment by either bank of the cash dividend, ordinary shares in lieu. These preference shares can be repurchased at par up to the fifth anniversary of the issue and at 125% of face value thereafter. The preference share investments are held by the Fund at cost. Warrants issued with, but detachable from, the preference shares give an option to purchase up to 25% of the enlarged ordinary share capital of each bank following exercise of the warrants. The strike price of the warrants exercisable by the Fund for the first 15% of the ordinary share capital is €0.975 for AIB and €0.52 for Bank of Ireland. The strike price of the balance of the warrants is €0.375 for AIB and €0.20 for Bank of Ireland. The warrants are exercisable at any time from the fifth to tenth anniversary of issue of the preference shares or immediately prior to any takeover or merger of the bank concerned, whichever is earlier. If either bank redeems up to €1.5 billion of the Fund's investment in preference shares from privately-sourced core Tier 1 capital prior to 31 December 2009, then the warrants will be reduced pro rata to that redemption to an amount representing not less than 15% of the ordinary shares of the bank concerned.

The Commission has also made a number of private placement investments in credit securities issued by Irish financial institutions. At end-2008 – the date of the latest published annual accounts of the Fund – the value of these investments was €662 million. Finally, the Fund's third-party investment managers had investments on behalf of the NPRF Commission in quoted equities and debt securities issued by Irish financial institutions to the value of €13.4 million at end-2008.