Michael McGrath (Cork South Central, Fianna Fail)
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Question 61: To ask the Minister for Finance the position regarding the capital ratios required to be maintained by Irish banks as part of the regulatory system; the role of the Financial Regulator and the EU in setting the required ratios; and if he will make a statement on the matter. [9755/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Levels of regulatory capital that banks must hold as a cushion against the credit and other risks that they must run are established by the so-called Basel II Framework, which was adopted in 2004, implemented in Ireland and across the EU in 2006 and which came into effect from 1 January 2008. The Basel II Framework was agreed by members of the Basel Committee on Banking Supervision, which provides a forum for regular cooperation on banking supervisory matters. While Ireland is not a member of the Basel Committee on Banking Supervision, we are represented by the European Commission. Ireland considers all proposals and contributes to discussions taking place at European level on these issues.

The Capital Requirements Directive (CRD) implements the Basel II framework in the European Union. The CRD comprises two directives – Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions and Directive 2006/49/2006 on the capital adequacy of investment firms and credit institutions.

Irish banks are required to calculate capital requirements and maintain a minimum level of their own funds in accordance with the CRD. Specifically, Article 75 of the Directive 2006/48/EC refers to the minimum level of own funds required. However, in relation to minimum own funds there are a number of relevant Articles including Articles 22, 109, 123, 124 and 136.

The Financial Regulator is responsible for the implementation of the Capital Requirements Directive in Ireland. Their approach to the implementation of the CRD is detailed in the Regulatory Notice 'Implementation of the CRD' dated 28 December 2006.

By way of concluding, recent developments have demonstrated that capital requirements are at the heart of the soundness and stability of individual institutions and the financial system overall.