Emmet Stagg (Kildare North, Labour)
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Question 105: To ask the Minister for Finance the current regulatory capital requirements for banks here; the way he expects these requirements to evolve in the coming years; the level of capital that is now expected by financial markets; the benchmark for capital levels that underpins preparations for the National Asset Management Agency and subsequent recapitalisation of the banking sector here; his views on whether there are market expectations that bank recapitalisation is done up front rather than in a staged, multi annual manner; and if he will make a statement on the matter. [11651/10]

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.

I indicated last September that, following the transfer of eligible bank loans to NAMA, it is likely that institutions will require additional capital and that each institution should explore all available options, both internal and external, for raising such capital. However, I also stated that, to the extent that the institutions are not in a position to raise sufficient capital from such sources, the Government remains committed, consistent with EU rules, to providing relevant banks and building societies with an appropriate level of capital to enable them to continue to meet their regulatory requirements.

In light of its responsibility for the implementation of the CRD, the Financial Regulator is currently assessing the capital requirements arising for those credit institutions participating in NAMA to ensure that the banking system in Ireland meets appropriate regulatory standards and market expectations. Recent developments have demonstrated that capital requirements are at the heart of the soundness and stability of individual institutions and the financial system overall and that context, it should be noted that the CRD is already being reviewed. The European Commission is expected to make proposals to amend the CRD later this year. Therefore, in order to address issues that emerge, the CRD can be expected to evolve to cater for such situations.