Willie Penrose (Longford-Westmeath, Labour)
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Question 97: To ask the Minister for Finance the amount and the terms of promissory notes transferred to date by the Government to Anglo Irish Bank and Irish Nationwide Building Society; the amount he expects to issue of promissory notes during 2010; when the first payments are due; if the annual payments on these promissory notes will be made from the general fund; and if he will make a statement on the matter. [17200/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In line with my statement to the House on 30 March on the banking situation, I subsequently issued Promissory Notes on 31 March to Anglo Irish Bank and Irish Nationwide Building Society. These Notes will ensure that both institutions continue to meet their regulatory capital requirements. The initial principal amount of the Note that issued to Anglo Irish Bank is €8.3bn and to INBS it is €2.6bn. As I indicated in my recent statement, it is likely that Anglo will need further capital in due course but the extent and timing of such further support remains to be determined.

The terms of the Promissory Notes that issued to both institutions on 31 March are substantively the same and, inter alia, provide that ten per cent of the principal amount will, if demanded by the institution, be paid each year and that the first such payment will fall due for payment from the Central Fund on 31 March 2011. An annual interest coupon, related to Government bond yields, is also payable on the Promissory Notes which the Minister has absolute discretion to pay on the due date or to add to the principal amount. This ensures that the Note meets accounting requirements to be "fair valued" at the principal amount in the annual accounts of each institution, consistent with the regulatory capital requirements. In the event of a winding-up of either institution, the aggregate of the outstanding principal amount and any unpaid interest that has accrued on the institution's Note falls due for immediate payment.

The Deputy may also wish to note that, as indicated in my banking statement of 30 March, the use of Promissory Notes means that the institution's capital requirements are met in a way which spreads the cash payments over a number of years and thereby reduces the funding burden on the Exchequer that would otherwise arise in the current year.