James Bannon (Longford-Westmeath, Fine Gael)
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Question 102: To ask the Minister for Finance the implications of having to find the recapitalisation money for Anglo Irish Bank and a building society (details supplied) from the annual budget over the coming years, as determined by the recent EUROSTAT decision. [17122/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On March 31st this year the Government issued promissory notes to Anglo Irish Bank and Irish Nationwide Building Society for €8.3 and €2.6 billion respectively to help meet their capitalisation requirements over the coming years. Although the effect of this is to increase government debt by €10.9 billion in 2010 there will be no actual borrowing associated with these transactions for 2010. The reason the full amount is included in the 2010 figures - despite the fact that the money will not be borrowed in that year - is because accounting rules state that one must recognise a debt in the period in which it arises.

From 2011 the Government will begin to borrow the funds in equal tranches over the next ten to fifteen years to meet the requirements of the promissory notes. This will result in increased exchequer borrowing of approximately €1.1 billion for each of these years. The associated borrowing costs have been estimated by the NTMA to be approximately €50 million per each billion borrowed. In the context of the overall Budgetary position such an amount is manageable.

The recapitalisation of these institutions have been made pending the agreement of the respective restructuring plans with the EU commission. Until these restructuring plans have been agreed it is not appropriate to include these in any measure of the General Government Deficit; thus the existing Budget Consolidation Plan stands. As such, they have been classified as financial transactions, and this decision can be reviewed when further information is available. The decision to re-capitalise these institutions was taken by the Irish Government and not by Eurostat. This was necessary to ensure that the institutions complied with regulatory capital requirements.