Written answers

Thursday, 17 June 2010

Department of Finance

Legislative Programme

5:00 pm

Photo of Joanna TuffyJoanna Tuffy (Dublin Mid West, Labour)
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Question 10: To ask the Minister for Finance his views on the EU Commission's Communication on Bank Resolution Funds, published on 26 May 2010; if and when he intends to introduce legislation providing for a bank resolution mechanism or living will for insolvent banks; and if he will make a statement on the matter. [25642/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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In my dealing with the banks I have clearly maintained the principle that the banks will contribute to the cost of State's support – the banks have been charged for the Government's guarantee of their liabilities and the NAMA Act provides for a levy on the banks should NAMA result in a loss for the taxpayer. In the context of the enhancement of supervision and the restructuring of the banking sector underway in Ireland, due consideration is of course being given to maintaining this principle, ensuring that the sector contributes its appropriate share, minimising as much as possible taxpayers' exposure to potential costs arising from State support of the banking sector.

One possible mechanism for ensuring that the financial sector bears these costs is set out in the European Commission's recent Communication on Bank Resolution Funds. The Commission's Communication supports the establishment of ex ante resolution funds, funded by a levy on the banks to facilitate the managed failure of ailing banks in an orderly manner. The Communication noted the importance of linkages between any resolution fund and a special resolution regime - suggesting that a resolution fund should form part of the toolbox of measures available to Member States in an EU crisis management framework for resolving institutions in difficulty.

I have indicated previously that I am examining options for the introduction of a legislative regime to deal in a systematic way with distressed financial institutions, to ensure the State has in place a range of tools to address problem institutions effectively in the interests of maintaining financial stability, minimising reliance on public moneys and ensuring continuity of key banking activities.

In view of the central role performed by central banks in resolution frameworks for financial institutions my Department is in consultation with the Central Bank and the Financial Regulator with a view to the development of draft legislative proposals, which I will consider in due course.

Work is also underway at the EU level in this area, and the Commission is expected to bring forward legislative proposals on the use of resolution frameworks for cross border institutions in early 2011. Included in the Commission's proposal for discussion are additional powers for supervisors to require the preparation by systemically important institutions of firm-specific contingency and resolution plans. Ireland is, of course, participating fully in the work at EU level to examine this and other possible elements of bank resolution tool-kits in a cross-border context.

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