Lucinda Creighton (Dublin South East, Fine Gael)
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Question 73: To ask the Minister for Finance the situation regarding deposits in the banking system here in the aftermath of the €35 billion made available under the EU/International Monetary Fund deal; and if he will make a statement on the matter. [1335/11]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It has been clear for some time that the banks were facing serious challenges in terms of their liquidity position. Lingering concerns in the market regarding their capital position has led to negative market sentiment. The Deputy may be aware from Central Bank statistics that deposits by Irish residents in December 2009 fell from €310,657 billion to €297, 035 billion in November 2010 and deposits by non-residents fell from €228,553 billion to €172,631 billion for the same period, a fall of some €69.5 billion. The Financial Programme with the European Commission/ECB/IMF does not propose any departure from existing policy, indeed its prescription is an intensification and acceleration of the restructuring process already being undertaken by the Irish banks. A key objective is to ensure that the size of the domestic banking system is proportionate to the size of the economy and is appropriately aligned with the funding capacity of the banks overall, taking into account stable sources of deposit and wholesale funding.

The Deputy will be aware that the Central Bank is requiring the banks to meet a Core Tier 1 capital ratio of 12%.

In addition, under the ELG Scheme, deposit balances continue to be guaranteed. Since the signing of the agreement with the European Commission/ECB/IMF in December 2010, significant work is underway by the relevant authorities to complete the Prudential Capital Assessment Review (PCAR) and the Prudential Liquidity Assessment Plan (PLAR), these being two important components of the agreement.

The completion of these projects will bring additional confidence to the Irish Banking system.