Michael McGrath (Cork South Central, Fianna Fail)
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Question 80: To ask the Minister for Finance the amount by which he expects the €24 billion bank recapitalisation bill arising from the stress test results to be reduced by the imposition of losses on subordinated bondholders, debt for equity swaps and other liability management exercises. [14411/11]

Michael Noonan (Limerick City, Fine Gael)
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The Prudential Capital Assessment Review in the Central Bank of Ireland's Financial Measures Programme was published on 31 March 2011. The PCAR provides that €24 billion, which includes €3 billion in contingency funds, is required by the banks for capital purposes to ensure the banks maintain a minimum of Core Tier 1 capital ratio of 10.5 per cent at all times in the base case scenario and do not fall below a minimum Core Tier 1 capital ratio of 6 per cent even in an extreme stress scenario. It should be noted that €3 billion of any recapitalisation will be on a contingent basis and if it is not required, it must be returned to the State. While the Government is committed to ensuring that the banks meet the PCAR target, the Government will seek direct contributions to solving the capital issues of the banking system by looking for further significant contributions from subordinated debt holders, by the sale of assets to generate capital, and where possible, by seeking private sector investors. It is expected that the effect of these actions will be to reduce the amount of capital required very significantly.

In addition, under the Programme agreement with the IMF and EU, the Irish authorities are required to make arrangements for a claw back of any injection of capital by the State. Subject to approval by the Central Bank of Ireland, this mechanism will require the banks to repay any such capital in excess of their regulatory obligations when these financial institutions again have stable access to the wholesale funding market or have otherwise stabilised that funding including through a normal reliance on central bank funding.

The Deputy will be aware that along with the sale or run-off over time of the bank's non-core businesses, Bank of Ireland, Irish Life and Permanent, EBS Building Society and Allied Irish Bank have all recently confirmed plans to make subordinated bond holders help with the cost of recapitalisation thus reducing the cost to the taxpayer. In addition, the announcement of Bank of Ireland's plans for a rights issue is also another very important step. I understand that the precise size of the rights issue will be announced shortly after completion of its liability management exercise.

It would not be appropriate for me in my role as Minister for Finance to speculate on the amount the banks will raise from these actions.