Pearse Doherty (Donegal South West, Sinn Fein)
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Question 71: To ask the Minister for Finance the amount of money borrowed by the State since 2008 to recapitalise the covered institutions; the dates on which this money was borrowed; the body or institutions from whom the money was borrowed; the bank into which the money was transferred; the interest rates charged on this borrowing; and if he will make a statement on the matter. [41008/11]

Michael Noonan (Limerick City, Fine Gael)
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In 2009 the Exchequer funded a €4 billion capital injection into Anglo Irish Bank. In 2009 also there was a frontloading of the 1% of GNP Exchequer contribution to the National Pensions Reserve Fund (NPRF) for 2009 and 2010 to part-fund the recapitalisations of Allied Irish Bank (AIB) and Bank of Ireland (BOI) announced in February 2009. The total sum transferred from the Exchequer to the NPRF in 2009 was €3 billion. Both AIB and BOI were recapitalised by way of a €3.5 billion capital injection in the form of Preference Shares in each institution with all of that capital provided from the NPRF. Generally speaking, transfers from the NPRF do not impact the Exchequer and are not therefore deemed borrowings.

In 2010, the Exchequer provided €625 million to Educational Building Society (EBS) and €100 million to Irish Nationwide Building Society (INBS) by way of special investment shares. This method of investment gave the State extensive powers and full economic ownership of the two building societies.

During 2010 also, capital injections totalling €30.85 billion were committed to Anglo Irish Bank, INBS and EBS. The respective amounts were €25.3 billion for Anglo Irish Bank, €5.3 billion for INBS and €250 million for EBS. The consideration for the capital injections was promissory notes issued by the Exchequer to the insitutions in lieu of cash. These notes will be redeemed over a period of several years with the Exchequer committed to making annual repayments of 10% of the initial capital value of the notes. This means the Exchequer did not require upfront cash funding for the capital injection. While the promissory notes impact the General Government Debt from the date they were issued, they only impact the National Debt as the annual instalments are paid.

In March 2011, the Exchequer provided a combined €3,060 million to Anglo Irish Bank and INBS – now known as Irish Bank Resolution Corporation (IBRC) – representing the first instalment of the Promissory Notes committed to those institutions in 2010. In June 2011, the Exchequer provided €25 million to EBS, representing the first instalment of the Promissory Note committed to that institution in 2010.

Finally in relation to 2010, a further €3.7 billion was injected into AIB in return for ordinary shares. This capital was provided from the NPRF.

In July 2011, the Exchequer funded €7,568 million of the payments for the recapitalisation of the banking sector, which followed from the March 2011 PCAR process. €2,700 million was provided to Irish Life & Permanent (ILP) in return for ordinary shares and contingent capital notes, €985 million to BOI in return for contingent capital notes and €3,883 million to AIB by way of a capital contribution and contingent capital notes. Offsetting this cost somewhat were the €1,018 million in capital receipts transferred to the Exchequer from the NPRF from the sale of part of the State's shareholding in BOI and €46 million in fees related to the recapitalisations. This resulted in a net Exchequer contribution of some €6.5 billion towards the recapitalisation of the banking sector in 2011. The Budget 2012 Exchequer deficit estimate for 2012 made provision for €1.3 billion in Exchequer funding to complete the recapitalisation of ILP.

Of the €24 billion in capital identified as being required following the March 2011 PCAR process, a further €10 billion was provided from the NPRF with the balance of some €7.5 billion being sourced to date through burden sharing with subordinated bondholders, private investment, asset disposals and internal capital generation.

In terms of the dates on which borrowings were undertaken, the body or institution from whom the money was borrowed and the bank into which the money was transferred, the Deputy should be aware that there was no specific tranche of borrowing that was undertaken solely for the purpose of funding payments to banks. Rather the funds which become available to the State as a result of borrowing undertaken by the Exchequer are available, along with the funds sourced from revenues such as tax revenue, non-tax revenue and capital receipts, to fund overall expenditure, including the recapitalisation of the banks. But it is the case that in the absence of the requirement to provide capital to the banks, the Exchequer deficits and therefore the State's borrowing requirement would have been lower in these years. Because of the nature of the international capital markets it is not possible to identify exactly from whom the money was borrowed. All borrowing was transferred into the Exchequer account.

The average interest rate on Exchequer long-term borrowings undertaken in 2009 was 4.6% while the average interest rate on Exchequer long-term borrowings undertaken in 2010 was 4.7%.

In 2011 long-term funding was raised under the EU/IMF Programme rather than in the market. The average interest rate on Exchequer borrowings undertaken so far as part of the EU/IMF Programme is approximately 3.7%.