Written answers

Wednesday, 14 November 2012

Department of Finance

Banking Sector Regulation

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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To ask the Minister for Finance if bank bonuses were already discussed at the level of EU leaders; or if there are plans to discuss them in the context of the Liikanen review; and if he will make a statement on the matter. [42930/12]

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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To ask the Minister for Finance if he has discussed increasing banking regulation with any of the EU leaders recently; and if he will make a statement on the matter. [42927/12]

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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To ask the Minister for Finance if he has received a copy of the Liikanen Review Report; and if he will make a statement on the matter. [45674/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 91, 92 and 97 together.

In May 2012 the Commission called for a banking union to restore confidence in banks and in the euro. This was reflected in the report on Economic and Monetary Union prepared by the Presidents of the European Council, the Commission, the Eurogroup and the European Central Bank. A complete banking union is understood to combine a single supervisory structure, a single rulebook, a common deposit protection and a single bank resolution mechanism. The Interim report on the Future of the Economic and Monetary Union from the President of the Council was discussed at the European Council on 18/19 October. Discussions are continuing in relation to proposals on a Single Supervisory Mechanism and the associated regulation amending the European Banking Authority Regulation, the Bank recovery and resolution proposal, the recast of the deposit Guarantee Scheme Directive and the Capital Requirements Regulation and Directive (CRD IV). The issues raised by the Deputy refer primarily to the Capital Requirements Regulation and Directive. I attended the ECOFIN Council meetings on 9 October and 13 November. At both of these meetings the Cypriot Presidency gave an update on the progress thus far in the negotiations with the European Parliament on the Capital Requirements Regulation and Directive (CRD IV). The two proposals set out to amend and replace the existing capital requirement directives by two new legislative instruments: a regulation establishing prudential requirements that institutions need to respect, and a directive governing, amongst other things, access to deposit-taking activities.

They are aimed at transposing into EU law an international agreement approved by the G-20 in November 2010. The Basel III agreement, concluded by the Basel Committee on Banking Supervision, aims to strengthen bank capital requirements, introduces a mandatory capital conservation buffer and a discretionary countercyclical buffer, and foresees a framework for new regulatory requirements on liquidity and leverage. While the proposed regulation and directive contain references to the issue of bank remuneration, the issue of bank bonuses was not discussed at the recent ECOFIN meetings.

In tandem with this, the conclusions of the Heads of State or Government at the European Council on 18/19 October called for the rapid conclusion of the single rule book, including agreement on the proposals on bank capital requirements (CRD IV) by the end of the year.

As the Deputy will be aware, the Liikanen Report was published on 2 October 2012 and my Department has received a copy of the Report and is carefully considering the Recommendations of the Liikanen Group, which includes a number of recommendations on banks’ remuneration schemes including bonuses. The European Commission is currently conducting a public consultation and a legislative initiative is not anticipated before spring of next year. A legislative initiative would likely be accompanied by a regulatory impact analysis and further consultation period.

I look forward to seeing the results of the public consultation currently underway. We will need to examine the outcome of this process and the impact of any forthcoming legislative proposals on our recovering banking system.

Ireland broadly supports the EU’s regulatory initiatives to bring greater stability to the banking sector. We agree that the EU banking sector should be capable of meeting the needs of and supporting EU economies and societies. I hope that our efforts in this regard will convert a safe and stable banking system into one that also supports growth in the real economy.

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