Seán Fleming (Laois-Offaly, Fianna Fail)
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To ask the Minister for Finance if he will commit to an external expert examination of the asset disposal programme undertaken by the State supporter banks to ensure that taxpayer interests are being protected; and if he will make a statement on the matter. [1992/13]

Michael Noonan (Limerick City, Fine Gael)
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As you will be aware as part of the Central Bank’s Financial Measures Programme 2011 the three PLAR banks are required to deleverage c.€70bn of assets by 31 December 2013. Of this they were required to actively dispose of c.€34bn of assets. Each bank agreed comprehensive deleveraging plans to achieve these deleveraging requirements. The CBI has identified the PCAR haircuts within which the banks are required to deleverage their non-core assets with the over-riding safeguard that fire-sales of assets beyond these haircuts are to be avoided. Both BOI and AIB are currently on track to achieve their Year-end 2013 deleveraging targets. PTSB’s programme has been largely postponed pending the EC’s decision on its Restructuring Plan. IBRC is subject to an EC Restructuring Plan which requires it to work out its balance sheet over time, including where possible via disposal of loan books.

To achieve this, each of the banks established dedicated non-core units focused on managing sales processes and are required to report quarterly to the Central Bank which monitors their progress in achieving their deleveraging programmes. Each bank has a deleveraging/transaction committee to govern, monitor and oversee its deleveraging plans. Representatives from my department and the Central Bank attend the meetings of those committees, as non-voting observers. My department has established a Deleveraging Review Committee to oversee and monitor the operation of the institutions’ deleveraging committees and to refer transactions that give rise to financial stability considerations to the Central Bank for joint consideration. Additionally, each quarter, the banks and the Authorities meet with and update the External Partners (IMF/EU/ECB) as to the progress of the banks deleveraging plans including asset sales. There is significant external oversight.

In most instances the banks have also employed expert professional sales advisors to assist in ensuring that the sales processes undertaken maximise sales proceeds. These processes are conducted under strict confidentiality rules to ensure the economic position of the banks, and by extension the taxpayer as majority or part owner, is fully protected. As referred to above, the Deleveraging Committees and the main boards of the banks must approve all material sales conducted by the banks.

To date significant progress has been made. Total deleveraging achieved across government supported banks was €66.5bn as at 30 October 2012. Deleveraging to date has been achieved within average planned assumed discounts. Remaining deleveraging is anticipated to be achieved through run-down and work-out of non-core loan books over time. The asset disposal programmes have largely completed.

The on-going progress in deleveraging and deposit gathering activities has seen BOI make further progress towards improving its Loan to Deposit (LDR) ratio, reducing from 136% at June 2012 to less than 130% in November 2012. Similarly, AIB’s LDR reduced to less than 120% at the end of October (including loans held for sale) from 125% at end of June.

I am not convinced at this juncture in the Programme that value would be obtained for the State/taxpayer in conducting an external examination of the asset disposal programmes given the significant level of oversight to date, significant progress achieved so far and the expectation that the capital absorbed as part of the deleveraging programme will not exceed that assumed in the 2011 Financial Measures Programme undertaken by the CBI.

I will however be kept informed through my officials of on-going progress at each of the banks to ensure that remedial action, if required, can be taken to ensure that the State/taxpayer’s investments are protected.