John Browne (Wexford, Fianna Fail)
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To ask the Minister for Finance if he will provide an update to his estimate for the cost to the Exchequer in 2013 of the liquidation of the Irish Bank Resolution Corporation; and if he will make a statement on the matter. [14054/13]

Michael Noonan (Limerick City, Fine Gael)
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The February 2013 transactions in relation to the liquidation of IBRC and the exchange of the Promissory Notes for Irish Government bonds are expected to result in GGB and GGD benefits over time but there are potential upfront costs for the State that may be incurred. The two principal transaction costs are the payments required to be made by me, in my capacity as Minister for Finance, under Government guarantees and any payments to be made to NAMA to cover any shortfall (should one arise) following the sale of IBRC’s assets by the Special Liquidators. It was initially estimated that there could be payments required to be made by the Minister for Finance under the Eligible Liabilities Guarantee Scheme of circa €0.9 billion to €1.1 billion. The ELG Scheme provides an Irish State guarantee for specific issuances of eligible debt securities by participating institutions and for specific deposits placed with participating institutions. Any such payments would impact on GGB and GGD in the year that the transaction takes place. From an impact analysis perspective, it was initially assumed that ELG costs of €1.0 billion will arise in 2013, i.e., the midpoint of the circa €0.9 billion to €1.1 billion estimated range. An updated assessment of the expected ELG costs has been prepared by the Special Liquidators. This revised estimate now suggests that ELG costs will be in the region of circa €1.0 billion.

A Derivatives Guarantee is also provided by the Minister for Finance which guarantees all amounts payable by IBRC to derivative counterparties. It was not possible to produce a meaningful estimate with respect to potential costs under the Derivatives Guarantee at the time of the transaction. An assessment has now been prepared by the Special Liquidators which suggests that costs under the Derivatives Guarantee are expected to lie within the €50 million to €100 million range.

Separately, a Deposit Guarantee Scheme is in place which provides a guarantee of up to €100,000 per eligible depositor per institution. This scheme is funded by credit institutions lodging funds in a Deposit Protection Account maintained at the Central Bank. An assessment of the expected DGS costs has been prepared by the Special Liquidators, which suggests that DGS costs are expected to be less than €50 million. In any case, any payment from this fund does not represent a direct cost to the Minister for Finance.

So the total cost to the Exchequer as a result of the liquidation of IBRC is expected to be circa €1.1 billion, comprising costs under the ELG Scheme of circa €1.0 billion and costs under the Derivatives Guarantee of circa €50 to €100 million. This is broadly in line with initial estimates produced by my Department.

I also want to point out that, to the extent that there were assets available to settle unsecured creditors in the liquidation process the Minister for Finance would stand pari passu with other unsecured creditors and would be entitled to a clawback of some or all of the amounts paid out under guarantees. Indeed, the CBI would also stand pari passu with other unsecured creditors with respect to any amounts paid out under the DGS – and would, therefore, also be entitled to a clawback of some or all of the amounts paid out under the DGS depending on the availability of assets to settle such unsecured claims.

It is also important to note that the Minister for Finance will also be required to compensate NAMA if the amount raised from the sale of assets by the Special Liquidator is insufficient to cover amounts due to NAMA. The Special Liquidators are appointing independent valuation experts to determine the value of the assets but the shortfall, if any, will not be known, with any certainty, until the independent valuation and asset sale process has completed.