Pearse Doherty (Donegal South West, Sinn Fein)
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281. To ask the Minister for Finance his views on comments (details supplied) by Commissioner Barnier on 10 July stating that the proposed bank resolution scheme would not have fully protected the State from the collapse of Anglo Irish Bank. [35119/13]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that under the Irish Presidency on 26 June 2013 EU Finance Ministers agreed a common position on the proposal for a harmonized bank recovery and resolution regime, which sets out provisions governing how resolution is carried out and how the costs are shared. This EU-wide resolution framework for the managed resolution of banks and investment firms will give national resolution authorities all the tools to prevent crises from emerging in the first place, and address them early on in the process if they do. If the financial situation of a bank deteriorates beyond repair, national authorities will have a common toolkit and roadmap to manage the failure of banks in an orderly fashion, with a "bail-in" mechanism to call on shareholders and creditors when attributing losses of failed banks. The bail-in tool will significantly reduce the cost of bank restructuring for the State if future crises emerge.

Where bail-in is applied, the institutions’ creditors would be written down in a pre-defined order to enable the institution to regain viability. In short, shareholders would bear losses first. Once shareholders claims have been exhausted subordinated creditors would then be written down. Only when these claims have been exhausted could senior creditors be written down, with preference for eligible deposits over €100,000 of natural persons, small, medium and micro-entities. A minimum 8% of total liabilities including own funds must be bailed-in before Member States are afforded a limited flexibility to use other sources of funding including public support.

The Council agreement provides that covered depositors i.e. deposits up to €100,000 that are protected under the Deposit Guarantee Scheme (DGS) will always be excluded from bail-in. These depositors will be fully protected in any resolution action.

The Deputy raises a question on the specific application of the new bank resolution rules to Anglo Irish Bank in a hypothetical scenario. In the event that the bail-in tool was available when the crisis struck and that Anglo had been put into resolution other decisions surrounding Anglo may have been taken differently, by regulators and by creditors. Even with the benefit of hindsight it would not be possible to estimate with any degree of certainty if the existence of the bail-in tool would have avoided the need for any State support for Anglo.