Terence Flanagan (Dublin North East, Independent)
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43. To ask the Minister for Finance the position regarding the exit from the bailout (details supplied); and if he will make a statement on the matter. [53439/13]

Michael Noonan (Limerick City, Fine Gael)
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At the outset it should be noted that the exit from the EU-IMF Programme of Assistance without a precautionary credit line will have no bearing on whether a bank is likely to be bailed in or not in the future.

The rules relating to bail-in are set out in the proposed EU Directive on Bank Recovery and Resolution (BRRD), which is currently at an advanced stage of negotiation with the European Parliament. The BRRD proposal provides a common framework of rules and powers to help EU countries manage arrangements to deal with failing banks at national level as well as cross-border banks, whilst preserving essential bank operations and minimising taxpayers' exposure to losses.

There are three pillars to the BRRD framework to facilitate a range of appropriate actions by authorities:

- Preparatory and preventative measures including reinforced supervision and robust recovery and resolution planning for major institutions;

- Early intervention which would include supervisory powers, implementing recovery plans and appointing a special manager; and

- Resolution tools including sale of business, bridge bank and asset separation tools and also the use of bail-in mechanisms.

The BRRD will apply to all 28 Member States and will ensure that losses incurred by a credit institution are allocated to its shareholders and creditors in accordance with a pre-defined hierarchy of claims. This is an important means of ensuring that a bank’s losses are absorbed by those who fund its activities and not taxpayers.

The proposed directive also includes a proposal for a resolution fund. This fund can be used for operational purposes, such as the provision of capital to a bridge bank and in some cases it can be used to provide solvency support to an institution in resolution. The resolution fund would be funded by the wider banking industry and in a banking union context this will be set up at a European level, thereby increasing the amount of funding available.

In relation to the events in Cyprus earlier this year, I have said before that it was an exceptional case which took place in the absence of a clearly defined resolution regime. The BRRD now addresses this and provides for a common framework for resolution for all EU Member States. This therefore should reduce ad-hoc solutions to bank crises going forward.