Séamus Healy (Tipperary South, Workers and Unemployed Action Group)
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44. To ask the Minister for Finance further to Parliamentary Question No. 177 of 18 April 2012 (details supplied) and in view of the statement made by him in the reply and the fact that the statement indicates that €1.2 billion was put into Bank of Ireland by the National Pension Reserve Fund on behalf of the State following the Central Bank’s 2011 prudential capital assessment review the portion of ownership of Bank of Ireland that passed into the hands of the State as a result of NPRF putting the €1.2 billion into the bank; the type of shares in Bank of Ireland that were purchased by the NPRF in this transaction; when the transaction was completed; the portion of Bank of Ireland that was owned by the State on each of the following dates, 1 January 2011 and the day following the date of completion of the €1.2 billion transaction; and if he will make a statement on the matter. [26474/14]

Michael Noonan (Limerick City, Fine Gael)
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The table referred to in PQ 18719/12 issued on April 18th 2012 showed a total investment by the State of €1.2bn in Bank of Ireland as a result of the 2011 PCAR exercise. This figure was shown coming from the NPRF and a note to the table indicated that the contribution from the exchequer was put at zero as the figure was calculated net of the proceeds from the share sale to private investors.

In order to understand the background to this presentation, the relevant transactions need to be broken down into their component parts.  First the NPRF subscribed for its pro-rata share of the 2011 rights issue i.e. approximately €1.2bn of ordinary shares and that is the figure shown in the table. Second there was a contractual agreement to sell approximately €1bn of these rights issue shares to a North American investor consortium at the same price. Third there was the investment of €1bn in Contingent Capital Notes ("cocos") made by the Minister directly i.e. from exchequer funds. Fourth in order to mitigate the impact of this outlay on the exchequer, the Minister subsequently directed the NPRF to transfer the funds from the ordinary share disposal to the exchequer and this transfer is disclosed in the 2011 NPRF Annual Report. The coco investment and the disposal proceeds effectively offset each other and explain why the exchequer contribution in the table is shown as zero.

The State's equity holding in Bank of Ireland was 36% on 1 January 2011 and post the NPRF's net €0.2bn investment in the ordinary equity of the bank, the State's shareholding fell to 15.1%, if one includes approximately 0.1% held separately by the NPRF in a discretionary fund. 

The disposal to the North American consortium completed in two tranches, with the first shares transferring on July 29th 2011 and the second on October 12th 2011. If the State had not agreed to sell a portion of the shares it was entitled to as part of the bank's rights issue, it would have maintained its stake at 36% but at a significant additional cost to the taxpayer during what was a very difficult period for the country. Moreover as I have said in recent days, the announcement that private investors were prepared to put money into Bank of Ireland at the time had significant knock on benefits for both the bank and the State itself.