Written answers

Tuesday, 15 July 2014

Photo of Catherine MurphyCatherine Murphy (Kildare North, Independent)
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166. To ask the Minister for Finance further to Parliamentary Questions Nos 63 and 64 of 3 July 2014, his intention regarding the proceeds of the sale of the €25 billion of floating rate notes and €3.46 billion of Government fixed coupon bonds acquired by the Central Bank of Ireland last year; the portion that will be destroyed and to what specific schedule; the portion that will be redirected toward supplementing Government income and to what schedule; the total projected cost of the bonds, including all interest-coupons-final maturity payments; and if he will make a statement on the matter. [30831/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Subsequent to the liquidation of IBRC the Central Bank acquired €25bn of Floating Rate Notes (FRNs) and €3.46bn of Government Fixed Coupon 2025 bonds.  The Bank undertook to sell the combined portfolio of the FRNs and the fixed rate bond as soon as possible provided the conditions of financial stability permit.  The Bank also indicated that, as a minimum, it will make sales in accordance with the following schedule: to end 2014 (€0.5 billion), 2015-2018 (€0.5 billion per annum), 2019-2023 (€1 billion per annum), and 2024 on (€2 billion per annum until all bonds are sold).  The Bank's recent Annual Report notes that sales have been made from this combined portfolio, with the Bank selling €350mn of its holdings of the Government 2025 Fixed Rate Bond in 2013.  The timing of the sales is a matter for the Central Bank which may elect to sell bonds at a particular time if it feels that this is the best course of action, for example, in order to take advantage of favourable market conditions. 

The Central Bank of Ireland is independent in the exercise of its functions.  The issue of proceeds from the disposals and its impact on profit distribution is a matter for the Central Bank of Ireland and the Department of Finance has no role in those matters.

I have been advised by the NTMA that total cash interest payable on the floating rate bonds in 2013 was €638 million. Following last month's rate reset in respect of the December 2014 interest payment, total cash interest payable in 2014 is presently expected to be just over €750 million. The increase in interest payable in 2014 compared to 2013 largely reflects the fact that a full year's interest is payable this year. Interest payable on the floating rate bonds is currently projected to increase in the coming years, consistent with the projected increase in the six-month Euribor interest rate as the interest margins on the floating rate bonds are fixed. The interest margin averages 2.63% across the eight issues. 

The Central Bank provides the Department of Finance with an estimate of expected surplus income to be paid to the Central Fund on a regular basis. This estimate will continue to form part of the Government's overall budgetary strategy. However, the level of detail on the composition of its profits provided by the Central Bank of Ireland to the Department is not sufficiently granular to enable the Department to estimate the impact on those profits of the timing of specific bond disposals undertaken by the CBI. 

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