Michael McGrath (Cork South Central, Fianna Fail)
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314. To ask the Minister for Finance if he has prepared an application to the ESM for retrospective recapitalisation of the banks; the earliest date on which such an application will be considered; and if he will make a statement on the matter. [34631/14]

Michael Noonan (Limerick City, Fine Gael)
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The Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns." and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism, the ESM, could recapitalize banks directly.

On 10 June 2014 the euro area Member States reached a preliminary agreement on the operational framework for the ESM's Direct Recapitalisation Instrument (DRI). This includes a specific provision in relation to the retroactive application of the instrument. Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.

What is now required  is a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty and the aim is to have this process completed by November this year, subject to completion of national approval procedures.  This would allow the ESM DRI to come into effect once the Single Supervisory Mechanism is in place and operational which is expected to be in November of this year.

In relation to retrospective recapitalisation, the preliminary agreement states that the potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement. Obviously, it will not be possible to make a formal application to the ESM for retrospective recapitalisation before the Instrument is in place and it would therefore be premature to make any submission in advance of that.