Michael McGrath (Cork South Central, Fianna Fail)
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386. To ask the Minister for Finance the current and most recently published unrealised capital gain the State has on the holdings of bonds from the promissory note arrangement; the way this gain is realised; the way this is reflected in the national accounts; and if he will make a statement on the matter. [32218/15]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank reports annually in its Annual Report on the unrealised capital gain on the holdings of bonds from the promissory note arrangement in 2013.  The 2014 Annual Report includes an unrealised capital gain on the floating rate notes of €9.1 billion.

Unrealised gains contribute to the Central Bank's accounting reserves but not to its profits, unless or until the bonds are sold. When the Central Bank sells one of these bonds, it realises a gain which is then recorded as part of its profit. While such bonds are held by the Central Bank, interest paid on them contributes to the Central Bank's profits, partly offset by the effective cost of funds to the Central Bank. 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.  I should state clearly that 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.  By law, the Central Bank can retain up to 20 per cent of its profits for the purpose of adding to its accounting reserves; any amount not retained is distributed to the Exchequer. According to Government accounting principles, defined by Eurostat, the surplus income paid to the Exchequer is partly treated as a capital receipt and partly as a current receipt. Only the current part serves to reduce the General Government deficit; the remainder does not impact on the deficit but does reduce Government net debt.

Further information regarding the impact of the sales of these bonds is contained in the Central Bank document - .