Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

234. To ask the Minister for Finance if he is pursuing the retrospective recapitalisation of the banking sector; his plans for disposal of bank assets; and if he will make a statement on the matter. [10651/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As I have said previously I see no benefit in making an application for retrospective use of the ESM's Direct Recapitalisation Instrument (DRI). During the period between June 2012, when the agreement was reached regarding retrospective recapitalisation, and December 2014, when the DRI tool became operational, the Irish economy recovered significantly and the options available for the State to recover its money invested in the banks expanded. This remains the case, with investors now willing to support Irish banks, the institutions have begun to repay capital to the State and the market value of our investments has improved accordingly.

The terms and conditions attaching to the use of the DRI instrument are extremely onerous as the instrument is designed to be used almost as a last resort after the creditor waterfall has been applied and other options are exhausted. Moreover the likely mechanics behind a potential retroactive application of the instrument, if such a decision could be agreed, are likely to be equally if not more onerous in my view, and would not be in the best interests of the State.

As you will be aware the operational framework of the ESM DRI includes stringent conditionality and any application would need to be unanimous amongst the other eighteen ESM Governors. Achieving such an outcome for a deal which valued our investments at a level significantly above what we might achieve in the market today is extremely unlikely, particularly given the strength of our economic recovery since 2012 and the other concessions won by Ireland in recent years.

The disposal of our bank assets is a process that will likely take place over a number of years and this is incorporated in the Programme for Government. I have said before that my interest is in recovering the maximum amount of money for the Irish taxpayer from these assets over time and current market conditions are not conducive to achieving this objective. Fortunately given that our public finances are once again on the right path, we are not under pressure to dispose of these assets in the short-term.

With regard to AIB in particular, I have indicated in the past that an IPO is likely to be the optimal route to recouping value from our investment. At the beginning of this year officials in my Department appointed an Independent Financial Advisor to assist with analysis and planning related to our shareholding in AIB, and much of this initial preparation has now been completed. However, given the complex nature of an IPO process, the need to access certain IPO 'windows' and the recent volatility seen in stock markets, I would now deem it more likely that a market event involving AIB would occur in 2017, rather than 2016.