Written answers
Thursday, 16 November 2017
Department of Finance
IBRC Liquidation
Michael McGrath (Cork South Central, Fianna Fail)
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70. To ask the Minister for Finance the interest projected to be earned from the bonds issued by the Central Bank to fund the wind down of Anglo Irish Bank in each of the years 2017 to 2021; the impact this will have on Central Bank profits; the impact this will have on Exchequer revenue and the fiscal position of the State; and if he will make a statement on the matter. [48649/17]
Paschal Donohoe (Dublin Central, Fine Gael)
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The Deputy might kindly note that the bonds in question were not issued by the Central Bank. In February 2013, the Central Bank of Ireland acquired a range of assets following the liquidation of the Irish Bank Resolution Corporation (IBRC), including Promissory Notes (non-standard instruments) which were exchanged for a portfolio of eight Floating Rate Notes (FRNs) (standard long-dated government bonds with a floating rate coupon, i.e. a regular interest payment which varies with market rates) amounting to €25.034 billion.
The Central Bank’s remaining holdings of these bonds (the FRNs) totals €16.034 billion and the average coupon, or interest rate, (weighted by holding) is 6-month Euribor +266 basis points. For reference, the 6-month Euribor as at 14 November 2017 is -0.275%.
The 6-month Euribor is reset every 6 months and so is subject to change on those occasions. The last coupons fixed on 15 June for reset on 19 June. 6-month Euribor was -0.271% on 15 June 2017. The coupons will again fix at 6-month Euribor on 14 December for reset on 18 December.
As stated previously, the Central Bank is committed to disposing of the assets acquired as part of the IBRC liquidation as soon as possible, provided financial stability conditions permit.
The Central Bank also indicated a minimum schedule of disposals as follows:
2014-2018 €0.5 billion per annum;
2019-2023 €1 billion per annum; and
from 2024 onwards €2 billion per annum until all bonds are sold.
As at 15 November 2017, the Bank has so far disposed of €9 billion nominal of the Floating Rate Notes:
€0.5 billion in 2014;
€2 billion in 2015;
€3 billion in 2016; and
€3.5 billion so far this year.
The Central Bank met its disposal target in 2014, and has significantly exceeded its disposal targets in 2015, 2016, and already in 2017.
Due to the volatility associated with the disposal of these assets, Budget 2018 contains prudently-based estimates of Central Bank income out to 2021, which factors in interest earned on the FRNs, however, it is not possible to give an exact figure due to the number of unknown variables. Table 10 of the Economic and Fiscal Outlook illustrates the total impact of the estimates distributed into the component which benefits the general government balance and the remainder which counts positively towards the Exchequer only (available at the following link: ). Under the EU fiscal rules, expenditure is now sustainably financed and is linked to the trend economic growth rate rather than revenue developments.
Michael McGrath (Cork South Central, Fianna Fail)
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71. To ask the Minister for Finance the interest rate earned on the bonds issued by the Central Bank to fund the wind down of Anglo Irish Bank promissory notes; the interest rate on the new national debt issued to fund the purchase by the NTMA of the promissory notes from the Central Bank; and if he will make a statement on the matter. [48650/17]
Paschal Donohoe (Dublin Central, Fine Gael)
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Subsequent to the liquidation of IBRC the Central Bank acquired €25.034bn of Floating Rate Notes (FRNs) and €3.46bn of the fixed rate 5.4% Treasury Bond 2025.
The following table sets out the interest rate on each of these bonds:
Note Type | Rate | Maturity | Original Nominal acquired by CBI (€m) |
---|---|---|---|
Floating Rate Note | 6 month Euribor+268bps | 18/06/53 | 5,034 |
Floating Rate Note | 6 month Euribor+267bps | 18/06/51 | 5,000 |
Floating Rate Note | 6 month Euribor+265bps | 18/06/49 | 3,000 |
Floating Rate Note | 6 month Euribor+262bps | 18/06/47 | 3,000 |
Floating Rate Note | 6 month Euribor+260bps | 18/06/45 | 3,000 |
Floating Rate Note | 6 month Euribor+257bps | 18/06/43 | 2,000 |
Floating Rate Note | 6 month Euribor+253bps | 18/06/41 | 2,000 |
Floating Rate Note | 6 month Euribor+250bps | 18/06/38 | 2,000 |
Fixed Rate | 5.40% | 13/03/25 | 3,461 |
The floating rate notes with original maturities of 18/06/2038, 18/06/2041, 18/06/2043 and 18/06/2045 have been fully bought back and cancelled by the NTMA.
It is important to note that there was no specific issuance undertaken to fund the purchase of these notes. Instead, the proceeds of all Exchequer borrowings are lodged to the Exchequer account at the CBI and all moneys within that account are fungible.
The first of the floating rate notes was purchased by the NTMA in December 2014.
The weighted average yield on fixed rate benchmark bond issuance by the NTMA in 2015, 2016 and to date in 2017 are as follows:
2015: 1.51%
2016: 0.82%
2017 year to date: 0.89%
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