The two building societies referred to by the Deputy are independent financial institutions. Accordingly, subject to the requirements and conditions of the Building Societies Act, any question of a merger is a matter in the first instance for the two societies. In that regard, both societies have stated that they have commenced negotiations regarding a possible merger and which, I am informed, are ongoing.
As I indicated in my second stage speech on the NAMA Bill last September, it is likely that some covered institutions will require additional capital to absorb losses that will arise in connection with the transfer of loans to NAMA. I also indicated that, to the extent that sufficient capital cannot be raised independently or generated from internal sources, the Government is committed to providing appropriate capital to allow institutions to continue to meet their regulatory requirements. In the case of a building society, the NAMA Act amended the Building Societies Act to create a new type of share, called a "special investment share", in a building society and which will provide a mechanism for the State to make a capital investment in a building society. The Act also provides that the Minister for Finance may specify the terms and conditions on which special investment shares shall be issued. These may include voting rights on resolutions and the appointment of directors. I do not consider that any further legislative change is required to enable the State make a capital investment in a building society or to assume appropriate control of a building society consequent upon any such investment.
It is still too early to be definitive on the scale of new capital likely to be required by the building societies referred to by the Deputy, either individually or jointly. Prior to Christmas, at their Special General Meetings to allow their Boards to issue "special investment shares", the societies informed their members of their estimate of the capital shortfall. The eventual size of any capital injection by the State is a matter that is kept under constant review by the Boards of the institutions, their auditors, the Financial Regulator and my Department in consultation with its advisors, having regard to commercial performance, the level of future impairments and the price paid for NAMA eligible assets. It can be expected, however, that if the State invests capital in a building society, it will do so on appropriate terms and conditions and that it will seek to secure an appropriate stake in the society in order to ensure that the taxpayers' investment is protected. However, the precise stake, together with the other commercial aspects of any such investment, will be a matter for negotiation and decision at the time of the proposed investment having regard to all the relevant factors including the relative scale of the proposed capital investment.
