Dáil Éireann Debate, Wednesday - 3 February 2010
109 Deputy James Reilly asked the Minister for Finance the principles that will underlie his legislative proposals to deal with distressed financial institutions; and if he will make a statement on the matter. [5207/10]
View answerIn the course of the NAMA Bill debate, I indicated I would examine options for the introduction of a legislative regime to deal in a systematic way with distressed financial institutions. My objective is to ensure the State has in place a range of tools to address problem institutions effectively in the interests of maintaining financial stability, minimising reliance on public moneys and ensuring continuity of key banking activities. Normal corporate insolvency procedures are not adequate for failing financial institutions as they were not designed with the objective of protecting financial stability.
My deliberations in this area are assisted by the work ongoing in a number of international fora. At EU level, the Commission has been consulting on a EU framework for cross-border crisis management in the banking sector to allow the relevant authorities to manage financial crisis events at cross-border banks. Included in the Commission's proposal for discussion are additional powers for supervisors to require the preparation by systemically important institutions of firm-specific contingency and resolution plans. These plans sometimes referred to as ‘living wills' would detail how an institution and its business might be wound up rapidly and in an orderly fashion. Ireland is, of course, participating fully in the work at EU level to examine this and other possible elements of bank resolution tool-kits in a cross-border context.
Internationally, there is growing agreement on the common features that a resolution framework for the financial sector could include. These may involve, for example, permitting relevant authorities to take control of a financial institution at an early stage of its financial difficulties through some form of administration and providing authorities with a range of tools to deal with a distressed institution. When I have completed my deliberations I will consider appropriate next steps having regard to the evolving EU and international discourse on this important area.
