Thursday, 2 June 2011

Questions (57, 58, 59, 60, 61, 62, 63, 64)

Michael McGrath

Question:

57 Deputy Michael McGrath asked the Minister for Finance if the EU, IMF and ECB insisted that an additional buffer of €5.3 billion be included in the bank stress results which were announced at the end of March 2011; if he will confirm when it was decided that the additional €5.3 billion was to be included; and if he will make a statement on the matter. [14019/11]

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Written answers (Question to Minister for Finance)

The Central Bank of Ireland has informed me that as part of the stress tests, it added two levels of conservatism to the calculated capital requirements thus creating a capital buffer. This was established to take into consideration the potential capital absorbing impact of certain matters falling outside the parameters of the stress test. This includes defaults falling outside the stress test period, changes to capital rules that may impact the measure of capital or of risk and changes to funding structures and costs. Although the stress test was for a defined period there was a need to satisfy the market and the external partners that the capital calculation was convincingly adequate for the longer term. The buffer capital consisted of €2.3bn additional Tier 1 capital and €3bn of contingent convertible debt. The latter amount only converts to tier 1 capital in the future if the existing capital reaches a certain trigger level. This latter structure reflects the greater uncertainty associated with this requirement. This introduces an extra layer of resilience, and recognizes the possible, albeit unlikely emergence of large losses after 2013.

The buffer represents a further protective capital layer over and above already conservative provisions which are themselves based on an even more stressed macroeconomic environment than currently prevails. The decision regarding the capital buffer was taken during the review phase of the stress tests by Central Bank of Ireland in consultation with the external authorities, prior to their finalization in end March 2011.

Michael McGrath

Question:

58 Deputy Michael McGrath asked the Minister for Finance if there is any evidence that the US Treasury Secretary Timothy Geithner or the US authorities signalled their opposition to burden sharing with senior bondholders as part of the agreement reached by the Irish Government with the EU, IMF and ECB in November 2010; and if he will make a statement on the matter. [14020/11]

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On the 17th of May last, in response to a similar Parliamentary Question from Deputy Finian McGrath, I pointed out that Ireland is not a member of the G7, and does not participate in its discussions. I therefore have no records of the matter raised in the question. I do understand that there have, from time to time, been discussions about Ireland among various parties. However, Ireland's engagement in relation to our EU/IMF programme of support has been principally with the IMF and the EU institutions, along with the member states concerned.

Michael McGrath

Question:

59 Deputy Michael McGrath asked the Minister for Finance when he expects Ireland will return to the international sovereign debt markets to meet its funding requirements; and if he will make a statement on the matter. [14022/11]

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It is the stated intention of the National Treasury Management Agency (NTMA) to return to sovereign debt markets as soon as market conditions permit. The steps necessary to enable such a return include resolution of the banking sector issues and continued progress in the reduction of the budget deficit in line with the targets agreed in the EU/IMF Programme of Financial Support, together with the implementation of policies that will see us return to sustainable economic growth. A key development in that regard has been the publication of the results of the bank stress tests on 31 March 2011 and the associated recapitalisation exercise which have been well received by investors and rating agencies alike. The NTMA is in constant contact with market participants and will advise me when it feels that the time is right to re-enter the markets.

I should say that, based on conservative projections of our funding needs and taking account of funding possibilities, there is no urgency about a return to the markets. Indeed, the purpose of a programme such as the EU/IMF Programme for Ireland is to provide the space necessary for economic and fiscal adjustment to take place. Based on current projections and assuming no market access, the State has access to sufficient funds for its needs into the second half of 2013.

Michael McGrath

Question:

60 Deputy Michael McGrath asked the Minister for Finance his views on comments made by the Minister, Deputy Leo Varadkar, that it is likely Ireland will need a successor deal with the EU, IMF and ECB to meet the country’s funding requirements; and if he will make a statement on the matter. [14023/11]

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I understand that the comments referred to in the question were made in relation to the likely funding transport infrastructure projects and were not about the EU/IMF Programme of financial support in general. Ireland's Programme is on track and we are doing what is necessary to restore our ability to fund ourselves. It is the stated intention of the National Treasury Management Agency (NTMA) to return to sovereign debt markets as soon as market conditions permit. The steps necessary to enable such a return include resolution of the banking sector issues and continued progress in the reduction of the budget deficit in line with the targets agreed in the EU/IMF Programme of Financial Support, together with the implementation of policies that will see us return to sustainable economic growth. A key development in that regard has been the publication of the results of the bank stress tests on 31 March 2011 and the associated recapitalisation exercise which have been well received by investors and rating agencies alike. The NTMA is in constant contact with market participants and will advise me when it feels that the time is right to re-enter the markets.

I should say that, based on conservative projections of our funding needs and taking account of funding possibilities, there is no urgency about a return to the markets. Indeed, the purpose of a programme such as the EU/IMF Programme for Ireland is to provide the space necessary for economic and fiscal adjustment to take place. Based on current projections and assuming no market access, the State has access to sufficient funds for its needs into the second half of 2013.

Michael McGrath

Question:

61 Deputy Michael McGrath asked the Minister for Finance if he will provide details of the amount of Irish Government bonds held by each of the Irish banks; and if he will make a statement on the matter. [14024/11]

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The Central Bank has published the details of the sovereign exposures of the four domestic institutions subject to Prudential Capital Assessment Review (PCAR) 2011. In the following tables, sovereign exposures as at 31 December 2010 are set out based on the information available to the Central Bank. Sovereign exposures include, though are not limited to, the following categories of assets: holdings of government treasury bills and commercial paper; loans to central government; loans or debt issued by non-central government (for example, local authorities); NAMA bonds; holdings of promissory notes issued by governments. The full text of the updated Financial Measures Programme Report which was published on 31 May 2011 is available on www.centralbank.ie.

AIB Sovereign Exposures on an accounting gross exposure basis (€m 2010)

€m

Maturity

Total

Ireland (excl. NAMA exposures)

3 month

227

1 year

837

2 year

700

3 year

229

5 year

875

10 year

2,464

15 year

48

Total

5,380

Ireland, of which NAMA exposures

3 month

0

1 year

8,036

2 year

0

3 year

0

5 year

0

10 year

0

15 year

0

Total

8,036

Bank of Ireland Sovereign Exposures on an accounting gross exposure basis (€m 2010)

€m

Maturity

Total

Ireland (excl. NAMA exposures)

3 month

212

1 year

189

2 year

580

3 year

523

5 year

703

10 year

1,062

15 year

0

Total

3,269

Ireland, of which NAMA exposures

3 month

0

1 year

5,075

2 year

0

3 year

0

5 year

0

10 year

0

15 year

0

Total

5,075

EBS Sovereign Exposures on an accounting gross exposure basis (€m 2010)

€m

Maturity

Total

Ireland (excl. NAMA exposures)

3 month

308

1 year

25

2 year

0

3 year

150

5 year

0

10 year

0

15 year

0

Total

483

Ireland, of which NAMA exposures

3 month

0

1 year

0

2 year

0

3 year

0

5 year

0

10 year

321

15 year

0

Total

321

Irish Life and Permanent Sovereign Exposures on an accounting gross exposure basis (€m 2010)

€m

Maturity

Total

Ireland (excl. NAMA exposures)

3 month

125

1 year

456

2 year

362

3 year

6

5 year

463

10 year

379

15 year

18

Total

1,808

Ireland, of which NAMA exposures

3 month

0

1 year

0

2 year

0

3 year

0

5 year

0

10 year

0

15 year

0

Total

0

Michael McGrath

Question:

62 Deputy Michael McGrath asked the Minister for Finance if he will provide details of the amount of unguaranteed senior bonds currently in the Irish banking system. [14025/11]

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I understand that the Deputy is referring to the amount of unguaranteed senior bonds in the covered institutions. The Central Bank of Ireland has advised me that the as at end May 2011, the total unguaranteed senior debt in the covered institutions is €35,938m of which €19,632m is unguaranteed senior secured and €16,306m is unguaranteed senior unsecured.

Michael McGrath

Question:

63 Deputy Michael McGrath asked the Minister for Finance if he will provide details of the amount of Irish sovereign bonds that are maturing and falling due for payment during the remainder of the current year and for 2012 and 2013. [14026/11]

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I am informed by the National Treasury Management Agency (NTMA) that the following Irish government bonds are due for repayment in the years 2011 to 2013:

EBS Sovereign Exposures on an accounting gross exposure basis (€m 2010)

Bond

Maturity Date

Amount Outstanding (May 2011)

€million

4% Treasury Bond

11 November 2011

4,390.00

3.9% Treasury Bond

05 March 2012

5,545.00

5.0% Treasury Bond

18 April 2013

6,027.51

8.75% Capital Stock

30 September 2012

18.40

The NTMA updates the list of outstanding bonds and their maturity dates daily on this web-link: http://www.ntma.ie/GovernmentBonds/Daily_Bonds_Outstanding.pdf.

Michael McGrath

Question:

64 Deputy Michael McGrath asked the Minister for Finance when it is envisaged that Ireland will require funding beyond the facility of €50 billion provided under the deal with the EU, IMF and ECB in view of projected budget deficits and maturity of Government bonds; and if he will make a statement on the matter. [14027/11]

View answer

The Joint EU/IMF Programme of Financial Support for Ireland provides for a total financial package of €85 billion. Some €67½ billion comes from the European funding facilities — the European Financial Stability Fund (EFSF) and the European Financial Stability Mechanism (EFSM) — bilateral loans from the UK, Sweden and Denmark and the International Monetary Fund's (IMF) Extended Fund Facility (EFF). The remaining €17½ billion comes from the State's own resources, namely the National Pensions Reserve Fund and other domestic cash sources. €35 billion of the total €85 billion financial support package was originally set aside for the banking sector with the remaining €50 billion available for the purpose of financing the State.

The recent banking stress tests carried out by the Central Bank identified an additional €24 billion in support to the banking sector as being required, including €3 billion of funds which take the form of contingent capital. However, it is anticipated that mitigating actions, such as burdening sharing, will mean that up to €5 billion of this €24 billion will not have to be provided by the State.

The budgetary forecasts contained in the recently published Stability Programme Update (SPU) prudently assume that an additional €20 billion in State support to the banking sector will be required. On that basis, therefore, some €15 billion of the funding originally earmarked for the banking sector is now available for use for sovereign purposes, bringing the potential total available for sovereign purposes to €65 billion. The combined Exchequer deficits for the years 2011-2013 are estimated at €48½ billion in the SPU. Maturing Government debt, both long-term and short-term, over the same period amounts to some €27 billion.

It is the stated intention of the National Treasury Management Agency (NTMA) to return to sovereign debt markets as soon as market conditions permit. The steps necessary to enable such a return include resolution of the banking sector issues and continued progress in the reduction of the budget deficit in line with the targets agreed in the EU/IMF Programme of Financial Support, together with the implementation of policies that will see us return to sustainable economic growth. A key development in that regard has been the publication of the results of the bank stress tests on 31 March 2011 and the associated recapitalisation exercise which have been well received by investors and rating agencies alike. The NTMA is in constant contact with market participants and will advise me when it feels that the time is right to re-enter the markets.

I should say that, based on conservative projections of our funding needs and taking account of funding possibilities, there is no urgency about a return to the markets. Indeed, the purpose of a programme such as the EU/IMF Programme for Ireland is to provide the space necessary for economic and fiscal adjustment to take place. Based on current projections and assuming no market access, the State has access to sufficient funds for its needs into the second half of 2013.