Dáil Éireann Debate, Wednesday - 18 April 2012
13 Deputy John Browne asked the Minister for Finance if the Irish Bank Resolution Corporation remains eligible to enter short-term funding arrangements with the ECB and the reason an external financial institution, Bank of Ireland, was brought into the arrangement in respect of the 31 March promissory note payment; and if he will make a statement on the matter. [19265/12]
View answerThe Central Bank indicated in October 2011 that IBRC should not increase its usage of financing arrangements provided under open market operations with the ECB. At the end of 2011, IBRC had €2.1 billion borrowed under open market operations from the ECB. Furthermore the bank had €40.1 bn of Emergency Liquidity Assistance from the Irish Central Bank. The provision of this ELA by the Central Bank of Ireland to IBRC is subject to the on-going non-objection of a majority of the ECB's governing council. It is therefore clear that IBRC remains eligible to enter into financing arrangements with the Central Bank and Eurosystem.
The ECB expressed a preference that IBRC would finance the bond in the market with a bank that was not in majority State ownership. Accordingly, IBRC and the State approached Bank of Ireland and proposed that Bank of Ireland enter into a repurchase agreement in respect of the Government bonds issued as settlement for the 2012 promissory note instalment. After negotiations and having carefully considered the commercial benefits and risks associated with the transaction, Bank of Ireland agreed, subject to stockholder approval, the key terms of the transaction.
The transaction can be financed by Bank of Ireland, through standard ECB money market operations using the Government bonds issued which are Eurosystem eligible.
