Wednesday, 4 July 2012

Questions (60, 61, 62, 63, 64, 65)

Micheál Martin

Question:

57 Deputy Micheál Martin asked the Minister for Finance his views on whether Europe needs to move urgently to put in place a Eurozone wide bank resolution mechanism that does not require all residual costs to be borne by national governments; and if he will make a statement on the matter. [29364/12]

View answer

Micheál Martin

Question:

58 Deputy Micheál Martin asked the Minister for Finance his views on whether there needs to be a common deposit insurance scheme, common supervisory authority and bail in of senior bondholders across the eurozone; and if he will make a statement on the matter. [29365/12]

View answer

Written answers (Question to Minister for Finance)

I propose to take Questions Nos. 57 and 58 together.

The European Union, through various Directives and Regulations, currently provides for common rules to be applied by national supervisors. There is no single European supervisor although supervision is co-ordinated at a European level by the European Banking Authority. Supervision, deposit insurance and resolution are all national competencies.

The proposal for a banking union was first mooted by Commission President Barroso on 23 May. It has developed over the last number of weeks culminating in the paper on Economic and Monetary Union that was discussed at last week's European Council meeting.

One of the main proposals in the paper on Economic and Monetary Union relates to an integrated financial framework. It proposes that, building on the single rulebook, an integrated financial framework should have two central elements: [a] single European banking supervision and [b] a common deposit insurance and resolution framework.

The European Commission will present proposals for a single supervisory mechanism shortly and these will be examined fully. A European deposit insurance scheme could introduce a European dimension to national deposit guarantee schemes for banks overseen by the European supervision. This would strengthen the credibility of the existing arrangements and serve as an important assurance that eligible deposits of all credit institutions are sufficiently insured. A European resolution scheme — with appropriate resolution tools, could provide assistance in the application of resolution measures to banks overseen by the European supervision with the aim of orderly winding-down non-viable institutions and thereby protect tax payer funds.

Of importance to Ireland is that these proposals are coherent and make a substantive contribution to strengthening the Eurozone's financial system. Ireland could support progress towards these objectives if the impacts were to ease the burden of support the sovereign has provided to the banking sector and shared responsibility for banking risks. It is also important that any proposal be applied retrospectively to the Irish bank recapitalisations. In this context I welcome the Euro area Summit Statement of 29 June which affirms the importance to break the vicious circle between banks and sovereigns and commits to further examine the situation of the Irish financial sector with a view to improving sustainability.

Micheál Martin

Question:

59 Deputy Micheál Martin asked the Minister for Finance if he has discussed the possibility of severing the link between sovereign debt and banking systems with Chancellor Merkel and any other EU leader; and if he will make a statement on the matter. [28966/12]

View answer

Micheál Martin

Question:

63 Deputy Micheál Martin asked the Minister for Finance the contact he has had with Chancellor Merkel regarding her response to requests for a banking union in Europe; and if he will make a statement on the matter. [30395/12]

View answer

Micheál Martin

Question:

64 Deputy Micheál Martin asked the Minister for Finance his views regarding Chancellor Merkel’s position that there cannot be banking union unless there is political union across the EU; and if he will make a statement on the matter. [30396/12]

View answer

I propose to take Questions Nos. 59, 63 and 64 together.

I am in continuous contact with other European finance ministers and will attend Eurogroup and ECOFIN on the 9th and 10th of July to debate the proposals on Economic and Monetary Union agreed at last week's Council meeting. Officials in my Department have been in regular contact with their counterparts across the European Union for some time in the build up to last week's European Council and in the days since.

While I myself have not had discussions directly with Chancellor Merkel specific to the banking union proposals, I have had regular bilateral discussions on these and other related issues with my German counterpart at Eurogroup and ECOFIN, in addition to my visit to Berlin earlier this year. This matter would have also have been raised by the Taoiseach in his bilateral discussions with all European leaders around that important Council meeting.

The proposal for a banking union was first mooted by Commission President Barroso on 23 May. It has developed over the last number of weeks culminating in the paper on Economic and Monetary Union that was discussed at last week's European Council meeting.

One of the main proposals in the paper on Economic and Monetary Union relates to an integrated financial framework. It proposes that, building on the single rulebook, an integrated financial framework should have two central elements: [a] single European banking supervision and [b] a common deposit insurance and resolution framework.

The European Commission will present proposals for a single supervisory mechanism shortly and these will be examined fully. A European deposit insurance scheme would introduce a European dimension to national deposit guarantee schemes for banks overseen by the European supervision. This could strengthen the credibility of the existing arrangements and serve as an important assurance that eligible deposits of all credit institutions are sufficiently insured. A European resolution scheme — with appropriate resolution tools, could provide assistance in the application of resolution measures to banks overseen by the European supervision with the aim of orderly winding-down non-viable institutions and thereby protect tax payer funds. However much depends on the actual detail of the proposals. Once proposals are brought forward they will be examined carefully and we will engage constructively in their consideration at European Council.

I welcome the Euro area Summit Statement of 29 June which affirms the importance to break the vicious circle between banks and sovereigns and commits to further examine the situation of the Irish financial sector with a view to improving sustainability. This represents a significant shift in European policy and one which will be further developed following the examination by the Eurogroup to further improve the sustainability of our adjustment programme.

Micheál Martin

Question:

60 Deputy Micheál Martin asked the Minister for Finance his views on whether there is a belief amongst EU leaders that Spain may need an equity injection; and if he will make a statement on the matter. [30399/12]

View answer

As the Deputy will be aware, agreement has been reached to provide loans of up to €100 billion for the recapitalisation of Spanish banks. Loans have not been requested to finance the Spanish sovereign. The financial assistance is to be provided by the EFSF until the ESM becomes available, at which stage it will be transferred to the ESM.

The Deputy will also be aware that Heads of State or Government of the euro area have decided that once an effective supervisory mechanism is established, the ESM could have the possibility to recapitalise euro area banks directly. This is a very positive development from an Irish perspective.

A ‘top-down' exercise by external evaluators has estimated the capital needs for the Spanish banking sector as a whole to be in the region €51-62 billion. However, the exact amount will be determined based on a thorough bottom-up assessment of individual financial institutions which has already been launched. More detailed work between the Spanish authorities and the Troika is continuing and it is anticipated that further progress will be made during this month.

Question No. 61 answered with Question No. 54.