Written Answers Nos 146-168
146. Deputy Tom Fleming asked the Minister for Finance the position regarding the setting up of a national reconstruction bank that was originally included in the Programme for Government and was to contribute to the rebuilding of the economy by lending to business and by surrendering a hold on private debts which are not going to be repaid; and if he will make a statement on the matter. [45895/12]
View answerThe establishment of the Strategic Investment Fund (SIF) was announced by the Government in September 2011. Resources from the National Pensions Reserve Fund (NPRF) will be channeled through the SIF towards productive investment on commercial terms in the Irish economy. The SIF will seek matching commercial investment from the private sector in order to maximise the resources of the NPRF. The immediate priority for the Government is to put NewERA on a statutory footing and reorient the NPRF into a Strategic Investment Fund which will make strategic investments to support economic activity, competitiveness and employment in Ireland. Officials of my Department are liaising with the National Treasury Management Agency, which is the Manager of the NPRF, in identifying and drafting the necessary legislation to achieve this objective. It is not expected that legislation will be published before next year. Establishing a Strategic Investment Bank is a considerably more complex and time-consuming process than establishing the SIF. Given the need in the short term to enable the SIF make investments to support economic activity and employment in Ireland, the development of the SIF and drafting of necessary legislation is being prioritised.
147. Deputy Tom Fleming asked the Minister for Finance the position regarding the €7.5 billion that was made available to the banks last year to deal with distressed mortgages; the reason it has not been passed on to borrowers; and if he will make a statement on the matter. [45918/12]
View answerAs the Deputy will be aware, the Irish banks were required to raise €24.0bn in capital following the 2011 Prudential Capital Assessment Review (PCAR) in order to remain above a minimum capital target of 10.5% Core Tier 1 in the base scenario and 6% Core Tier 1 in the stress Scenario. The Central Bank made its decision on required recapitalisation based on loan-loss projections along with further calculations concerning the prospective income, expenditure, and deleveraging plans of the banks as outlined in the 2011 Financial Measures Programme (FMP) Report. This report was published by the Central Bank of Ireland on 31 March 2011 and is available at
http://www.centralbank.ie/regulation/industry-sectors/credit-institutions/pages/financialmeasuresprogramme.aspx
In order to arrive at a stressed loan-loss estimate that was fully credible to the international markets, the Central Bank engaged BlackRock Solutions, a specialist in analysing potential loan losses under stressed conditions. However I must again reiterate that the stress test scenarios were designed to represent extreme but plausible events, but they were not forecasts.
In terms of mortgages, the Central Bank has informed me that the following projected losses for the period 2011-2013 were used for capital determination purposes in the FMP exercise.
|
€million |
AIB |
AIB |
BOI |
BOI |
ILP |
ILP |
EBS |
EBS |
Total |
Total |
|
- |
Base |
Stress |
Base |
Stress |
Base |
Stress |
Base |
Stress |
Base |
Stress |
|
Residential Mortgages |
2,005 |
3,066 |
1,361 |
2,366 |
1,624 |
2,679 |
848 |
1,380 |
5,838 |
9,491 |
|
Total |
9,545 |
12,604 |
7,380 |
10,119 |
2,114 |
3,421 |
975 |
1,577 |
20,014 |
27,722 |
The Government is aware of the significant difficulties some homeowners are facing in meeting their mortgage obligations and it is committed to advancing appropriate measures to assist those mortgage holders who are experiencing real and genuine difficulty. In this regard, the Government is now actively implementing the main recommendations contained in the report of the Inter-Departmental Working Group on Mortgage Arrears. Some of the new initiatives to assist troubled mortgage customers are detailed below:
- The Personal Insolvency Bill was approved by Government and published last June and the Committee stage of the Bill was passed by the Dáil last month;
- The Minister for Housing and Planning has formally launched the “mortgage to rent” scheme on a nationwide basis;
- Lenders have now provided details to the Central Bank on their proposed forbearance and loan modification options and some forbearance measures have been introduced on a pilot basis with a further roll out later in the year;
- Also an extensive independent mortgage advice framework has now been put in place by the Minister of Social Protection comprising (i) an enhanced website
www.keepingyourhome.ie (ii) a Mortgage Arrears information helpline, and (iii) the provision of free independent ‘one-to-one’ professional financial advice to borrowers when considering a long term forbearance/resolution offer from their lender. The list of accountants providing this service is located on the www.keepingyourhome.ie website.
The Government remains very committed to progressing these measures, which are in addition to existing supports such as the protections afforded by the Central Bank Code of Conduct on Mortgage Arrears, to assist genuine mortgage holders in difficulty and the Government sub-committee on mortgage arrears, which is chaired by An Taoiseach, continues to meet to ensure this receives priority attention across relevant Departments and agencies.
148. Deputy Joe Higgins asked the Minister for Finance when the Central Bank of Ireland through the Central Statistics Office propose to begin working on compiling a wealth audit in 2013; the way the CSO will conduct the audit and the assets that will be included. [45930/12]
View answerI have been informed by the Central Bank that the Central Statistics Office, on behalf of the Central Bank, has commenced preliminary work on a Household Finance and Consumption Survey, which will survey a small sample of Irish households (likely to be in the order of 4,000 households). The survey will collect information on household composition, employment, incomes, assets, debts and other financial decisions. Similar surveys are being carried out in all other euro area Member States, as part of an initiative to fill the gap in available statistics related to household balance sheets and financial decision making.
The main aim of the survey, both at national and euro area level, is to compile micro-level data on household finances, which should provide important insights into the economic behavior of households. The Irish survey is being conducted on the basis of a common questionnaire and methodology to be applied across all participating countries to provide information on the situation in the euro area as a whole, while also allowing comparisons to be made across countries. The first results of the survey, which will take some time to carry out, will be available in 2014.
149. Deputy Tom Fleming asked the Minister for Finance the reason the banks are allowed to continue to increase their variable mortgage rates at the same time as the European Central Bank reduces its own rates; if he will intervene on behalf of tax payers who bailed out the banks and on behalf of hard pressed households, many of whom are now finding it increasingly difficult to pay their mortgages; and if he will make a statement on the matter. [45934/12]
View answerThe Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank has no statutory role in the setting of interest rates by regulated entities apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. The lending institutions in Ireland are independent commercial entities. Ultimately the pricing of financial products, including, interest rates and products is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.
However, within its existing powers and through the use of suasion, the Central Bank will continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds. All mortgage lenders were written to and asked to consider the impact on arrears when considering any future interest rate increases.
Given the increased financial pressures currently being experienced by mortgage consumers, the Central Bank was of the view that they needed sufficient time to plan for any increases in their standard variable interest rate. The Central Bank advised mortgage lenders that it expects them to notify affected consumers, in writing, at least one month in advance of any increases in their standard variable rate. This notification must include:
a) The date from which the new rate will apply;
b) The details of the old and new rate;
c) The revised repayment amount; and
d) An invitation for the consumer to contact the lender if he/she anticipates difficulties meeting the higher repayments.
With regard to consumers in arrears or in danger of going into financial difficulty and/or concerned about going into mortgage arrears, the revised Code of Conduct on Mortgage Arrears (CCMA) offers increased protections to these consumers. The revised CCMA was issued to mortgage lenders on 6 December 2010 and is effective from 1 January 2011. It builds on the provisions of the previous version, but includes more detailed requirements, including the establishment of a formal Mortgage Arrears Resolution Process (MARP). Other examples of significant changes are:
- pre-arrears cases must be treated in accordance with the MARP;
- arrears have been defined;
- the primary residences which can be protected by the CCMA have been defined; and
- an Appeals process under the CCMA replaces the complaints process under the Consumer Protection Code.
The Central Bank has also published a guide for consumers on mortgage arrears ‘Mortgage Arrears – A Consumer Guide to Dealing with your Lender’ and this is available on the Central Bank website.
http://www.centralbank.ie/regulation/processes/consumer-protection-code/Documents/Consumer%20Booklet%20-%20FINAL%20Feb%202011.pdf
150. Deputy Joe Higgins asked the Minister for Finance the amount of revenue that was brought in under the domicile levy in 2011. [45935/12]
View answerThe Domicile Levy is payable on or before 31 October in each year following the preceding validation date of 31 December on a self-assessment basis. The yield from the levy in 2011 was €1.667 million in respect of the amount due for valuation date 31 December 2010. Individuals who are liable to pay the Domicile Levy can use any Income Tax paid in the relevant tax year as a credit against their levy liability.
151. Deputy Tom Fleming asked the Minister for Finance the reason banks are allowed to continue to increase charges and interest rates whilst at the same time refusing to lend to viable businesses; if he will intervene in this issue; and if he will make a statement on the matter. [45937/12]
View answerThe Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank has no statutory role in the setting of interest rates charged by regulated entities apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. The lending institutions in Ireland are independent commercial entities. Ultimately the pricing of financial products, including, interest rates and products is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.
Neither the Central Bank nor I have any responsibility for increased charges and interest rate charged by the financial institutions. I have no powers to compel the institutions to reduce their rates or to lend to viable businesses. However, the Deputy should be aware that the Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. The pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. The banks also meet with the Department and the CRO on a quarterly basis to discuss progress.
Oversight by the CRO applies to both pillar banks - AIB and Bank of Ireland. SMEs, sole traders or farmers can apply for a review where credit is refused, withdrawn, or offered on unreasonable conditions. Banks have set up formal internal review processes, which must first examine an appeal by a customer. Ulster Bank has also set up an internal appeal process. The CRO ensures that the banks do not refuse credit to viable businesses, both by its existence and by offering the right to a review of refusals.
152. Deputy Terence Flanagan asked the Minister for Finance his views on a matter (details supplied) regarding income tax; and if he will make a statement on the matter. [45940/12]
View answerThe position is as stated in the Programme for Government that as part of the Government’s fiscal strategy we will maintain the current rates of income tax together with bands and credits. In addition, we will not increase the top marginal rates of taxes on income. There are no plans at this time to depart from this policy. I should point out that the top marginal rate of taxation on income is now 52 per cent for PAYE workers and 55 per cent for the self-employed. The latest OECD data indicates that Ireland has the most progressive tax system of the EU members of its organisation. A progressive taxation system ensures that the burden of taxation falls most heavily on those with a higher ability to pay.
In addition, it is estimated that in 2012, the top 5 per cent of income earners will pay 43 per cent of the total income tax, while it is estimated that those earning €50,000 or less, which represents 78 per cent of income earners, will pay 20 per cent of the total income tax. Furthermore, it is estimated that in 2012, 841,100 individuals, who represents 39 per cent of the income tax base, will be exempt from income tax. When marginal rates of tax are very high, jobs are lost. Indirect taxes have a less adverse impact on employment. That is why in the last Budget, indirect taxes rather that taxes on income were increased.
However, that does not mean that the wealthy should not carry the principal burden of tax. The minimum effective tax restriction on high earners is designed to ensure this by imposing a minimum effective income tax rate of 30 per cent for those subject to the full restriction, in addition to 4 per cent in PRSI and up to 10 per cent in the USC.
153. Deputy Gerry Adams asked the Minister for Finance further to Parliamentary Question No. 232 of the 22 May 2012 acknowledging that Goldman Sachs has acted as a consultancy firm for his officials in the Department of Finance, if he will confirm if Goldman Sachs has acted as an advisor on any topic related to the former Anglo or Irish Nationwide now known as IBRC; if he will confirm if Goldman Sachs have ever acted directly as an advisor to IBRC, now or since Anglo and Irish Nationwide were nationalised; if he will confirm if Goldman Sachs are precluded from bidding or being part of a consortium bidding for loans in State owned financial institutions such as IBRC where they may have acted as an advisor in the past; and if he will make a statement on the matter. [45954/12]
View answerGoldman Sachs was not engaged by the Department of Finance as an advisor on any topic related to the former Anglo or Irish Nationwide now known as IBRC. I have also been advised that since nationalisation, neither the former Anglo Irish Bank Corporation Limited nor IBRC has engaged Goldman Sachs to provide advisory services to the Bank. Prior to its merger with Anglo Irish Bank in July 2011, the former Irish Nationwide Building Society did engage Goldman Sachs in 2010 and 2011. I have been informed that Goldman Sachs is not precluded from bidding for loans which IBRC may decide to sell at a future date.
154. Deputy Gerry Adams asked the Minister for Finance further to Parliamentary Question No. 191 of 1 of May 2012, if to date he or his officials have met with the former MEP and Fine Gael member Pat Cox in his newly announced capacity as paid advisor to a company (details supplied); if he will detail the date of such a meeting; and if he will make a statement on the matter. [45955/12]
View answerI can confirm that I have had no meeting with Mr Cox in his capacity as advisor to the Company. In addition, I have enquired from my officials and I am informed that no meetings have taken place between my officials and Mr Cox in his capacity as advisor to Certus.
155. Deputy Gerry Adams asked the Minister for Finance further to Parliamentary Question No. 51 of 23 of May 2012, if he will confirm if any of the State owned financial institutions have developed support units for small and medium enterprises borrowers in arrears similar to the support units for mortgage arrears; if he will confirm if any of the State owned financial institutions intend to outsource these services similar to a company's (details supplied) contract with AIB for its residential mortgages; if he will confirm if AIB, Permanent TSB or IBRC have similar rules for the outsourcing or contracting of services as National Assets Management Agency where competitors in the same fields are given a share of the different servicing requirements rather than business being given exclusively to one or two firms; and if he will make a statement on the matter. [45956/12]
View answerThe covered institutions have supplied the following information regarding their dealings with their SME borrowers:
Permanent TSB:
As stated in PQ 41543/12 Permanent TSB does not have a significant amount of business loans and therefore the setting up of a support unit for small and medium enterprises borrowers in arrears is not relevant for that institution.
I am informed by Permanent TSB that it does not have in place such rules as outlined in your question in relation to the third party administration (outsourcing) of loan books. However Permanent TSB has confirmed that it will review the particular circumstances of each of the loan books to be outsourced including the size of the loan book, asset types and asset quality in order to determine whether it would be suitable to outsource to one or more parties.
AIB:
AIB has informed me that its decision to create the Financial Solutions Group ensures that specialised AIB staff are assigned to the management of distressed borrowers, inclusive of SME's. No decision has been made by AIB at this point in time to outsource any of the SME portfolio. All options to facilitate the early management of the distressed SME portfolio will be considered.
AIB are considering all options that will facilitate the early management of its loan in arrears. All decisions in relation to outsourcing are required to go through an appropriate approval process and are subject to compliance with a full procurement and tendering process.
IBRC :
I have been advised that IBRC’s SME borrowers are managed as part of the Bank’s normal business process. IBRC considers it prudent at present to continue managing this activity in-house however IBRC have informed me that it will consider its options in this regard should an opportunity arise in the future to further the Bank’s ultimate goal of maximising returns for the Irish taxpayer. Any future decisions to outsource such services would be governed by IBRC’s Group Procurement Policy to ensure a cost-effective, transparent and efficient procurement process.
156. Deputy Pearse Doherty asked the Minister for Finance if he will in tabular form the payments by year approved by the Central Bank of Ireland, reductions on such approved payments made by the High Court and the sums actually paid in respect of administration services at the Insurance Corporation of Ireland now Icarom, since that organisation was first placed in administration. [45965/12]
View answerThe Central Bank has informed me that it has no role in the approval of the fees of the administrator of any insurance undertaking where an administrator has been appointed by order of the High Court, although in the circumstances of Icarom they would have advised the administrators that they had no objection to them applying to the court for their fees. The Central Bank has also advised that the determination of fees is a matter which is entirely for decision by the High Court under the provisions of Section 3(4) (b) of the Insurance (No.2) Act, 1983 under which the court shall, from time to time on the application of the administrator, by order fix the amount or the basis of calculation of the amount of the costs, expenses and remuneration of the administrator.
157. Deputy Pearse Doherty asked the Minister for Finance if he will quantify the number of ongoing legal cases, if any, where the State or an agency of the State is the applicant and Pricewaterhouse Coopers is the respondent. [45966/12]
View answerThe Chief State Solicitor’s Office have confirmed that they are not acting for the State or any state agencies in any proceedings in respect of which Pricewaterhouse Coopers are a defendant or a respondent. It should be noted, however, that the Chief State Solicitor’s Office does not represent all state agencies and it is therefore possible that some state agencies could potentially have brought such an action through a private solicitor, but I am not aware of any such proceedings.
158. Deputy Pearse Doherty asked the Minister for Finance if he will quantify the number of ongoing legal cases, if any, where the State or an agency of the State is the applicant or one of the applicants and Ernst and Young is the respondent or one of the respondents [45967/12]
View answerThe Chief State Solicitor’s Office have confirmed that they are not acting for the State or any State agencies in any proceedings in respect of which Ernst and Young are a defendant or a respondent. It should be noted, however, that the Chief State Solicitor’s Office does not represent all state agencies and it is therefore possible that some state agencies could potentially have brought such an action through a private solicitor, but I am not aware of any such proceedings.
159. Deputy Pearse Doherty asked the Minister for Finance if he will quantify the number of ongoing legal cases, if any, where the State or an agency of the State is the applicant or one of the applicants and KPMG is the respondent or one of the respondents. [45968/12]
View answerThe Chief State Solicitor’s Office have confirmed that they are not acting for the State or any state agencies in any proceedings in respect of which KPMG are a defendant or a respondent. It should be noted, however, that the Chief State Solicitor’s Office does not represent all state agencies and it s therefore possible that some state agencies could potentially have brought such an action through a private solicitor, but I am not aware of any such proceedings.
160. Deputy Pearse Doherty asked the Minister for Finance if he will quantify the number of ongoing legal cases, if any, where the State or an agency of the State is the applicant or one of the applicants and Deloitte and Touche is the respondent or one of the respondents. [45969/12]
View answerThe Chief State Solicitor’s Office have confirmed that they are not acting for the State or any state agencies in any proceedings in respect of which Deloitte and Touche are a defendant or a respondent. It should be noted, however, that the Chief State Solicitor’s Office does not represent all state agencies and it is therefore possible that some state agencies could potentially have brought such an action through a private solicitor, but I am not aware of any such proceedings.
161. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No.147 of 9 October 2012, if he will reconsider his response in view of the various forecasts given by the National Asset Management Agency (details supplied) of its 2011 annual outturn before 31 December 2011. [45971/12]
View answerIt would not be appropriate, as the Deputy had sought in the earlier Parliamentary Question (42681.12) referred to, for the Minister for Finance to provide an estimate of the financial outturn for the National Asset Management Agency in advance of the closure of accounts and the production of the statement of accounts by that Agency. It is instructive to note, however, that, as set out in its most recent Section 55 Quarterly Accounts published last week, the Agency made a net profit of €89 million during the three months ending 30th June 2012 and an overall net profit of €222 million for the first half of the year. I welcome the strong financial performance to which these figures attest and hope that the Agency performs as well during the second half of the year. The Deputy will appreciate that there is a significant difference in terms of the rigour required between, on the one hand, the formal provision by the Minister for Finance before the Houses of the Oireachtas of projections pertaining to an entity under his auspices and, on the other, an informal forecast made by the Agency’s Chief Executive during an interview with an international media outlet.
162. Deputy Pearse Doherty asked the Minister for Finance further to a report in a national newspaper that 99.5% state-owned Permanent TSB is considering entering into a loan management contract with a private-sector company (details supplied) for the management of €2bn of commercial property development loans, the reason PTSB is not a National Asset Management Agency participating Institution, the reason these loans were not transferred to NAMA in 2010 and the reason these €2bn loans are not being transferred to NAMA now. [45973/12]
View answer163. Deputy Pearse Doherty asked the Minister for Finance further to a report in a national newspaper that 99.5% State-owned Permanent TSB is considering entering into a loan management contract with a private-sector company (details supplied) for the management of €2bn of commercial property development loans if he will provide an estimate of the fees that will be paid by PTSB to the company over the proposed life of the loan management contract. [45974/12]
View answer165. Deputy Pearse Doherty asked the Minister for Finance if he wil provide an assessment of the effect of the National Asset Management Agency acquiring €2bn of commercial property development loans from Permanent TSB, the management of which loans PTSB is reportedly contracting out to a company (details supplied). [45976/12]
View answerI propose to take Questions Nos. 162, 163 and 165 together.
Permanent TSB confirms that a tendering process is underway in relation to third party servicing of its portfolio of commercial property loans and that the party referred to is among the parties that the bank has spoken to in this regard. The bank has not completed the tendering process, nor has it signed a contract with any party in this regard and even if such a contract is signed in the future the bank has confirmed that the fees would not be publically disclosed as they would be commercially sensitive.
As the Deputy will be aware Permanent TSB is not a participating institution under the NAMA Act 2009 as it did not make an application for such a designation. As a result none of its commercial property loans were acquired by NAMA in 2010. The Deputy will also be aware that only Land and Development loans in the participating institutions were acquired by NAMA from those institutions. The NAMA Act does not allow for a scenario where NAMA would service assets which have not been acquired by it. Permanent TSB is not currently selling its commercial property loan assets and therefore an analysis of the impact of an acquisition of Permanent TSB’s commercial property loans by NAMA would have limited value.
164. Deputy Pearse Doherty asked the Minister for Finance if he will provide an explanation of what he means when he refers to pillar banks in the cases of Allied Irish Banks and Bank of Ireland; if he regards 99.5% Permanent TSB as a pillar bank and if not, the reason for such distinction. [45975/12]
View answerIn my speech of 31 March 2011 to the Dáil I first outlined the concept of Pillar Banks, being Bank of Ireland and AIB. The concept was to strengthen these banks through recapitalisation and restructuring in order that they could play a material role in the provision of credit to the economy, as universal banks providing nationwide coverage and a full range of services to retail, SME and corporate customers. At that time the future strategic direction of Permanent TSB was less certain. Since then we have agreed a way forward for Permanent TSB with the Troika which envisages it playing an important role in the future of Irish retail banking, being a more focussed retail bank bringing an element of competition to the marketplace which has consolidated significantly since 2008. In this regard Permanent TSB submitted a restructuring plan to the European Commission in June 2012.
166. Deputy Pearse Doherty asked the Minister for Finance in respect of Bank of Ireland in which he controls 15% of the ordinary shares and in addition holds preference shares valued at €1,473 million in December 2011; if he will provide an estimate of the year when the Bank will return to profitability. [45977/12]
View answerAs the Deputy is aware, Bank of Ireland is a quoted company and is listed on the Irish Stock Exchange. Under listing rules I am unable to release any confidential information to the house which could be reasonably expected to have an impact on the Bank’s share price.
167. Deputy Pearse Doherty asked the Minister for Finance in respect of Bank of Ireland in which he controls 15% of the ordinary shares and in addition holds preference shares valued at €1,473 million in December 2011; if he will provide an estimate of the year when the Bank will next pay dividends to its ordinary shareholders. [45978/12]
View answer169. Deputy Pearse Doherty asked the Minister for Finance in respect of Bank of Ireland in which he controls 15% of the ordinary shares and in addition holds preference shares valued at €1,473 million in December 2011, the safeguards that he has in place to ensure that shareholders in the bank do not benefit from the distribution of dividends, or from other shareholding rewards until firstly, the bank has returned to profitability and secondly that any distribution takes account of the €4.7bn provided to the Bank by the State. [45980/12]
View answerI propose to take Questions Nos. 167 and 169 together.
As the Deputy is aware, Bank of Ireland has been granted four State–Aid approvals between 2009 and 2011. Under the terms of these Agreements, Bank of Ireland has committed not to pay dividends to Ordinary Shareholders either prior to 31 December 2015 or the date by which the NPRFC Preference shares are repaid in full or are no longer owned by Ireland, for whatever reason. If and when the above restriction no longer applies, the Bank’s ability to pay ordinary dividends would depend on its level of capitalisation and profitability and would ultimately be a matter for the Board of Directors of Bank of Ireland. It should be noted that the State’s preference shares rank senior to ordinary shareholders with respect to dividends.
168. Deputy Pearse Doherty asked the Minister for Finance in respect of Bank of Ireland in which he controls 15% of the ordinary shares and in addition holds preference shares valued at €1,473 million in December 2011; the reason the bank is seeking via an application to the High Court to reduce its share premium account by €3.92bn to €1.97bn. [45979/12]
View answerAs the Deputy will be aware the transfer of reserves from the share premium account to distributable reserves is a normal transfer allowable under company law. Indeed, this exercise was completed by Allied Irish Bank earlier this year. At the EGM of 15 June 2011, a resolution was passed by 99.57% of the shareholders of the Bank of Ireland authorising this transfer. The reserve generated will enable the Bank to have sufficient distributable reserves to, amongst other things, make distributions and pay dividends to its Stockholders going forward (where permissible in law to so do), including helping to facilitate the payment of the dividend on the State’s Preference Stock units in 2013.
