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Promissory Note Negotiations

Dáil Éireann Debate, Tuesday - 4 December 2012

Tuesday, 4 December 2012

Questions (144, 170)

Stephen Donnelly

Question:

144. Deputy Stephen S. Donnelly asked the Minister for Finance in relation to the promissory note interest payments to Irish Bank Resolution Corporation, if any of the amount being paid in is being withdrawn on an ongoing basis, for example, once per year; if he will provide an estimate of the total amount of interest that will be paid assuming no deal with the ECB, and the estimate for the amount of this which will ultimately be returned to the State; and if he will make a statement on the matter. [53891/12]

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Stephen Donnelly

Question:

170. Deputy Stephen S. Donnelly asked the Minister for Finance further to Parliamentary Question No. 199 of 27 November 2012, regarding the Irish Bank Resolution Corporation promissory note payments and expected Exchequer return, that if the total promissory note capital payment is €30.6 billion and the projected sum of interest rate payments is €16.8 billion as per his answers, giving a total payment to IBRC of €47.4 billion, and that if the projected cost of IBRC to the State is between €25 billion and €28 billion as per his answer, he would expect that the entire interest payment of €16.8 billion plus between €2.6 billion and €5.6 billion of the €30.6 billion capital, resulting in a total of between €19.4 billion and €22.4 billion being returned to the State; and if he will make a statement on the matter. [54546/12]

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Written answers

I propose to take Questions Nos. 144 and 170 together.

As the Deputy is aware, the promissory note repayments, both capital and interest, are made to IBRC. As IBRC is wholly owned by the State, any future return to the State will be by way of dividends from IBRC or from the projected final net asset position for IBRC. IBRC provides details of their outstanding liabilities in their published accounts. This cumulative figure amounted to €50.4bn at 30 June 2012 including €45.2bn representing sale and repurchase agreements with banks and central banks. This amount will have to be repaid over time, mainly from annual instalments on the promissory notes. The realisable value on the remaining IBRC loan book (€15.6bn at 30 June 2012) will also be used to reduce this liability over time. The amount of money required by IBRC to repay total liabilities (including these sale and repurchase agreements) is subject to material uncertainty and market factors which include the expected timing of asset recoveries and sales (themselves dependant on property prices, especially in the UK and Ireland); the volume and timing of maturing funding commitments and deposits; and projected interest rates within the Eurozone.

The bank’s policy is that, due to the commercially sensitive nature of such information as noted above, combined with the many external variables involved, it does not issue formal projections. However, I can point out that the Chairman of IBRC stated recently at the Oireachtas Committee for Finance and Public Expenditure that he hopes the final bill for Anglo Irish Bank, “will come nearer to €25 billion than the €29 billion to €34 billion figure”, previously announced. The bank remains of the view that there will be a small return to the State at full resolution, given the assumptions currently being used.

In relation to inclusion of interest in the projected ultimate outturn, I have been advised that in calculating the projected final net asset position, IBRC take into account interest from all assets including customers, securities and promissory notes.

An interest holiday was inserted into each of the promissory notes which meant that between 1 January 2011 and 31 December 2012 no interest was payable. While there was an interest holiday this does not affect the promissory note repayments of the principal amount. The cash flows on the promissory notes are 10% (€3.06 billion) of the original amount per annum until the full amount is repaid. Set out is a detailed aggregated schedule of capital repayments and interest payments on the promissory notes.

Promissory Note Schedule

€bn

Total interest

Paid: A

Total Capital Reduction: B

Repayments:

A + B

31/03/2011

0.55

2.51

3.06

31/03/2012

-

3.06

3.06

**

31/03/2013

0.49

2.57

3.06

31/03/2014

1.84

1.22

3.06

31/03/2015

1.75

1.31

3.06

31/03/2016

1.65

1.41

3.06

31/03/2017

1.55

1.51

3.06

31/03/2018

1.44

1.62

3.06

31/03/2019

1.32

1.74

3.06

31/03/2020

1.19

1.87

3.06

31/03/2021

1.06

2.00

3.06

31/03/2022

0.91

2.15

3.06

31/03/2023

0.75

2.31

3.06

31/03/2024

0.57

1.52

2.09

31/03/2025

0.45

0.47

0.91

31/03/2026

0.39

0.52

0.91

31/03/2027

0.33

0.58

0.91

31/03/2028

0.26

0.65

0.91

31/03/2029

0.19

0.73

0.91

31/03/2030

0.10

0.81

0.91

31/03/2031

0.01

0.05

0.05

16.8

30.6

47.4

* These numbers may not tot exactly as a result of rounding

** The March 2012 repayment was settled with a long term Government bond.

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