Written Answers Nos. 53-60
53. Deputy Pearse Doherty asked the Minister for Finance if he will set out in tabular form, by year, for 2013 onwards, the forecast impact on general government deficit and general government debt of the proposed new scheme to substitute the promissory notes provided to the Irish Bank Resolution Corporation with sovereign and NAMA bonds. [7720/13]
View answerAs the Deputy will be aware the Irish Government Bonds that have been issued in exchange for the Promissory Notes are floating rate bonds. The coupon on these bonds is 6-month Euribor plus a margin ranging from 2.50% to 2.68%. Given the nature of this floating rate it is impossible to be accurate with regard to the exact interest cost in 2013 to 2015.
Information was released by the Department of Finance last week analysing the impact of the transaction on the general government deficit and debt over the period 2013 – 2015. As part of the explanatory information that was released, estimates were produced which showed interest costs for 2013-2015 and ELG costs for 2013.
The following tables set out the impact of the transaction on general government deficit (GGB) and general government debt (GGD) based upon no policy change.
|
General Government Deficit Impact (€M) |
2013 |
2014 |
2015 |
|
Underlying GGB per Budget 2013 document |
(12,645) |
(8,905) |
(5,325) |
|
Adjustments |
|||
|
1. Promissory Notes - interest savings |
1,875 |
1,775 |
1,675 |
|
2. Government Bonds – interest costs |
(800) |
(875) |
(950) |
|
3. ELG claim costs* |
(1,000) |
- |
- |
|
4. Interest cost of payments under ELG |
(50) |
(50) |
(50) |
|
5. Change in CBI surplus dividend income |
- |
50 |
125 |
|
6. Interest cost savings (incl. interest on interest) |
- |
100 |
225 |
|
7. NAMA true-up** |
n.a. |
n.a. |
n.a. |
|
Change in underlying GGB due to transaction |
25 |
1,000 |
1,025 |
|
Underlying GGB post-transaction |
(12,620) |
(7,905) |
(4,300) |
|
Pre-Transaction Underlying GGB/Nominal GDP |
(7.5%) |
(5.1%) |
(2.9%) |
|
Post-Transaction Underlying GGB/Nominal GDP |
(7.5%) |
(4.5%) |
(2.4%) |
|
Change |
0.0% |
0.6% |
0.6% |
*Estimated ELG claim range: €0.9 - €1.1 billion.
**Unknown until end of valuation process.
Note: Budget 2013 forecasts assume no dividends paid by IBRC to the State; table may contain rounding differences and figures are rounded to nearest €25 million; future interest costs to determine the financial impacts are best estimates.
|
General Government Debt Impact (€M) |
2013 |
2014 |
2015 |
|
GGD per Budget 2013 document |
203,500 |
209,200 |
211,900 |
|
Adjustments |
|||
|
1. Promissory Notes - interest savings |
(500) |
(1,825) |
(1,750) |
|
2. Government Bonds – interest costs |
800 |
875 |
950 |
|
3. ELG claim costs* |
1,000 |
- |
- |
|
4. Interest cost of payments under ELG |
50 |
50 |
50 |
|
5. Change in CBI surplus dividend income |
- |
(50) |
(125) |
|
6. Interest cost savings (incl. interest on interest) |
- |
(100) |
(225) |
|
7. NAMA true-up** |
n.a. |
n.a. |
n.a. |
|
Change in GGD in year |
1,350 |
(1,050) |
(1,100) |
|
Cumulative change in GGD |
1,350 |
300 |
(800) |
|
GGD post-transaction |
204,850 |
209,500 |
211,100 |
|
Pre-Transaction Underlying GGB/Nominal GDP |
121.3% |
120.2% |
116.8% |
|
Post-Transaction Underlying GGB/Nominal GDP |
122.1% |
120.3% |
116.4% |
|
Change |
0.8% |
0.2% |
(0.4%) |
*Estimated ELG claim range: €0.9 - €1.1billion
** Unknown until end of valuation process
Note: Budget 2013 forecasts assume no dividends paid by IBRC to the State; table may contain rounding differences and figures are rounded to nearest €25 million; future interest costs to determine the financial impacts are best estimates
Note that the tables showing the GGB and GGD impacts assume that the full portfolio of Government bonds are priced at an interest margin of 270 basis points over 6-month EURIBOR. The Government bond portfolios were ultimately priced at a range of different interest margins over 6-month EURIBOR.
Copies of this material is available on the Department of Finance website under the following links:http://www.finance.gov.ie/viewdoc.asp?DocID=7543 http://www.finance.gov.ie/viewdoc.asp?DocID=7545
The Department has not produced figures for the Debt and Deficit effects beyond 2015.
54. Deputy Pearse Doherty asked the Minister for Finance if he will outline the terms of any new bonds which he proposes to issue as part of the proposed new scheme to substitute the promissory notes provided to the Irish Bank Resolution Corporation with sovereign and NAMA bonds. [7721/13]
View answer55. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the date upon which he proposes to issue sovereign bonds as part of the proposed new scheme to substitute the promissory notes provided to the Irish Bank Resolution Corporation with sovereign and National Asset Management Agency bonds. [7722/13]
View answer65. Deputy Pearse Doherty asked the Minister for Finance the way the floating interest rate on the sovereign bonds replacing promissory notes will be calculated; and if he will make a statement on the matter. [7732/13]
View answer68. Deputy Pearse Doherty asked the Minister for Finance the duration and maturity of the sovereign bonds and the coupon rates of each one; and if he will make a statement on the matter. [7735/13]
View answerI propose to take Questions Nos. 54, 55, 65 and 68 together.
The exchange of Irish Government Bonds for the IBRC Promissory took place on Friday 8 February 2013. The Deputy refers to the substitution of the Promissory Notes provided to Irish Bank Resolution Corporation with National Asset Management Agency bonds however this is not the case.
With regard to the question submitted by the Deputy about the duration and maturity of sovereign bonds I am going to assume that he is referring to the sovereign bonds issued to discharge the liability under the Promissory Notes and not the total stock of Irish sovereign bonds.
With this in mind, eight new Floating Rate Treasury Bonds have been issued to discharge the Promissory Notes liability consisting of:
a 25 year, €2bn bond maturing in 2038 with an interest rate of 6-month Euribor plus a margin of 2.50%;
a 28 year €2bn bond maturing in 2041 with an interest rate of 6-month Euribor plus a margin of 2.53%;
a 30 year, €2bn bond maturing in 2043 with an interest rate of 6-month Euribor plus a margin of 2.57%;
a 32 year, €3bn bond maturing in 2045 with an interest rate of 6-month Euribor plus a margin of 2.60%;
a 34 year, €3bn bond maturing in 2047 with an interest rate of 6-month Euribor plus a margin of 2.62%;
a 36 year, €3bn bond maturing in 2049 with an interest rate of 6-month Euribor plus a margin of 2.65%;
a 38 year, €5bn bond maturing in 2051 with an interest rate of 6-month Euribor plus a margin of 2.67%; and
a 40 year, €5bn bond maturing in 2053 with an interest rate of 6-month Euribor plus a margin of 2.68%.
The bonds will pay interest every six months (June and December).
This information is set out in tabular form on the NTMA's website at the following link: http://www.ntma.ie/news/ntma-issues-eight-new-floating-rate-treasury-bonds-in-exchange-for-promissory-notes/
The Deputy refers to the terms of any new bonds which will be issued. As is the case with all Irish sovereign bonds there are detailed offering circulars available on the NTMA website which outline the terms and conditions in detail. I attach the link here: http://www.ntma.ie/business-areas/funding-and-debt-management/government-bonds/
56. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the maximum period for which the Central Bank of Ireland may hold any sovereign bond issued as part of the proposed bond issued as part of the proposed new scheme to substitute the promissory notes provided to the Irish Bank Resolution Corporation with sovereign and National Asset Management Agency bonds; and the factors that will affect the period for which the Central Bank has discretion in any decision to hold the sovereign bonds. [7723/13]
View answerThe Central Bank have undertaken that minimum of bonds will be sold in accordance with the following schedule: €0.5bn by the end of 2014, €0.5bn per annum from 2015 to 2018, €1bn per annum from 2019 to 2023 and €2bn per annum from 2024 onwards.
This schedule of mandatory sales would exhaust the portfolio in 2032. The bonds will be placed in the Central Bank's trading portfolio and sold as soon as possible, provided that conditions of financial stability permit. The disposal strategy will maintain full compliance with the Treaty prohibition on monetary financing.
57. Deputy Pearse Doherty asked the Minister for Finance if he will provide the number of depositors and the total amount of deposits in Irish Bank Resolution Corporation on 6 February 2013: and the number of deposits in excess of €100,000; and the overall value of such deposits and the total excess of those deposits over €100,000 each. [7724/13]
View answerAs the Deputy will be aware, on 5 February 2013 the Oireachtas passed legislation (Irish Bank Resolution Corporation Act 2013), appointing joint Special Liquidators to IBRC with immediate effect to wind up its business and operations.
At this early stage of the special liquidation Special Liquidators are engaged in intensive processes which involve inter alia, asserting control over the businesses, processes, systems and personnel of IBRC. It is important that focus is placed on assessing, reorganising and restructuring the day–to-day activities of the Bank to meet the primary objective of ensuring the purpose of the special liquidation is achieved, as this is key to ensuring that value is extracted from the liquidation.
As such the Bank is not in a position to provide the information requested by the Deputy.
58. Deputy Pearse Doherty asked the Minister for Finance if he will provide a schedule of bonds payable by Irish Bank Resolution Corporation on 6 February 2013 showing the type of bond, the date redeemable, the coupon and the redeemable amount. [7725/13]
View answerAs the Deputy will be aware, on 5 February 2013 the Oireachtas passed legislation (Irish Bank Resolution Corporation Act 2013), appointing joint Special Liquidators to IBRC with immediate effect to wind up its business and operations.
At this early stage of the special liquidation Special Liquidators are engaged in intensive processes which involve inter alia, asserting control over the businesses, processes, systems and personnel of IBRC. It is important that focus is placed on assessing, reorganising and restructuring the day–to-day activities of the Bank to meet the primary objective of ensuring the purpose of the special liquidation is achieved, as this is key to ensuring that value is extracted from the liquidation.
As such the Bank is not in a position to provide the information requested by the Deputy.
I thank the Deputy for his understanding in what is a crucial phase in the liquidation.
59. Deputy Pearse Doherty asked the Minister for Finance if he will clarify the way outstanding bonds in Irish Bank Resolution Corporation will be dealt with as part of the liquidation announced on 6 February 2013. [7726/13]
View answerCertain bonds outstanding in Irish Bank Resolution Corporation will be covered under the Eligible Liabilities Guarantee Scheme (ELG Scheme) which provides for a State guarantee for eligible liabilities. To the extent other bondholders do not have the right to claim under the ELG Scheme (such as unguaranteed bondholders and subordinated bondholders), they will retain their claims according to the priority of claims in liquidation and will likely have to await the outcome of the liquidation process to recognise any payment of their claim.
60. Deputy Pearse Doherty asked the Minister for Finance if he will estimate the cost to the Central Bank of Ireland in compensating depositors at the Irish Bank Resolution Corporation for deposits up to €100,000; and if he will confirm if there is a pre-existing fund maintained by the CBI for such events; and if he will make a statement on the matter. [7727/13]
View answerI have been advised that the total deposits held by IBRC was €323 million at 31 January 2013. The Special Liquidator submitted preliminary DGS information to the Central Bank of Ireland on 12 February which estimates eligible deposits of €123 million. If the threshold for DGS qualification is mechanically applied (i.e. €100,000 per person), the payment in respect of DGS-covered deposits would be just over €30 million. However, the total DGS pay-out is likely to be significantly lower than this figure after the Special Liquidator excludes accounts such as:
- Accounts that have been legally pledged as security against other liabilities (in IBRC, NAMA or possibly other third parties),
- Accounts of Large Companies (only Small Companies, as defined in the Companies Act 1986, qualify for DGS pay-out).
It will take some weeks before the final pay-out figure will be known. The aim of the Central Bank is to pay compensation within 20 working days to depositors who have been duly verified as eligible. The Central Bank of Ireland maintains a Deposit Protection Account which will be used to fund any Deposit Guarantee Scheme pay-out. The current balance on this account is €388 million and this is funded by credit institutions who contribute 0.2% of their total deposit.
