Dáil Éireann Debate, Thursday - 21 February 2013
101. Deputy Michael McGrath asked the Minister for Finance if consideration had been given prior to the decision to liquidate IBRC for the company to pay a dividend to the State from the annual interest it received under the promissory note arrangement as a means of reducing the annual cost associated with it; and if he will make a statement on the matter. [9526/13]
View answerPrior to liquidation, IBRC maintained a buffer above minimum capital requirements which allowed it to operate in a manner that met the objective of working out its loan book. Conditions in relation to distributable reserves, as set out in the Companies (Amendment) Act 1983, restricted the ability of IBRC to make dividend payments.
Importantly, the decision to liquidate IBRC was based on a number of factors including removing IBRC from the financial landscape, ending the need for exceptional liquidity assistance in the Irish banking system and the inherent risk associated with short term borrowings which had to be rolled over on a fortnightly basis. The liquidation of IBRC has significant benefits for the State as it goes a long way towards addressing the systemic liquidity issue in the Irish banking system and substantially improves the debt position of the State; spreads the cost of the promissory notes from a weighted average life of c. 7-8 years to c.34-35 years at a lower funding cost for the State, resulting in significant annual interest savings; means a reduction in the underlying deficit of c.€1bn per annum in the coming years, reducing the forecast deficit by c. 0.6% of GDP annually; will reduce the General Government debt over time; and will materially improving our ability to regain access to the bond markets and exit the Troika programme.
