Dáil Éireann Debate, Tuesday - 5 March 2013
165. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the benefits of replacing the promissory notes extant at the Educational Building Society, part of the Allied Irish Banks group, with long term government bonds. [11350/13]
View answerThe Deputy will be aware that the State injected €875m of capital into the EBS Building Society (EBS) in order for it to meet regulatory requirements. Of this total amount, €625 million was by way of two separate subscriptions for Special Investment Shares, while €250 million was provided by means of a Promissory Note. The terms of the EBS Promissory Note provide, inter alia, that ten per cent of the amount outstanding as at the end of 2010 shall be paid each year until the note is paid off in full. This equates to €25 million per annum, with the next annual payment to be made on 17 June 2013.
Given that the EBS Building Society was acquired by Allied Irish Banks (AIB) which is a systemically important bank to the Irish economy, compared to the wind-down situation at IBRC, the Government is not currently considering a restructuring of the EBS Promissory Note. As the Deputy is aware, the annual repayments of the EBS Promissory Notes are made up of capital and interest elements. Any changes to the repayment scheduling of the capital balance will have an impact on the interest payments as would any assumptions around how the funding was replaced, interest rate changes and other funding considerations. Differing assumptions around these metrics can have a material impact on the ultimate valuation and it is subject to a wide range of possible outcomes. As detailed above, the Deputy will be aware that the EBS Promissory Notes are significantly smaller in scale that the previous Promissory Note arrangement for IBRC.
