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Banking Sector Regulation

Dáil Éireann Debate, Tuesday - 16 April 2013

Tuesday, 16 April 2013

Questions (356, 357)

Mattie McGrath

Question:

356. Deputy Mattie McGrath asked the Minister for Finance if the Central Bank of Ireland and the Financial Service Regulatory Authority of Ireland is aware of discrepancies between Allied Irish Bank's Annual Financial Report of 2008 and documents filed by Allied Irish Bank with the Company Registration Office in 2008 in relation to a first floating charge placed in favour of the Central Bank over all of AIB's right, title, interest and benefit, present and future in and to eligible securities; and if he will make a statement on the matter. [17626/13]

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Mattie McGrath

Question:

357. Deputy Mattie McGrath asked the Minister for Finance if a charge by way of a first floating charge placed in favour of the Central Bank of Ireland over all of Allied Irish Bank's right, title, interest and benefit, present and future is in and to each of the eligible securities or is in and to certain segregated securities; and if he will make a statement on the matter. [17627/13]

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Written answers

I propose to take Questions Nos. 356 and 357 together.

I have been informed by AIB that there was no discrepancy in the wording of AIB's 2008 Annual Report and the documents filed by AIB at the Company Registration Office in relation to a first floating charge placed in favour of the Central Bank over all of AIB's right, title, interest and benefit, present and future in and to eligible securities.

The Charge by way of a first and floating charge is to certain segregated securities as specified by the bank in accordance with the terms of Target 2. The charge referred to in the question is a charge made by AIB to the CBI in relation to its obligations due to participation in Target 2. Target 2 is a real time gross settlement system for the Euro, used for the settlement of central bank operations, large-value interbank transfers as well as other Euro payments. It allows for payments to be processed continuously rather than in time delayed batches.

As the participation of banks in the system generates risk to the operator of the system i.e. the Euro system of Central Banks including the Central Bank of Ireland, a requirement of the Target 2 system is a floating charge over the Bank's eligible securities. In accordance with the terms of Target 2, and as referred to in the deed of charge, the Bank specifies to the CBI which of its holdings of eligible securities provide the security from time to time. The specified or "segregated" securities must be of an amount which covers the bank's obligations to the system.

The charge is structured as a floating charge in recognition of the standard operations of banks whereby they change their available eligible securities on an on-going basis. Within the detail of the charge there is then a mechanism to allow the floating charge to cover a specific subset of the banks' securities from time to time as designated by the bank.

The deed of charge specifies the meaning of segregated to be those eligible securities which have been identified by AIB to the CBI and also specifies that where the value of the eligible securities which have been identified exceed the value of the payments being settled by AIB, then AIB can resubmit a schedule of segregated securities reducing them to meet the required value.

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