As the deputy is aware, there were two separate but related repurchase agreements in place at the time of IBRC’s liquidation concerning the 2025 Irish Government Bonds; one between IBRC and Bank of Ireland (“the IBRC repo”) and another between Bank of Ireland and the Central Bank of Ireland as part of normal Eurosystem refinancing operations. Under these repurchase agreements the 2025 Government Bonds were pledged as collateral by IBRC to Bank of Ireland (under the IBRC repo), and further by Bank of Ireland to the CBI (under the normal Eurosystem refinancing operations) in return for cash which was provided from the Eurosystem to Bank of Ireland and further from Bank of Ireland to IBRC (under the IBRC repo). As a result, at the time of the IBRC liquidation, the CBI held the 2025 Irish Government Bonds as collateral on behalf of the Eurosystem and IBRC held the cash proceeds of the repurchase agreement between it and BOI. The Bank of Ireland held neither bonds nor cash, but rather obligations for payment of cash and receipt of bonds with IBRC and offsetting obligations with the CBI. The liquidation of IBRC constituted an event of default under the IBRC repo with BOI. As a result, IBRC was obligated to repurchase the bonds from the Bank of Ireland at a repurchase price governed by the IBRC repo. As IBRC was unable to repurchase these bonds from Bank of Ireland with cash, Bank of Ireland retained the 2025 Irish Government Bonds in fulfilment of IBRC’s obligations under IBRC repo. In effect, the 2025 Irish Government Bonds, held as collateral by the Bank of Ireland under IBRC repo, were retained by Bank of Ireland in lieu of IBRC repurchasing these bonds with cash.
After the 2025 Government bond repo agreement between IBRC and Bank of Ireland terminated, the CBI purchased the bond. This bond was placed in the trading portfolio of the Central Bank, along with the bonds acquired in exchange for the Promissory Notes, and these bonds will be sold as soon as possible, provided conditions of financial stability permit.
To specifically respond to the points raised in your question, I am informed by the Bank of Ireland that, as a consequence of the termination of the IBRC repo and subsequent sale of the bonds to the CBI, the Bank of Ireland did not incur a gain or loss on these transactions.
In addition, the funding provided to Bank of Ireland by the Eurosystem through the repo with CBI was further provided by Bank of Ireland to IBRC under the IBRC repo. IBRC’s non-payment of that funding back to Bank of Ireland upon default on the IBRC repo did not result in financing being retained by Bank of Ireland, as this financing had been passed to IBRC under the IBRC repo and was not repaid to Bank of Ireland upon the termination of the IBRC repo.
Finally, the financing provided to Bank of Ireland by the Eurosystem under the repo through the CBI was provided under ordinary open market operations.
