I propose to take Questions Nos. 48 and 49 together.
As the Deputy is aware, prior to liquidation, IBRC’s funding profile was primarily reliant on borrowings from the Central Bank of Ireland. The majority of funds were advanced to IBRC under a Special Master Repurchase Agreement (“SMRA”), involving the sale and repurchase of the c. €25bn nominal value Promissory Notes and €796m nominal value NAMA senior bonds. IBRC also had a smaller amount of outstanding borrowing under the Eurosystem’s Main Refinancing Operation secured by other assets with a nominal value of approximately €370m. In addition, €3.46bn nominal value 2025 Irish Government Bonds also provided significant secured funding in a market repo (see Parliamentary Question No. 157 of 30 of April 2013 for further information regarding the Bank of Ireland repurchase agreement). As is typical for collateralised lending arrangements, these repurchase agreements incorporated standard market terms including the requirement to provide collateral of a value in excess of the amount of lending extended under the agreement, i.e. “excess collateral”, whereby the collateral taken as part of the repurchase agreement is priced and subject to appropriate haircuts by the respective lenders.
As the Deputy is also aware, in addition to the repurchase agreements, ELA funds of approximately €15bn were advanced by the Central Bank under a Facility Deed which benefitted from a Ministerial Guarantee. The Central Bank also had security over all the ELA lending through a floating charge over the otherwise unencumbered assets of IBRC.
Upon appointment of the Special Liquidators existing funding arrangements between IBRC and the Central Bank of Ireland (CBI) were terminated. As a result, IBRC was obligated to repurchase the collateral provided under the repurchase agreements from its lenders at prices governed by those agreements. As IBRC was unable to repurchase this collateral with cash, the lenders retained and valued the collateral in fulfilment of IBRC’s obligations under the agreements, with the value of collateral in excess of the borrowings being due back to IBRC. In effect, the Promissory Notes, the NAMA Senior Bonds, the other assets and the 2025 Irish Government Bonds, held as collateral under the various repurchase agreements, were retained by the lenders in lieu of IBRC repurchasing this collateral with cash.
Under the terms of the various repurchase agreements, the value of the collateral in excess of the borrowed amount was applied by the lenders to reduce, or “set off”, the total amount outstanding under the Facility Deed. While the values applied to individual securities held as collateral under the various repurchase agreements are commercially sensitive and so are not provided in granular detail, the combined result of these set off arrangements was to reduce the total amount outstanding under the Facility Deed from c. €15bn at the time of the liquidation to €12.928bn at the time it was acquired by NAMA.