Joe Higgins
Question:12. Deputy Joe Higgins asked the Minister for Finance the payments made to date to pay for the capitalisation of the banks and all other supports given to the banks. [41478/13]
View answerThursday, 3 October 2013
Questions (12)
Written answers
As the Deputy will be aware, before this government entered office, taxpayers’ money amounting to €46.3bn was injected into the banks, in the form of capital support, most of which went into the former Anglo Irish Bank. Subsequent to the formation of the current government the banks were required to raise a total of €24bn as a result of the Central Bank’s 2011 Prudential Capital Assessment Review (PCAR). However, primarily as a result of successful private equity contributions, asset sales and burden sharing with bondholders, the Government only had to inject €16.5bn into the relevant institutions. In addition, the State acquired Irish Life for €1.3bn to complete the recapitalisation of Irish Life & Permanent, giving a total commitment of €17.8bn. In all the State’s Total Capital Investment in the Banks amounted to €64.1bn at its peak. This figure represents the gross capital or money committed to recapitalising these institutions and does not take account of revenues received directly or indirectly from the banks in return for State support, or indeed from disposals. The State has now started the process of exiting its bank investments and to date, successful disposals by the State of its bank investments include:
- The entire €1 billion holding of Contingent Capital Notes (CCN’s) in Bank of Ireland. The State disposed of its holding in the bonds at a price of 101% of their par value plus accrued interest. The transaction settled on Tuesday the 15th of January and the State was paid proceeds of €1,056 million comprising principal of €1,000 million, interest accrued of over €46 million and a profit of €10 million.
- The sale of Irish Life earlier this year for a consideration of €1.3 billion which was approximately a 30% premium to the price that was achievable when the previous bid process was suspended in November 2011. The consideration received resulted in the State recouping the full investment made by the taxpayer in Irish Life. In addition a €40 million dividend was paid to the State on completion.
Of course the State still has a sizable portfolio of banking investments which it has yet to monetise. The National Pension Reserve Fund’s (NPRF) directed portfolio in Allied Irish Bank and Bank of Ireland was valued at €8.8bn at 30 June 2013. The State also holds contingent capital investments of €2bn in AIB and PTSB and an equity position in PTSB. The NPRF to date has also received a total of €2.2 billion in cash from its Bank of Ireland investments – comprising preference share dividends, the repurchase of warrants by the Bank and the sale of ordinary shares to a consortium of private investors.
Finally, in addition to the cost of capitalisation, the State has supported the banks’ deposit and funding activities as follows:
- The Credit Institutions Financial Support Scheme (CIFS) which operated from 30 September 2008 to 29 September 2010; and,
- The Eligible Liabilities Guarantee Scheme (ELG) which operated until March 2013.
The CIFS and ELG schemes provided guarantees from the State in return for the payment of a percentage fee of the covered liabilities. A total of €4,106.6 million has been received into the Exchequer to date in fees and interest accrued from the covered banks in payment for these schemes. This is made up of €763.7 million in respect of the CIFS scheme and €3,342.9 million in respect of the Eligible Liabilities Guarantee Scheme (ELG). These amounts are expected to be offset by claims under the Eligible Liabilities Guarantee (“ELG”) scheme in relation to the liquidation of IBRC which could cost the State circa €1bn in 2013 based on best estimates. (These costs would have been incurred by IBRC at some point regardless of the transaction.)
It is the Government’s stated intention to break the link between the Sovereign and the Banks which is a desire shared by our European partners. Should an opportunity arise to sell any further investments, this will be considered having assessed the best interests of the State.