Dáil Éireann Debate, Thursday - 3 October 2013
17. Deputy John Browne asked the Minister for Finance if he has presented to the ESM a formal case for retroactive recapitalisation of the continuing Irish banks; the timetable for the conclusion of efforts in this regard; and if he will make a statement on the matter. [41442/13]
View answerThe Deputy will be aware that the Euro-Area Heads of State or Government agreed on 29th June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism is in place involving the ECB, the European Stability Mechanism (ESM) could recapitalize banks directly. The Eurogroup meeting of 20th June 2013 agreed on the main features of the ESM’s Direct Bank Recapitalisation instrument (DBR). The instrument will come into effect when the Single Supervisory Mechanism is in place. This is not expected to take place until at least mid-to-late 2014.
There is a specific provision for retrospective recapitalisation which states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” The agreement, that we were active in negotiating, keeps open the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it. The Eurogroup has agreed that there will be strict eligibility criteria as well as a clear pecking order for the ESM DBR instrument.
Finally, it is a matter for the ESM Board of Governors (i.e. Euro area Finance Ministers) to decide on any application made for its facilities, including the DBR facility and its retrospective recapitalisation element. However, it will not be possible to make any application in respect of retroactive recapitalisation until the instrument is declared operational, which as I have said is expected to be in the second half of next year.
