Dáil Éireann Debate, Tuesday - 12 November 2013
102. Deputy Finian McGrath asked the Minister for Finance the support given in assisting banks with their bad bank assets to enable these banks to continue to service their customers and business in order that the economy can make a rapid recovery from the economic crisis. [48095/13]
View answerThe Government remains committed to ensuring a sound sustainable and innovative banking system capable of driving economic growth and job creation while providing banking services to the population at large in a way that is fair and just. Working closely with the Central Bank of Ireland, we aim to secure both financial stability and an effective banking sector, while safeguarding the interests of customers and promoting the development of financial services. The banking system must be the enabler of economic recovery by restoring public and market confidence in its financial health, management competence and ethical integrity.
A comprehensive restructuring of the banking system has been undertaken to build a new core system that is fit for purpose for the economy, businesses and households by providing new lending into the economy. Major steps have been taken to address the challenges in the banking system in order to create a robust, smaller, and better capitalised banking system that will effectively serve the needs of the Irish economy and can operate on a viable basis without recourse to the State. The State completed the recapitalisations in 2011 following a credible and fully transparent stress testing exercise at an overall cost of c.41% of Irish GDP (€64bn).
Furthermore, significant progress has been made in relation to deleveraging the banking system. System wide deleveraging targets have been surpassed both in terms of amount deleveraged and impact on regulatory capital. For AIB, non-core deleveraging is now complete having achieved the Central Bank of Ireland’s year end 2013 €20.5bn target while Bank of Ireland has completed its disposal plan and the remaining deleveraging is on target and forecast to be achieved through rundown (rather than disposal) of non-core loan books. This deleveraging will greatly assist both AIB and Bank of Ireland to re-focus their operations to areas which will support our economic recovery. The restructuring of the Irish Banking system, including the recent liquidation of IBRC, will serve to provide a secure financial system for deposits and ensure the flow of credit to Irish consumers and businesses.
As part of a wider set of measures taken to address the liquidity and solvency issues of systemically important Irish Banks, NAMA was established in late 2009 to remove from participating banks’ balance sheets problem loans secured by property and development land, the value of which had fallen steeply. In all 5 banks (AIB, Bank of Ireland, Permanent TSB, Irish Nationwide, Anglo Irish) participated in the scheme.
NAMA acquired €74bn (nominal value) of loans for €32bn representing an overall discount of 57%. NAMA paid for the loans through the issue of Government Guaranteed Senior Debt (95% of the cost) and unguaranteed subordinated debt (5%). NAMA has redeemed €7bn, to date, in Senior Debt and is on course to meet its bond redemption target of €7.5bn by the end of 2013.
