Dáil Éireann Debate, Tuesday - 19 November 2013
187. Deputy Gerry Adams asked the Minister for Finance the position regarding the decision by the EU Council to reduce the role of the ESM in any future recapitalisation of banks; the way the proposed new rules will affect any retrospective recapitalisation of Irish banks; and if he will make a statement on the matter. [47690/13]
View answerI assume the question refers to the European Council conclusions following the meeting of EU Heads of State or Government in October of this year.
The Council conclusions outline the hierarchy of decision making for bank recapitalisation. It continues to provide for ESM Direct Bank Recapitalisation (DBR) as part of this process.
The ECOFIN Council agreed in June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, 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. There is a specific provision included in those main features. This provision states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” Therefore, 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 DBR instrument will come into effect when the Single Supervisory Mechanism is in place and operational. This is not expected to take place until the second half of 2014.
The Eurogroup has agreed that there will be strict eligibility criteria as well as a clear pecking order for the ESM DBR instrument, so any possible application for DBR will be determined on its own merits within the rules laid down by the ESM’s DBR instrument.
The overall framework agreed this summer builds upon the earlier Euro area Heads of State or Government agreement secured on the 29th of June 2012 and is an important step in the Eurozone’s efforts in this regard.
