Dáil Éireann Debate, Wednesday - 20 November 2013
47. Deputy Terence Flanagan asked the Minister for Finance if he will provide an update regarding negotiations in relation to support from the European Stability Mechanism for retrospective recapitalisation of our banks; and if he will make a statement on the matter. [49615/13]
View answerThe Euro Area Heads of State or Government 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 (DBR) instrument. 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. There is a specific provision for retrospective recapitalisation included in the 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 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.
The October 2013 European Council called on the Eurogroup to finalise the detailed guidelines for ESM direct recapitalisation so that the ESM can have the possibility to recapitalise banks directly, following the establishment of the Single Supervisory Mechanism.
