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Banks Recapitalisation

Dáil Éireann Debate, Thursday - 16 January 2014

Thursday, 16 January 2014

Questions (30)

Pearse Doherty

Question:

30. Deputy Pearse Doherty asked the Minister for Finance if he proposes to apply for a retroactive recapitalisation of Ireland’s banking debt in 2014 through the ESM; and if he will make a statement on the matter. [1651/14]

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Written answers

The Euro Area Heads of State or Government (EU HoSG) 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 could, following a regular decision, have the capacity to 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 DBR instrument will come into effect when the SSM is operational. There is a specific provision included in those main features that provides for retroactive recapitalisation. 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 SSM is expected to be place and operational towards the end 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 in Summer 2013 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.

I remain confident that the commitment made by the EU HoSG in June 2012 to break the vicious circle between banks and sovereigns will be respected.

The question of whether Ireland may apply for retroactive recapitalisation of our banks has yet to be decided upon and will, in due course, be a matter for Government, with any recommendation based on what is in Ireland’s best interest.

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