Dáil Éireann Debate, Tuesday - 8 April 2014
83. Deputy Gerry Adams asked the Minister for Finance his views on the lack of progress at the Brussels EU summit meeting on direct bank recapitalisation of Irish banks; and if he will make a statement on the matter. [14772/14]
View answer112. Deputy Brian Stanley asked the Minister for Finance his strategy for recouping money paid into our pillar banks through the direct recapitalisation instrument of the ESM; the extent to which the instrument could retroactively recapitalise the pillar banks based on the June 2013 main features of the operational framework and way forward. [16286/14]
View answerI propose to take Questions Nos. 83 and 112 together.
The European Stability Mechanism's (ESM) Direct Recapitalisation Instrument (DRI) was not on the Agenda for the March meeting of the Euro-area Heads of State or Government (HoSG).
As the Deputies are aware, the Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns", and that when a Single Supervisory Mechanism (SSM), involving the ECB, is in place and operational, the European Stability Mechanism could recapitalize banks directly.
The Eurogroup meeting on 20th June 2013 agreed on the main features of the European Stability Mechanism's (ESM) Direct Recapitalisation Instrument (DRI). The objective of the ESM's DRI will be to preserve the financial stability of the euro area as a whole and of its Member States in line with Article 3 of the ESM Treaty, and to help remove the risk of contagion from the financial sector to the sovereign by allowing the recapitalisation of institutions directly.
There is a specific provision included in the main features of the DRI, which 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 European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.
The operational framework of the DRI has been discussed at ministerial level and the aim is to complete this discussion as soon as possible in order to allow the ESM Member States sufficient time to complete any necessary national procedures before the SSM is in place and operational later this year. It will not be possible to make a formal application to the ESM for, nor to establish the extent of, retrospective recapitalisation in advance of the Instrument being in place.
However, both I and my Government colleagues will ensure that Ireland's case for retrospective direct recapitalisation is made at all levels as appropriate. I remain confident that the commitment made by the Euro-area Heads of State or Government in June 2012 to break the vicious circle between banks and sovereigns will be respected.
