Dáil Éireann Debate, Wednesday - 22 October 2014
70. Deputy Brendan Griffin asked the Minister for Finance his plans for the remainder of the thirty-first Dáil to receive a deal on Ireland's retrospective banking debt; and if he will make a statement on the matter. [40613/14]
View answerThe 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, involving the ECB, is in place and operational, the European Stability Mechanism, the ESM, could recapitalize banks directly.
On 10 June 2014 the euro area Member States reached a preliminary agreement on the operational framework for the ESM's Direct Recapitalisation Instrument (DRI). This includes a specific provision in relation to the retroactive application of the instrument. 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.
What is now required is a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty. The aim is to have this process completed by early November this year, subject to completion of national approval procedures. For Ireland the European Stability Mechanism (Amendment) Bill 2014, which is currently passing through the Houses and is expected to be enacted by the end of this month, will fulfil this purpose. Once the Single Supervisory Mechanism is in place and operational, on 4 November this year, it is expected that the ESM Board of Governors will then take a decision to include the DRI among the list of ESM instruments.
In relation to retrospective recapitalisation, the draft guideline states that the potential application of the instrument for this purpose should be decided on a case-by-case basis and by mutual agreement. As I have stated previously, it will not be possible to make a formal application to the ESM for retrospective recapitalisation before the Instrument is in place as expected in November.
However I would remind the Deputy that unlike back in 2012, the ESM is no longer the only option open to us to recover the money provided to recapitalise our banks. Investors are now willing to invest in Irish banks again and the market value of our investments has improved accordingly.
The decision on any application once the instrument is in place is a matter of timing. I believe that in Europe a strategic approach tends to deliver and I therefore intend to keep the option of a retroactive recapitalisation on the table with the timing of any application to be decided in due course.
