Dáil Éireann Debate, Wednesday - 14 January 2015
166. Deputy Catherine Murphy asked the Minister for Finance if it is still his policy to seek retrospective recapitalisation of formerly guaranteed institutions; the progress made to date; his views on comments made last month (details supplied) that the health of such banks now points towards a partial selling off of Government stakes; if this course of action is being considered; and if he will make a statement on the matter. [1648/15]
View answer172. Deputy Catherine Murphy asked the Minister for Finance if an application under the direct recapitalisation instrument of the European Stability Mechanism treaty to attain a retrospective recapitalisation of certain Irish financial institutions since the treaty has been constituted; if not, his plans to do so; when it will happen; if this option has been ruled out; and if he will make a statement on the matter. [1717/15]
View answer181. Deputy Catherine Murphy asked the Minister for Finance the discussions and or meetings he has held in the past six months with the European Central Bank and eurozone Ministers for Finance regarding the stated Government policy of seeking retrospective recapitalisation of formerly covered financial institutions; if he has conveyed any change in policy in this regard to them; and if he will make a statement on the matter. [1780/15]
View answerI propose to take Questions Nos. 166, 172 and 181 together.
As you will be 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, involving the ECB, is in place and operational, the European Stability Mechanism (ESM) could recapitalize banks directly.
As Minister for Finance, I attend regular meetings of the ECOFIN, the Eurogroup, and the Board of Governors of the European Stability Mechanism. The introduction of the ESM's Direct Recapitalisation Instrument (DRI), has been discussed on a number of occasions at those meetings.
On 8 December 2014, the ESM Board of Governors approved the creation of the DRI in accordance with Article 19 of the ESM. The operational framework for the DRI, approved on the same date, includes a specific provision in relation to the retroactive application of the instrument. The 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.
However, 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 support Irish banks again and the market value of our investments has improved accordingly.
My overall objective in relation to the State's investment in the banks is to maximise the return to the Irish taxpayer over time. In line with this objective my Department is working with AIB, the institution where €20.8 billion has been invested, on reconfiguring the capital structure. I have also appointed Goldman Sachs International to provide financial advice. The focus will be on ensuring that the best decisions are made regarding potential capital restructuring options and sequencing in order to maximise the return of cash to the State from our AIB investments over time. While this is just the start of the process, it is an essential first step on the road to recovering value for the taxpayer.
All options remain on the table and it is too early to specify what steps will be taken next or indeed to put a timeline on decisions.
