Thursday, 29 Jan 2015

Written Answers Nos 50-58

State Banking Sector

Questions (50)

Pearse Doherty

Question:

50. Deputy Pearse Doherty asked the Minister for Finance the amount of deferred tax assets held by each State backed bank; and if he will make a statement on the matter. [4101/15]

Written answers

Minister for Finance

As per the most recent publicly available financial information, the deferred tax assets at each of the banks at 30 June 2014 were Allied Irish Banks: €4.0bn; Bank of Ireland: €1.7bn; Permanent tsb: €0.4bn.

Banking Sector

Questions (51)

Pearse Doherty

Question:

51. Deputy Pearse Doherty asked the Minister for Finance if Permanent TSB has contracted external consultants to advise on raising capital; and if so, the company involved; the value of the contract; and if he will make a statement on the matter. [4102/15]

Written answers

Minister for Finance

Permanent TSB has informed me that in line with standard market practice for a capital markets transaction of this nature, they have appointed a number of key financial, legal and accounting advisors to advise on significant aspects of the transaction.  These advisors are: Deutsche Bank, Davy, A&L Goodbody, Clifford Chance, Allen & Overy, KPMG and PwC.

As the deputy is aware the values and details of the contracts are commercially sensitive in nature and therefore cannot be disclosed.

Central Bank of Ireland Expenditure

Questions (52, 57, 58, 60, 65)

Pearse Doherty

Question:

52. Deputy Pearse Doherty asked the Minister for Finance the effect the Central Bank of Ireland's holding of the Anglo Irish Bank bonds will have on Ireland's ability to avail of quantitative easing; and if he will make a statement on the matter. [4104/15]

Michael McGrath

Question:

57. Deputy Michael McGrath asked the Minister for Finance if the implementation of quantitative easing by the Central Bank of Ireland will be constrained by its current hold of Exchequer debt as a result of the promissory note arrangement; if these bonds will be specifically excluded from the calculation of the maximum level of quantitative easing that can be undertaken by the Central Bank of Ireland; and if he will make a statement on the matter. [4201/15]

Michael McGrath

Question:

58. Deputy Michael McGrath asked the Minister for Finance the options and process for the Central Bank of Ireland for implementation of quantitative easing at a national level; and if he will make a statement on the matter. [4202/15]

Michael McGrath

Question:

60. Deputy Michael McGrath asked the Minister for Finance if the Central Bank of Ireland will need to buy the bonds of other eurozone states in a reciprocal arrangement whereby they would buy Government bonds to maximise the potential of quantitative easing; and if he will make a statement on the matter. [4204/15]

Lucinda Creighton

Question:

65. Deputy Lucinda Creighton asked the Minister for Finance if Irish Government bonds held by the Central Bank of Ireland as a result of the promissory note will not reduce the volume of Government bonds the Central Bank of Ireland may purchase as part of the newly announced European Central Bank, ECB, quantitative easing programme; if the Government bonds held by the Central Bank of Ireland as part of the promissory note deal no longer need to be sold as previously agreed in view of the changed ECB policy; and if he will make a statement on the matter. [4282/15]

Written answers

Minister for Finance

I propose to take Questions Nos. 52, 57, 58, 60 and 65 together.

At the outset, I want to stress that the formulation of monetary policy in the euro area both its design and implementation is a matter for the Eurosystem, which comprises the European Central Bank (ECB) and the nineteen National Central Banks of the participating Member States.

Under the Treaty, the Eurosystem is independent in the formulation of monetary policy, so I will not comment on the likely composition of asset purchases by the Irish Central Bank.

Price stability in the euro area has been defined as annual inflation of close to but not exceeding 2 per cent (inflation being measured by the Harmonised Index of Consumer Prices).  Inflation in the euro area has been below levels consistent with price stability for some time and, in fact, moved into negative territory in December.

With policy rates effectively at zero per cent, the Governing Council of the ECB decided last week to expand its asset purchases to include inter alia sovereign bonds issued by the participating Member States in order to ease monetary and financial conditions further.

From an Irish perspective, the Central Bank of Ireland (CBI) is clearly part of the Eurosystem and will therefore be involved in implementing the monetary policy that has been decided upon.

The ECB has indicated that its asset purchase programme in relation to sovereign bonds will be restricted to bonds with a remaining maturity of greater than 2 but less than 30 years.  It has also indicated limits on the Eurosystem's holdings of any one issuer's bonds, taking into account existing holdings.  These limits refer to the same 2 to 30 year maturity window.  To be precise, holdings within the 2 to 30 year remaining maturity window will not exceed 33 per cent of an issuer's tradeable bonds within the same window.  The majority of the bonds acquired by the CBI in exchange for the Promissory Notes have more than 30 years remaining.  Currently, this is the case for €19 billion out of the original €25 billion nominal issuance. Therefore, the holding of these bonds by the CBI will, in practice, have no impact on the amounts that can be purchased by the CBI.  While other bonds within the 2-30 year maturity window that are already held by the CBI and other National Central Banks will be taken into account for the purposes of calculating the amounts that can be purchased, I understand that this still leaves ample room for participation by the CBI in the asset purchase programme.

I understand that the Bank's disposal strategy for its Special Portfolio - those bonds acquired following the liquidation of IBRC and the exchange of the Promissory Notes remains as previously announced, i.e. it will continue to dispose of the bonds as soon as possible, provided conditions of financial stability permit.  Disposals may or may not impact on the purchasable amounts under the asset purchase programme depending on the maturity of the bonds sold.

NAMA Portfolio

Questions (53)

Róisín Shortall

Question:

53. Deputy Róisín Shortall asked the Minister for Finance further to Parliamentary Question No. 252 of 20 January 2015, if he will provide a breakdown of the 5,000 units referred to in the second paragraph of his reply in terms of the numbers that are let for social housing, reserved for social housing, and available on the open market. [4147/15]

Written answers

Minister for Finance

I will expand upon my answer to Parliamentary Question No. 252 of 20 January 2015.

I am advised by NAMA that of the approximately 14,000 completed residential units currently within the Agency's portfolio, approximately 9,000 are rented in the private rental market.  The remaining 5,000 are either (a) let or reserved for social housing or (b) are available on the open market through professional agents appointed by NAMA debtors and receivers to either rent or buy.

Of the 5,000 units, approximately 600 residential properties are currently leased by NAMA debtors and receivers or directly by its social housing SPV, NARPS, to local authorities and approved housing bodies for social housing.  

An additional 1,200 residential properties are reserved for social housing.  These are properties for which local authorities have confirmed demand and which are currently in the contractual process for purchase or lease for social hosing.  

The remaining 3,200 completed available properties are currently on the market through NAMA debtors or receivers for sale or rent.  A substantial proportion of these properties are managed as part of NAMA's portfolio of smaller debtor connections and many of them are located in rural areas and towns where demand remains constrained.  The Deputy may wish to note, in this regard, that many of these properties were originally made available by NAMA to local authorities for social housing but were ultimately deemed unsuitable by local authorities based on criteria such as their location and on wider planning and housing policy considerations.

For the Deputy's information, NAMA has to date made over 5,700 houses and apartments available for social housing.  Local authorities, through the auspices of the Housing Agency, have confirmed demand for just over 2,200 of these properties, of which 1,068 have already been delivered through a combination of purchase and long-term leasing arrangements for social housing. This includes the 600 units referred to above which are currently leased for social housing. Further detail on this initiative is available on the NAMA website, www.nama.ie.

Sovereign Debt

Questions (54)

Michael McGrath

Question:

54. Deputy Michael McGrath asked the Minister for Finance the State’s current exposure to Greek government debt; and if he will make a statement on the matter. [4198/15]

Written answers

Minister for Finance

Since May 2010, the euro area Member States and the International Monetary Fund (IMF) have been providing financial support to Greece through an Economic Adjustment Programme in the context of a sharp deterioration in its financing conditions.

The Eurogroup agreed to activate stability support to Greece via bilateral loans centrally pooled by the European Commission. At year-end 31 December 2014 the total amount owing to Ireland on the Greek loan facility was €347,437,121.03.

The National Treasury Management Agency has advised that none of the Exchequer cash and related financial asset investments are invested in Greek sovereign debt.

EU Meetings

Questions (55)

Michael McGrath

Question:

55. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 69 of 22 January 2015, if he will support the idea of a European debt conference; if he will bring a proposal for such a conference to his ECOFIN colleagues; and if he will make a statement on the matter. [4199/15]

Written answers

Minister for Finance

As I pointed out previously, my view is that when countries encounter difficulties, a process of negotiation is always better than one of conflict.

Specifically in the case of euro area Member States, all programme negotiations have been conducted within the Eurogroup and ECOFIN, with IMF involvement as appropriate.  My view is that these are the appropriate fora for resolving outstanding issues.

Government Bonds

Questions (56, 59)

Michael McGrath

Question:

56. Deputy Michael McGrath asked the Minister for Finance the expected impact on Ireland’s annual debt servicing costs in 2015 and 2016 from the quantitative easing plan announced by the European Central Bank; and if he will make a statement on the matter. [4200/15]

Michael McGrath

Question:

59. Deputy Michael McGrath asked the Minister for Finance if quantitative easing will impact on the National Treasury Management Agency’s stated policy for bond auctions this year; if they will be issuing a 30-year bond to capture the benefits of current low rates; and if he will make a statement on the matter. [4203/15]

Written answers

Minister for Finance

I propose to take Questions Nos. 56 and 59 together.

The National Treasury Management Agency (NTMA) is responsible for borrowing on behalf of the Government.

On 22 December 2014, the NTMA announced that it plans to issue €12 to €15 billion of long-term bonds over the course of 2015. As a first step in that process, the NTMA, on 7 January 2015, raised €4 billion through the syndicated sale of a new seven-year benchmark bond. The funds were raised at a yield of 0.867%, a historic low.

On 12 January 2015, the NTMA announced its Q1 2015 auction schedule. Bond auctions are scheduled for Thursday 12 February and Thursday 12 March, subject to market conditions. The details are to be announced on the Monday prior to each auction.

The NTMA today 29 January 2015 completed an auction of Irish Treasury Bills, selling the target amount of €500 million. The Treasury Bills, which have a maturity of six months, were sold at an annualised yield of 0.00%. Total bids received amounted to €1.745 billion which was 3.49 times the amount on offer.

Ireland currently has thirteen benchmark bonds with maturities across the yield curve out to 2030, which incorporates the new 15-year benchmark bond issued in November 2014.  As part of its regular ongoing funding strategy, the NTMA considers issuance of various maturities subject to market developments and investor appetite.  

The NTMA will closely monitor the market following the announcement of the expanded asset purchase programme by the European Central Bank (ECB) on 22 January. In recent months, prior to the ECB announcement, Irish Government bond yields declined steadily. It is reasonable to suggest that the expectation, on the part of financial market participants, of an announcement by the ECB that it would purchase sovereign bonds was a contributory factor in the decline. The initial reaction from the market since the ECB announcement has seen a further drop in yields. The ten-year benchmark bond, maturing in March 2025, traded at 1.07% on 26 January compared to 1.24% at close of business on 21 January, the day before the announcement.

The NTMA advise that they cannot be definitive about the impact of the ECB's expanded asset purchase programme on Ireland's future debt servicing costs, as a range of other factors also matter. However if one of the implications of the programme is that bond yields remain low, this would be positive for debt servicing. The NTMA's funding strategy will continue to take account of the quantum of the funding requirement, market conditions, debt servicing implications, and feedback from Ireland's Primary Dealers in government bonds.

Questions Nos. 57 and 58 answered with Question No. 52.