Denis Naughten
Ceist:8 Mr. Naughten asked the Minister for Finance if he has satisfied himself with the financial prospects of ACC bank; and if he will make a statement on the matter. [23625/00]
Other Questions - Bank's Financial Prospects.
The board of ACC Bank undertook a fundamental review of the bank, which was submitted to me in May this year. The bank is improving its competitive position by implementing a programme of restructuring and rationalisation with the ultimate objective of ensuring a change in ownership for the bank.
In connection with the restructuring of the bank, I have sanctioned the negotiation of an employee share ownership plan and I understand that negotiations have commenced between the management and staff.
The bank itself plans to move away from unprofitable lines in general retail banking which demand scale and to concentrate on business banking, which has proven more attractive for the bank. ACC also plans to change the way it does business by moving away from being primarily a manufacturer of financial products to being an adviser-consultant on and a distributor of finan cial products. A key element in the plan is to deliver a significant reduction in the cost:income ratio. Successful implementation of this business strategy should improve the bank's financial prospects.
In 1999, ACC's underlying profits before tax and exceptional items were about £19.3 million. The bank's recent DIRT settlement of £17.9 million is expected to lead to a small net loss for the current year, but the underlying position is still profitable. On the basis of the interim results on 30 June 2000, shareholders' funds stood at IR£128.8 million. Allowing for growth in business, the capital adequacy ratio is expected to be comfortably in excess of the Central Bank's regulatory requirements.
I have communicated to the board that ACC Bank has my full support in preparing to meet the challenges of an increasingly competitive marketplace. I am satisfied that the underlying prospects for ACC, combined with the financial improvements from restructuring, will allow it to continue to trade profitably and to prepare for a successful change in ownership. I expect to receive a business plan from the company setting out its strategy to achieve this objective early next year.
The Deputy will be aware that I will be bringing legislation before the House which will involve an increase in the amount of share capital I can subscribe. It will also provide for an ESOP and enabling provisions in relation to the sale of the bank.
Does the Minister believe the pending litigation with Bank of Scotland, the half yearly loss of £9.3 million and the handling of the recent Four Seasons loan put a serious question mark over the sale of ACC Bank?
I am not in a position to comment on individual cases. ACC Bank is legally debarred from communicating to me the information which relates to the second part of Deputy Naughten's supplementary question.
Has the Minister sought assurances from ACC Bank regarding the possibility of a requirement of additional State funding in the light of current liabilities?
Following the publication of the first report of the parliamentary inquiry into DIRT, I have changed the ACC reporting procedure. I now meet the chairman of ACC on a quarterly basis and officials of my Department meet the chief executive and others, at least on a quarterly basis. I have had communications with the ACC on many occasions regarding various matters which are in the public domain.
The interim results of June 2000 show shareholders' funds of £128.8 million. Allowing for growth, the capital adequacy ratio is expected to be comfortably in excess of the Central Bank's regulatory requirements. I will bring a short Bill before the House in the near future as well as a Bill dealing with the ICC. These will allow the Minister to subscribe more share capital.
I do not question what the Minister said. However, has he sought assurances from the chairman regarding whether ACC would require additional State funding? Has he raised such questions with ACC Bank?
This is a very exact science. The figures are clear from the balance sheet. If additional State funding is required the figures show that clearly and the House usually allows legislation to allow the Minister to subscribe more share capital. That is not a problem.
The Deputy is aware that in the past two years ACC Bank has been involved in high profile cases, particularly in relation to the DIRT inquiry. I have had a number of communications with the chairman of ACC and I meet him regularly. The bank is preparing a new business plan. The difficulties regarding DIRT occurred when the present chairman was not a member of the board. I thank the chairman, Mr. Pádraig O'Connor for the time and effort he has devoted to ACC. It is far above what he envisaged when he accepted the position.
The matters referred to by the Deputy are not a problem. If they become a problem I can correct it quite easily.
The bank recently stated its intention to withdraw from a large number of corporate deals following a recent controversial loan. Does this not raise serious concerns with the Minister? Has he raised concerns regarding liability with ACC?
The job of any bank is to conduct its affairs in a prudent manner. Not all deals can be totally profitable. It is also in the nature of the banking business to suffer losses. I am satisfied that the changes brought about in ACC will address any past shortfalls in reporting arrangements.
Will the Minister answer yes or no?