Dáil Éireann Debate, Wednesday - 10 March 2010
117 Deputy Joanna Tuffy asked the Minister for Finance the way the State takeover of banks here would have dried up funding for the banks and the State; if he envisages such problems if and when the State takes majority control of the same banks post National Asset Management Agency and post recapitalisation; and if he will make a statement on the matter. [11654/10]
Amharc ar fhreagraFunding for banks depends on many factors, including current market conditions, collateral available to the banks, and capital and ownership structures of the banks. The Financial Regulator and the Central Bank, in conjunction with my Department and the NTMA, keep the liquidity and funding of the Irish banking system under constant review.
118 Deputy Ciarán Lynch asked the Minister for Finance the cost to the Exchequer and the 2010 cost of providing financial support for two banks (details supplied); and if he will make a statement on the matter. [11634/10]
Amharc ar fhreagraIn 2009, the Government invested €3.5bn each in AIB and Bank of Ireland in return for preference shares. This recapitalisation programme was funded from the National Pensions Reserve Fund. €4 billion came from the Fund's current resources while €3 billion was provided by means of a front-loading of the Exchequer contributions for 2009 and 2010. With regard to further possible State recapitalisation of either AIB or Bank of Ireland I understand that both institutions are actively exploring the option of capital raising in the private markets and this would be the Government's preferred option of raising capital. However, I have consistently stated that should some further State recapitalisation of the banks be necessary as a result of NAMA, the Government will do this by way of equity capital.
119 Deputy Ruairí Quinn asked the Minister for Finance the impact he expects bank recapitalisation will have on the Exchequer and the general Government balance in 2010 and in 2011; the impact he expects bank recapitalisation will have on the National Pensions Reserve Fund in 2010 and in 2011; and if he will make a statement on the matter. [11643/10]
Amharc ar fhreagraThe recapitalisation of Anglo Irish Bank in 2009 was funded by Exchequer borrowing in 2009. Following consultation with Eurostat, the injection was classified as a financial transaction, and therefore, did not affect the General Government Balance. As a general rule of thumb, each €1 billion extra borrowed is estimated to cost the Exchequer about €50 million per year in interest costs. The recapitalisations of both AIB and Bank of Ireland were made by the NPRF from their existing assets, and as such, had no impact on the Exchequer Borrowing Requirement. As these injections were also classified as financial transactions, there was no impact upon the General Government Balance, and as the NPRF used its existing assets to make the injection.
As the nature of any future recapitalisation is as yet unknown, it is not yet possible to assess exactly the effect on the Exchequer Balance and the General Government Balance. However, it would be expected that any further capital injections into financial institutions would take the form of a financial transaction, which would be treated in the same way as previously. In the case of the National Pension Reserve Fund, it is not possible to assess what effect any future recapitalisations may have, as the source of the funding for such recapitalisations has not yet been established.
