Dáil Éireann Debate, Wednesday - 23 May 2012
52 Deputy Mick Wallace asked the Minister for Finance his views on the fact that in year one the domestic banks are close to or have already reached the expected mortgage losses figure set out by the Central Bank of Ireland in last year’s stress test for the period 2011 to 2013; and if he will make a statement on the matter. [25653/12]
Amharc ar fhreagraThe Central Bank has informed me that their independent loan loss exercise, conducted by BlackRock Solutions ("BRS"), as part of the Financial Measures Programme 2011 ("FMP") and the Prudential Capital Assessment Review ("PCAR") was used to inform the capital requirements of the PCAR banks. The loan losses assumed by BRS were on the basis of nominal expected losses which banks might incur under base and adverse macro-economic scenarios over a three year horizon and assumed significant levels of collateral repossession. However, loan loss provisions recognised in the financial statements of the banks are based on the incurred loss approach (actual loss outcomes based on accounting rules) rather than on an expected loss approach. The Central Bank published in December 2011 new Impairment Provisioning and Disclosure guidelines which required the Covered Institutions to:
1. Recognise their incurred loan losses as early as possible within the context of International Financial Reporting Standards ("IFRS");
2. Adopt a more conservative approach to the measurement of impairment provisions across all loan portfolios; and
3. Significantly improve the number and granularity of their asset quality and credit risk management disclosures which will enhance users understanding of their asset quality profiles and credit risk management practices.
The Central Bank considers that the level of loan loss provisions at end-2011 is a result of both increasing arrears and the more conservative approach to impairment provisioning which has resulted in a front-loading of provisions. Notwithstanding the additional and significant provisions recognised in 2011 financial statements, loan arrears on aggregate remain within the PCAR 2011 stress case parameters.
The Central Bank continues to monitor arrears levels, impairment provisions and capital adequacy as well as implementing a number of arrears related work-streams.
53 Deputy Sandra McLellan asked the Minister for Finance his plans in the immediate future to sell parts of the AIB back to the private sector; and the amount that he would look to sell. [25633/12]
Amharc ar fhreagraAt present, AIB is undergoing a significant restructuring process and as one of the two pillar banks in the domestic economy it is natural that investors will seek to have preliminary discussions with both the bank and the State in order to better understand the underlying performance and value of the AIB franchise. The 2011 transaction completed by the State with private investors in Bank of Ireland demonstrates that international money managers remain optimistic over the outlook for the Irish economy. As and when any concrete interest is expressed by external investors in making an investment in AIB it will be carefully evaluated by my staff and the bank to ensure that taxpayers' interests are protected at all times.
54 Deputy Michael Colreavy asked the Minister for Finance if he will provide an update on the promissory note; the timeline of the transfer of the Government bond from National Asset Management Agency to the Bank of Ireland; the date of the planned Bank of Ireland EGM; and the process that will be undertaken if the Bank of Ireland board refuses to endorse the procedure that he has planned. [25643/12]
Amharc ar fhreagraAs the deputy is aware, Bank of Ireland (the "Bank") announced on 29 March 2012 that the Bank had reached a conditional agreement to conduct a securities repurchase transaction with IBRC. The Bank stated: “As the transaction is considered to be a related party transaction under Listing Rules, it is subject to independent stockholder approval. A circular containing additional details of the transaction and the date of the proposed Extraordinary General Court will be posted to stockholders once the circular has been approved by the UK Listing Authority and Irish Stock Exchange. It is anticipated that the transaction will become effective following satisfaction of all pre-conditions and independent stockholder approval.”
This is a commercial transaction between the Bank and IBRC. The Bank has stated in their announcement on 29 March 2012 that they will issue a circular and schedule and Extraordinary General Court (the "EGC") in due course.
As stated by the Bank on 29th March, the Bank has reached a conditional agreement to conduct a securities repurchase transaction with IBRC. However as already stated the transaction is subject to stockholder approval.
