Written Answers Nos. 187-208
187. Deputy Gerry Adams asked the Minister for Finance the number of persons in receipt of pensions from the Irish Bank Resolution Corporation which are in excess of €100,000; the names of those who are in receipt of the pensions and the sums they receive on an annual basis. [49416/12]
Amharc ar fhreagraI have been advised by IBRC that the number of retired employees currently in receipt of a defined benefit pension from the former Anglo Irish Bank and INBS in excess of €100,000 is 8. Due to the Bank’s obligations under Data Protection Acts 1988 and 2003 the names of these individuals and the annual sums they receive cannot be disclosed.
It should be noted that all bar 1.5% of current IBRC employees are on a defined contribution pension or no pension scheme as opposed to a defined benefit pension scheme. The future value of their annual pension is therefore not guaranteed.
188. Deputy Éamon Ó Cuív asked the Minister for Finance the extra cost to the Exchequer in income forgone of granting 30% and 35% mortgage interest relief TRS to all householders who purchased house between 1 January 2000 and 1 January 2012, respectively; and if he will make a statement on the matter. [49424/12]
Amharc ar fhreagraI am informed by the Revenue Commissioners that a basis for compiling the estimates requested by the Deputy could not be compiled without carrying out a significant development of the Revenue Commissioners’ TRS computer system at a cost which would be prohibitive in terms of the resources required. In addition, as the Deputy will be aware, following the Budget 2010 changes, only interest payable on qualifying home loans taken out on or after 1 January 2004 qualifies for tax relief. Interest payable on loans taken out prior to that date no longer qualifies for tax relief.
Notwithstanding the above, if the proposed rate of 35% as mentioned in the question was extended and confined to those first time buyers who took out their first mortgage in the period 2004 to 2008 for whom the rate of tax relief was increased in Budget 2012, the estimated full year cost to the Exchequer would be of the order of €55 million.
189. Deputy Maureen O'Sullivan asked the Minister for Finance his plans to promote the incentive involving negative equity mortgages offered by Bank of Ireland and other banks whereby a home owner could sell their house and move to a more suitable house, adding their savings to the purchase price and taking the mortgage with them at its existing level; the reason this incentive is not being rolled out on a greater scale to help curb problems with the mortgage arrears crisis here; and if he will make a statement on the matter. [49458/12]
Amharc ar fhreagraThe Central Bank has advised me that some lenders are already offering this product, or about to, but to date none are actively marketing it. Other lenders have committed to reconsidering the issuing of such products. The decision to introduce a negative equity type product is a matter for each mortgage lender. However any institution offering such a mortgage facility may do so only in accordance with criteria set out by and with the prior approval of the Central Bank. The Central Bank also advised me that, following the issue of the report of the Inter-Departmental Mortgage Arrears Working Group in September 2011, which included a recommendation on trade down mortgages, several lenders contacted the Central Bank with regard to offering negative equity mortgages. This included trade up, trade down and trade down where the customer was in arrears. While the provision of negative equity mortgages may facilitate people moving homes and generate transactions in the housing market, it is not expected that there will be a large take up of this product. All sales must comply with the affordability and suitability provisions set out in the Central Bank’s Consumer Protection Code.
I expect that the Central Bank will continue to assess the impact of these measures as part of their general oversight of the banks’ activities in the mortgage market.
190. Deputy Richard Boyd Barrett asked the Minister for Finance the reason Permanent TSB are not offering the mortgage arrears solutions set out in the Government's personal insolvency initiative, that is, mortgage to rent scheme; and if he will make a statement on the matter. [49463/12]
Amharc ar fhreagra222. Deputy Robert Troy asked the Minister for Finance if he will provide a definitive timeline as to when Permanent TSB will be rolling out the mortgage to rent scheme. [49524/12]
Amharc ar fhreagraI propose to take Questions Nos. 190 and 222 together.
The Deputies will be aware that last October the Government published the Report of the Inter-Departmental Working Group on Mortgage Arrears (“Keane Report”). The ‘Keane Report’ recommended, as one of a range of measures that could be deployed to assist distressed mortgage holders, the introduction of a mortgage to rent scheme for appropriate cases.
The Minister for Housing and Planning formally launched the mortgage to rent scheme on a nationwide basis at the end of June 2012. It is now one of the options available in appropriate cases in the roll-out of the lender’s Mortgage Arrears and Resolution Strategies.
Permanent TSB has advised me that the ‘Mortgage to Rent’ scheme is one of the institution’s long term treatment options for distressed home loan customers. It is being piloted with selected customers at present in conjunction with the Housing Agency as part of the implementation of the bank’s MARS Strategy with Central Bank oversight. The bank has further advised me that full roll-out of the ‘Mortgage to Rent’ scheme will commence from January 2013.
191. Deputy Pearse Doherty asked the Minister for Finance in respect of Allied Irish Bank, if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49474/12]
Amharc ar fhreagra192. Deputy Pearse Doherty asked the Minister for Finance in respect of the Educational Building Society, if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49475/12]
Amharc ar fhreagraI propose to take Questions Nos. 191 and 192 together.
In relation to the public interest directors in EBS, Mr. Anthony Spollen and Ms. Ann Riordan were appointed in January 2009. However, these directors resigned from their positions on 30 June 2011, prior to the acquisition of EBS Building Society by AIB on 1 July 2011. EBS now operates as a subsidiary of AIB. In relation to the public interest directors appointed to AIB since 2008, Mr. Declan Collier and Mr. Dick Spring were appointed in January 2009. However, Mr. Declan Collier resigned from the board with effect from AIB’s AGM on 28 June 2012.
Under the terms of the Government’s 2009 preference share investment in AIB and the Bank’s articles of association, there is currently no set expiry date relating to the public interest directors at AIB.
Information regarding the remuneration of these public interest directors can be found in the table and in the published annual reports of the institutions.
|
Fee Year |
AIB Public Interest Directors* |
Fees € |
Directors’ Remuneration Report |
|
2009 |
Mr Dick Spring Mr Declan Collier |
26,000 29,000 |
From pg 262 of 2009 Annual Report |
|
2010 |
Mr Dick Spring Mr Declan Collier |
47,000 40,000 |
From pg 299 of 2010 Annual Report |
|
2011 |
Mr Dick Spring Mr Declan Collier |
59,000 71,000 |
From pg 380 of 2011 Annual Report |
Note Dr. Michael Somers is a Government Nominee (not a Public Interest Director) appointed to the AIB board on 14 January 2010 under the terms of NPRFC’s investment of €3.5bn in AIB of May 2009.
|
Fee Year |
EBS Public Interest Directors |
Fees € |
Directors’ Remuneration Report |
|
2009 |
Mr Anthony Spollen Ms Ann Riordan |
37,500 37,500 |
From pg 23 of 2009 Annual Report |
|
2010 |
Mr Anthony Spollen Ms Ann Riordan |
29,000 29,000 |
From pg 24 of 2010 Annual Report |
|
2011 |
Mr Anthony Spollen Ms Ann Riordan |
14,500 15,600 |
From pg 138 of 2011 Annual Report |
193. Deputy Pearse Doherty asked the Minister for Finance in respect of Bank of Ireland, if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49476/12]
Amharc ar fhreagraAs the Deputy will be aware this Government has not appointed any public interest directors to the boards of the Covered Banks since taking office. The details of the public interest directors appointed to Bank of Ireland (BOI) are shown in the table below. Both of the Public Interest Directors in Bank of Ireland were appointed in January 2009. Information regarding the remuneration of directors, including public interest directors, can be found in the Bank’s published Annual Reports. There is currently no set expiry date relating to the public interest directors at BOI.
|
Fee Year |
Public Interest Directors |
Fees € |
Directors’ Remuneration Report |
|
2009* |
Mr Tom Considine Mr Joe Walsh |
79,000 80,000 |
From pgs 123 and 124 of 2009 Annual Report |
|
2010 |
Mr Tom Considine Mr Joe Walsh |
90,000 79,000 |
From pg 176 of 2010 Annual Report |
|
2011 |
Mr Tom Considine Mr Joe Walsh |
90,000 79,000 |
From pg 160 of 2011 Annual Report |
*On Feb 1, 2009 all Non-Executive Directors, the Governor and Deputy Governor took a 25% reduction in salary/fees. Fees include a basic fee and additional fees for Committee membership and Committee Chairmen.
194. Deputy Pearse Doherty asked the Minister for Finance in respect of Irish Nationwide Building Society, if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49477/12]
Amharc ar fhreagraI have been advised by IBRC that the following public interest directors were appointed under the terms of the Government Guarantee scheme to the Board of Irish Nationwide Building Society, both of whom have resigned from the Board at this stage.
|
Director |
Date of Appointments |
Date of Resignation |
|
Adrian Kearns |
23 January 2009 |
30 June 2011 |
|
Rory O’Ferrall |
23 January 2009 |
30 June 2011 |
Total remuneration for the respective Directors in the period from appointment to June 2011 is outlined in the table.
|
Director |
12 months ended December 2009 (€’000) |
12 months ended December 2010 (€’000) |
6 months ended June 2011 (€’000) |
|
Adrian Kearns |
55 |
36 |
18 |
|
Rory O’Ferrall |
55 |
36 |
18 |
Since nationalisation there are no specific public interest directors on the board of IBRC. However all appointments to the board of the bank are approved by the Minister for Finance under the terms and conditions attaching to the nationalisation of the bank. The Minister for Finance has extensive powers in relation to the appointment and removal of Chairpersons, CEOs and Ordinary Board Members under the Anglo Irish Bank Act 2009.
195. Deputy Pearse Doherty asked the Minister for Finance in respect of Anglo Irish Bank, if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49478/12]
Amharc ar fhreagraI have been advised by IBRC that the following public interest directors were appointed under the terms of the Government Guarantee scheme to the Board of Irish Bank Resolution Corporation Limited.
|
Director |
Date of Appointment |
Date of Resignation |
|
Frank Daly |
18 December 2008 |
22 December 2009 |
|
Alan Dukes* |
18 December 2008 |
*Mr. Dukes was appointed as Non-executive Chairman on 14 June 2010.
Non-executive Directors are appointed initially for three years, and subject to satisfactory performance may be re-appointed for additional terms. Mr. Dukes having duly reached the end of his initial three-year term as a Non-executive Director in December 2011 was re-appointed by the Board for a further three-year period as Non-executive Director as and from that date.
Total remuneration for the respective Directors in the period from appointment to December 2011 is outlined in the table.
|
Name |
15 months ended December 2009 (€’000) |
12 months ended December 2010 (€’000) |
12 months ended December 2011 (€’000) |
|
Frank Daly |
98 |
- |
- |
|
Alan Dukes |
102 |
127 |
150 |
The Board of IBRC has agreed that the annual fee payable for the position of Chairman of the Board should be reduced by 15% to €212,500 effective from 1 July 2012, in line with the 15% reduction in fees payable to all non-executive directors. In addition, the Chairman has agreed to take an annual fee of €112,500 effective from 1 July 2012, which is €100,000 lower than the agreed contractual fee.
Since nationalisation there are no specific public interest directors on the board of IBRC. However all appointments to the board of the bank are approved by the Minister for Finance under the terms and conditions attaching to the nationalisation of the bank. The Minister for Finance has extensive powers in relation to the appointment and removal of Chairpersons, CEOs and Ordinary Board Members under the Anglo Irish Bank Act 2009.
196. Deputy Pearse Doherty asked the Minister for Finance in respect of Irish Bank Resolution Corporation, if he will provide a listing of the public interest directors appointed to that bank since 2011; the total remuneration paid to each such director and the date on which their appointments expire. [49479/12]
Amharc ar fhreagraI have been advised that Irish Bank Resolution Corporation Limited has not appointed any public interest directors under the terms of the Government Guarantee Scheme since 2011. All appointments to the board of the bank are approved by the Minister for Finance under the terms and conditions attaching to the nationalisation of the bank. The Minister for Finance has extensive powers in relation to the appointment and removal of Chairpersons, CEOs and Ordinary Board Members under the Anglo Irish Bank Act 2009. As stated in response to PQ 49478/12 Mr. Frank Daly and Mr. Alan Dukes were appointed as public interest directors under the terms of the Government Guarantee Scheme in December 2008. Mr Frank Daly resigned on the 22nd December 2009. Mr Alan Dukes was appointed as non-executive Chairman on the 14th June 2010.
Further details of all directors remuneration is provided in the annual reports.
http://www.ibrc.ie/About_us/Financial_information/Annual_Report/Annual_Report_2011.pdf
197. Deputy Pearse Doherty asked the Minister for Finance if he will provide in detail the responsibilities of public interest directors in the formerly six covered financial institutions and to contrast those responsibilities with the responsibilities of other directors on the boards of those financial institutions. [49480/12]
Amharc ar fhreagra198. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the performance of each the public interest directors at the six formerly covered financial institutions. [49481/12]
Amharc ar fhreagraI propose to take Questions Nos. 197 and 198 together.
As I detailed in the answer to question numbers 167, 168 and 172 which were taken together on 9 October 2012, the legal position is that any director appointed to the board of the covered institutions whether under the Credit Institutions (Financial Support) Scheme 2008 or otherwise is subject to the requirements of company law in relation to the discharge of their responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the directors so called fiduciary responsibilities. To address the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances where those institutions have received huge financial support from the State, legal clarity, not just to the role of the public interest director but to that of the entire boards of those institutions, was provided under Section 48 of the Credit Institutions (Stabilisation) Act 2010. It provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act.
Accordingly, public interest directors do not have a formal reporting relationship to the Minister or to the Department of Finance. As Minister for Finance, I am strongly committed to ensuring that the boards of the covered institutions act at all times in a manner fully consistent with key public interest objectives for the banking sector.
199. Deputy Pearse Doherty asked the Minister for Finance in respect of Irish Life and Permanent if he will provide a listing of the public interest directors appointed to that bank since 2008; the total remuneration paid to each such director and the date on which their appointments expire. [49482/12]
Amharc ar fhreagraAs the Deputy will be aware Margaret Hayes and Ray MacSharry were appointed to the board of Irish Life & Permanent Group Holdings (now Permanent TSB Group Holdings) on 22 December 2008. Each public interest director was appointed until 30 September 2010 but has remained since that date as a replacement Government guarantee scheme has remained in place since then. The Memorandum and Articles of Association of the company require each director to retire every third year but in practice each public interest director has been subject to re-election by shareholders at each AGM since their appointment. The Deputy will also be aware that the remuneration of each of the directors is laid out in the annual report of the company each year. The relevant annual reports are easily accessible on the company website. http://www.permanenttsbgroup.ie
The table summarises the information available from the annual reports for Irish Life & Permanent Group Holdings (now Permanent TSB Group Holdings):
Margaret Hayes:
|
Year |
Fees (rounded to the nearest €1,000) |
Directors’ Report on Remuneration |
|
2008 |
€2,000 |
Page 58 of 2008 Annual Report |
|
2009 |
€77,000 |
Page 62 of 2009 Annual Report |
|
2010 |
€64,000 |
Page 65 of 2010 Annual Report |
|
2011 |
€64,000 |
Page 64 of 2011 Annual Report |
Ray MacSharry:
|
2008 |
€2,000 |
Page 58 of 2008 Annual Report |
|
2009 |
€69,000 |
Page 62 of 2009 Annual Report |
|
2010 |
€56,000 |
Page 65 of 2010 Annual Report |
|
2011 |
€56,000 |
Page 64 of 2011 Annual Report |
200. Deputy Pearse Doherty asked the Minister for Finance in respect of the €509,504,000 contribution paid by the State to the European Stability Mechanism in October 2012, the interest rate and expected date of receipt that applies to interest receivable on this contribution. [49483/12]
Amharc ar fhreagraThe ESM Treaty, which was signed by Euro Area Member States on 2 February 2012, entered into force on 27 September 2012. To obtain the highest possible credit rating, the capital structure of the ESM will have a total subscribed capital of €700 billion. Of this amount, €80 billion will be in the form of paid-in capital by the Euro Area Member States. The balance of €620 billion will be callable capital. The contribution key for each Member State is set out in Annex 1 to the Treaty and is based on the ECB capital contribution key. For Ireland the key is 1.5922% of the total paid and committed capital.
Ireland’s share of the €80bn in paid-in capital to the ESM will therefore be just above €1.27 billion, and will be paid in five equal instalments of €254.752 million. The first two instalments totalling €509.504 million were paid together on 13th October this year. It is expected that two more will be paid in 2013, with the final one paid in 2014.
Article 8 of the ESM Treaty provides that the authorised capital stock of the ESM shall be divided into seven million shares, each having a value of €100,000 divided according to the subscription key set out at Annex 1 of the Treaty.
Article 22 of the ESM Treaty governs the ESM’s investment policy. It provides that the ESM is to have a prudent investment policy, which will operate in accordance with guidelines to be adopted, and reviewed regularly, by its Board of Directors.
Article 23 of the ESM Treaty outlines the ESM’s dividend policy. This provides that where the amount of paid-in capital and the reserve fund exceed the level required to maintain its lending capacity, and where proceeds from the investment are not required to avoid a payment shortfall to creditors, a dividend shall, subject to guidelines adopted by and the approval of the Board of Directors, be distributed to the ESM members on a pro rata basis linked to contributions to the paid in capital.
As contributions to the ESM’s paid in capital represent a share subscription, interest is not therefore payable in respect of it. A dividend may be paid in accordance with Article 23 of the ESM Treaty.
201. Deputy Pearse Doherty asked the Minister for Finance in respect of the €509,504,000 paid by the State to the European Stability Mechanism in October 2012, the treatment of this and other future payments to the ESM in calculating the deficit target as set out in the memorandum of understanding with the IMF-EU-ECB. [49484/12]
Amharc ar fhreagra234. Deputy Finian McGrath asked the Minister for Finance the position regarding the moneys paid to the ESM following ratification of the ESM Treaty; and if he will make a statement on the matter. [49704/12]
Amharc ar fhreagraI propose to take Questions Nos. 201 and 234 together.
The capital structure of the European Stability Mechanism (ESM) is set out in the ESM Treaty which was signed by Euro Area Member States on 2 February 2012, and entered into force on 27 September 2012.
To obtain the highest possible credit rating, the capital structure of the ESM will have a total subscribed capital of €700 billion. Of this amount, €80 billion will be in the form of paid-in capital by the Euro Area Member States. The balance of €620 billion will be callable capital. The contribution key for each Member State is set out in Annex 1 to the Treaty and is based on the ECB capital contribution key. For Ireland the key is 1.5922% of the total paid and committed capital.
Ireland’s share of the €80 billion in paid-in capital to the ESM will therefore be just above €1.27 billion, and will be paid in five equal instalments of €254.752 million. The first two instalments, totalling €509.504 million, were paid together on 13th October this year. It is expected that two more will be paid in 2013, with the final one paid in 2014.
The ESM has been established as an International Financial Institution and on that basis Ireland’s contribution will be treated as a financial transaction and considered as an equity investment for Ireland. This means that while payments towards its paid-in capital will impact on Ireland’s Exchequer Borrowing Requirement, they will not impact on its General Government Deficit.
As our fiscal targets under the EU-IMF programme are defined in terms of the General Government Deficit, the capital contribution to the ESM does not impact on these fiscal targets.
If and when the ESM engages in programme funding, it will borrow money on the international financial markets and lend it on to the beneficiary ESM member state. This is how the EFSF operates at present. The capital of the ESM will not be paid out directly to programme countries. The callable capital will only fall to be called upon in the event that Member States borrowing from the ESM default or that the ESM incurs losses in ESM operations.
202. Deputy Pearse Doherty asked the Minister for Finance his latest estimate of nominal Gross Domestic Product in 2012. [49485/12]
Amharc ar fhreagra203. Deputy Pearse Doherty asked the Minister for Finance his latest estimate of the 2012 State deficit which stood at €14,071,652,000 at the end of October 2012. [49486/12]
Amharc ar fhreagra204. Deputy Pearse Doherty asked the Minister for Finance his latest estimate of deficit gross domestic product in 2012 and if it remains the case that the State will meet its target deficit GDP of 8.6% or less in 2012 as set out in the memorandum of understanding with the IMF-EU-ECB. [49487/12]
Amharc ar fhreagraI propose to take Questions Nos. 202 to 204, inclusive, together.
In April’s Stability Programme Update (SPU), 2012 nominal GDP was forecast at €158,925 million. This represented a growth rate of 1.6 per cent over the 2011 level of nominal GDP, based on the prevailing 2011 GDP estimates from the CSO. In the interim however, the CSO has revised up its estimate of 2011 nominal GDP to €158,993 million which will increase the starting point for my Department’s next formal forecast for 2012 nominal GDP, set to be released shortly. On a purely technical basis however, 2012 nominal GDP was estimated at €162,500 million (rounded to the nearest ½ billion) in the recent Maastricht returns by applying the 2012 SPU nominal growth rate to the revised CSO base for 2012.
The €14.1 billion deficit the Deputy refers to is the Exchequer deficit as of end-October 2012 and this is the most up to date assessment of the Exchequer cash position. The most recent estimate of the General Government deficit for 2012 is €13.6 billion or 8.4 per cent of GDP, as set out in the recent Maastricht Returns. This is a significant improvement on the underlying deficit of €16.7 billion or 10.7 per cent of GDP recorded in 2010. Importantly also, this latest 2012 deficit estimate is within the 8.6 per cent of GDP limit set by the ECOFIN Council in December 2010. The eighth quarterly review of the EU/IMF Programme also concluded that it was likely that Ireland would meet its 2012 deficit target.
My Department will be publishing its updated economic and fiscal forecasts shortly.
205. Deputy Pearse Doherty asked the Minister for Finance in respect of the €1.1billion top-up made by Allied Irish Banks to that Bank’s group pension scheme in August 2012, set out the contact or contacts the Bank had with him or his Department regarding to the transaction, specifically the date and nature of the contact or contacts. [49491/12]
Amharc ar fhreagraThe Deputy will be aware that a Relationship Framework was specified and published in March 2012. This document defines the nature of the relationship and interaction between the Minister for Finance and AIB. I can confirm to the Deputy that as the asset transfer to AIB’s pension scheme was required to fund the Bank’s Early Retirement and Voluntary Severance Programme, the Department of Finance was consulted on numerous occasions during 2012 in relation to this transaction.
However, I must point out that this transaction was a commercial decision for the Bank. I am informed that this transfer was approved by AIB’s Board of Directors and also the Bank’s deleveraging committee, which includes non-voting observers from the Department of Finance and the Central Bank of Ireland.
206. Deputy Pearse Doherty asked the Minister for Finance in respect of the €1.1 billion top-up made by Allied Irish Banks to the group pension scheme in August 2012, if he provided approval for this transaction in a bank in which he owns 99.8% of the shares; and if so, the date of the provision of any such approval. [49492/12]
Amharc ar fhreagraAIB has confirmed to me that the transfer of €1.1bn (nominal) loan assets to the AIB Defined Benefit Pension Scheme was approved by the AIB Board and the Bank's Deleveraging Committee whose members include the Department of Finance and the Central Bank in observatory capacities. The Deleveraging Committee, of which Department of Finance acts in an observatory capacity only, approved the transaction on 27 March 2012.
207. Deputy Pearse Doherty asked the Minister for Finance in respect of the €1.1 billion top-up made by Allied Irish Banks to the group pension scheme in August 2012, if he will identify in the stress testing undertaken by the Central Bank of Ireland with Barclays Capital, BlackRock and the Boston Consulting Group in early 2011 which resulted in the publication of the financial measures programme on 31 March 2011 where in this work was the €1.1 billion shortfall in the AIB pension fund examined or identified. [49493/12]
Amharc ar fhreagraThe Central Bank has informed me that the Capital Requirements Directive and the Central Bank set the rules around the calculation of the applicable capital base for credit institutions. These rules include reference to defined benefit pension deficits as these can affect the capital base of regulated entities. In a letter from the Financial Regulator to industry in 2005, banks were informed that those applying IAS 19/FRS 17 are allowed to add back to Tier 1 Capital the amount of the defined benefit pension liability that has accrued in relation to Irish pension schemes in their financial statements and to deduct an amount equal to the sum of (i) the Deficit under the Minimum Funding Requirement plus (ii) three years Supplementary Contributions. A subsequent letter issued by the Financial Regulator in 2009 amended the treatment of the Deficit under the Minimum Funding Requirement element such that credit institutions were required to include at least the Minimum Funding Requirement in its calculation of pension risk under Pillar 2 capital calculations.
The draft Capital Requirements Regulation (CRR) requires the removal of most prudential filters, including the Irish DB scheme pension filter detailed above. Article 461 of the draft CRR, relating to transitional provisions, provides for regulated entities to apply a phased approach to filters and deductions “required under national transposition measures for Articles 57, 61, 63, 63a and 66 of Directive 2006/48/EC” with a five year implementation period. The transitional provisions are the subject of on-going negotiation between the European Parliament (EP) and Council.
The capital base and capital requirements of the PCAR banks were assessed under PCAR and included in this assessment was forecast deductions for defined benefit pension deficits and subsequent capital filters under base and stress scenarios. The FMP report did not disclose details of the assumed levels of deduction for pension deficits. The focus on the PCAR was the forecast income, capital requirements and losses (particularly loan losses) in the three-year period.
The Central Bank included in the PCAR the forecast deduction for defined benefit pension deficits and subsequent capital filters under base and stress scenarios. In addition the Central Bank considered the implications of Basel III (namely CRD IV/ CRR). The PCAR tolerance levels and capital basis were set in accordance with the Central Bank’s definition of Core Tier 1 under the prevailing Capital Requirements Directive rules as at end-March 2011.
It is important to note, that the quality of capital in the Irish banking system has increased significantly as a result of lower tier capital buy backs and Government equity contributions. Whilst it is clear that the Basel III rules impose more conservative deductions than is currently the case, following a recapitalisation to levels determined by the 2011 PCAR, the FMP report stated that all four banks should comfortably meet Basel III Common Equity Tier 1 ratio on a phase-in basis under both the base case and stress case scenarios. The combined surplus to the minimum phase-in Common Equity Tier 1 under the PCAR base case under PCAR was estimated at the time as circa 13.3bn and 3.7bn under the stress case. Three of the banks would also meet the full 2019 minimum standard in the 2013 base case scenario.
208. Deputy Pearse Doherty asked the Minister for Finance in respect of the €1.1billion top-up made by Allied Irish Banks to the group pension scheme in August 2012, if he will estimate the capital value needed by a pension fund in order to make an annual payment of €529,000 to a scheme member, as is reportedly the case with annual payments to the former chief executive officer of AIB, Mr Eugene Sheehy. [49494/12]
Amharc ar fhreagraThe Deputy will be aware that the transfer of assets to the pension fund earlier this year was undertaken in order to facilitate the early retirement component of the voluntary severance program of the bank. Had the transfer of assets not taken place, the early retirement component of the voluntary severance could not have proceeded as it would have required a cash contribution from the bank. The voluntary severance scheme in the bank overall is expected to result in annual savings to AIB in excess of €200m which is a critical component of AIB’s return to long term viability. It is highly likely, that in the absence of the early retirement scheme, the bank would have been unable to achieve its target staff departure figures on a voluntary basis which would likely have required the need for significant numbers of compulsory redundancies. AIB informs me that for an employee retiring at age 60 with 40 years pensionable service and an annual pension of €529,000, AIB estimates that the capital value accumulated in a fund to provide this annual figure would be approx. €10.5m.
