Michael Colreavy
Ceist:18. Deputy Michael Colreavy asked the Minister for Finance the progress that has been made on separating banking and sovereign debt. [41496/13]
Amharc ar fhreagraThursday, 3 October 2013
Ceisteanna (18)
Freagraí scríofa
The Deputy will be aware that the Euro-Area Heads of State or Government agreed on 29th June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism is in place involving the ECB, the European Stability Mechanism (ESM) could recapitalize banks directly. The Eurogroup meeting of 20th June 2013 agreed on the main features of the ESM’s Direct Bank Recapitalisation instrument (DBR). The DBR instrument will come into effect when the Single Supervisory Mechanism is in place. This is not expected to take place until the second half of 2014.
There is a specific provision included in the instrument. This provision states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it. The Eurogroup has agreed that there will be strict eligibility criteria as well as a clear pecking order for the ESM DBR instrument, so any possible application for DBR (retroactive or not) will be determined on its own merits within the rules laid down by the ESM’s DBR instrument. This overall framework agreed this summer builds upon the earlier Euro area Heads of State and Government agreement secured on the 29th of June 2012, and is an important step in the Eurozone’s efforts in this regard.
The objective of the ESM Direct Bank Recapitalisation instrument is to help preserve the stability of the euro area and help remove the risk of contagion from the financial sector to the sovereign, thus weakening the vicious circle between banks and sovereigns as called for by the Euro Summit last year. However, it will not be possible to make any application in respect of retroactive recapitalisation until the instrument is declared operational, which as I have said is expected to be in the second half of next year.
Question No. 19 answered with Question No. 15.