Dáil Éireann Debate, Thursday - 16 November 2017
70. Deputy Michael McGrath asked the Minister for Finance the interest projected to be earned from the bonds issued by the Central Bank to fund the wind down of Anglo Irish Bank in each of the years 2017 to 2021; the impact this will have on Central Bank profits; the impact this will have on Exchequer revenue and the fiscal position of the State; and if he will make a statement on the matter. [48649/17]
Amharc ar fhreagraThe Deputy might kindly note that the bonds in question were not issued by the Central Bank. In February 2013, the Central Bank of Ireland acquired a range of assets following the liquidation of the Irish Bank Resolution Corporation (IBRC), including Promissory Notes (non-standard instruments) which were exchanged for a portfolio of eight Floating Rate Notes (FRNs) (standard long-dated government bonds with a floating rate coupon, i.e. a regular interest payment which varies with market rates) amounting to €25.034 billion.
The Central Bank’s remaining holdings of these bonds (the FRNs) totals €16.034 billion and the average coupon, or interest rate, (weighted by holding) is 6-month Euribor +266 basis points. For reference, the 6-month Euribor as at 14 November 2017 is -0.275%.
The 6-month Euribor is reset every 6 months and so is subject to change on those occasions. The last coupons fixed on 15 June for reset on 19 June. 6-month Euribor was -0.271% on 15 June 2017. The coupons will again fix at 6-month Euribor on 14 December for reset on 18 December.
As stated previously, the Central Bank is committed to disposing of the assets acquired as part of the IBRC liquidation as soon as possible, provided financial stability conditions permit.
The Central Bank also indicated a minimum schedule of disposals as follows:
2014-2018 €0.5 billion per annum;
2019-2023 €1 billion per annum; and
from 2024 onwards €2 billion per annum until all bonds are sold.
As at 15 November 2017, the Bank has so far disposed of €9 billion nominal of the Floating Rate Notes:
€0.5 billion in 2014;
€2 billion in 2015;
€3 billion in 2016; and
€3.5 billion so far this year.
The Central Bank met its disposal target in 2014, and has significantly exceeded its disposal targets in 2015, 2016, and already in 2017.
Due to the volatility associated with the disposal of these assets, Budget 2018 contains prudently-based estimates of Central Bank income out to 2021, which factors in interest earned on the FRNs, however, it is not possible to give an exact figure due to the number of unknown variables. Table 10 of the Economic and Fiscal Outlook illustrates the total impact of the estimates distributed into the component which benefits the general government balance and the remainder which counts positively towards the Exchequer only (available at the following link: http://budget.gov.ie/Budgets/2018/Documents/Budget_2018_Economic_and_Fiscal_Outlook.pdf). Under the EU fiscal rules, expenditure is now sustainably financed and is linked to the trend economic growth rate rather than revenue developments.
