Tuesday, 21 May 2013
Dáil Éireann Debate
61. Deputy John McGuinness asked the Minister for Finance his views on departures of senior personnel from the regulatory to take up roles in the financial services sector; and if he will make a statement on the matter. [23929/13]
63. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance if his attention has been drawn to a practice at the Central Bank of Ireland where retiring directors are re-hired on contracts for a number of days a week for a year as a means of increasing their pensions. [23959/13]
Minister for Finance (Deputy Michael Noonan): I propose to take Questions Nos. 61 and 63 together.
It is to be expected that staff will move between the Central Bank and the financial sector in both directions. This can be healthy to the extent that it allows the Central Bank to gain access to high-level sectoral expertise while allowing those with regulatory experience to move into the industry and support a compliance culture. This process needs to be managed in a way that ensures the independence and integrity of the Central Bank is preserved and seen to be preserved. To address this, a Human Resources Strategy has been developed by the Central Bank, which includes as key elements talent management and succession planning. I have been informed by the Central Bank that it has appropriate policies and procedures in place to deal with departures of senior personnel to take up roles in the financial services sector. Specifically, this potential issue is taken into account when drafting new contracts for certain roles or reassigning staff to other duties if a potential for conflict arises.
The Central Bank Code of Ethics requires that in the event of an employee intending to leave the employment of the Central Bank to take up alternative employment, self-employment or business, they are obliged to provide early notification to line management when a conflict of interest exists, or might be perceived to exist, between those duties held in the Central Bank and those to be undertaken with the new employer, in self-employment or in business. In such circumstances, the Central Bank may assign alternative tasks to the individual while their notice period is being served.
I am informed by the Central Bank that there is no practice there of rehiring retired directors or other retired staff in order to increase their individual pension benefits. In very exceptional and limited circumstances, the Central Bank may re-engage retired staff subject to public sector norms and pension scheme rules but pension benefits do not increase as a result of this re-engagement.
62. Deputy Willie O'Dea asked the Minister for Finance the progress made to date in implementation of the mortgage arrears resolution targets; and if he will make a statement on the matter. [23935/13]
122. Deputy Joe McHugh asked the Minister for Finance if he will will update Dáil Éireann on his strategy for supporting homeowners in mortgage difficulty; and if he will make a statement on the matter. [23752/13]
Minister for Finance (Deputy Michael Noonan): I propose to take Questions Nos. 62 and 122 together.
64. Deputy Catherine Murphy asked the Minister for Finance if he will provide details of the proposed bank resolution scheme which is being considered by ECOFIN under his chairmanship; if he will confirm the order in which it is proposed that bank creditors absorb losses under the proposed arrangement; if he is proposing a lower limit to the amount of deposits which can be affected in such a scenario; and if he will make a statement on the matter. [23660/13]
75. Deputy Seamus Kirk asked the Minister for Finance if he will ensure deposits are protected in any revised Eurozone bank resolution mechanism; and if he will make a statement on the matter. [23924/13]
Minister for Finance (Deputy Michael Noonan): I propose to take Questions Nos. 64 and 75 together.
The Bank Recovery and Resolution (“BRRD”) proposal aims to introduce an effective recovery and resolution framework for credit institutions and investment firms at national level to ensure minimum harmonisation at EU level. The proposed directive provides for three stages of crisis prevention and management: a preventative stage, an early intervention stage and a resolution stage. Part of the resolution stage provides for a bail-in tool which is a mechanism for allocating losses to shareholders and creditors of the institution under resolution in accordance with an established bail-in hierarchy.
The BRRD proposal, as published by the Commission, provides that under bail-in losses would in the first instance be allocated to shareholders. Once shareholders claims have been exhausted subordinated creditors would then be written down. Only when these claims have been exhausted could senior creditors be written down.
The hierarchy of claims for bail-in in the BRRD proposal that was published by the Commission last year does not differentiate between different classes of senior creditors such as depositors with deposits over €100,000 (uninsured depositors) and senior bondholders. This matter is the subject of on-going debate in the Council negotiations on the BRRD file.
At ECOFIN earlier this month I asked finance ministers to consider the scope and design of the bail-in tool in the BRRD directive. Among other things, these discussions focused on how bail-in would apply to uninsured depositors (i.e. deposits greater than €100,000). I proposed that these depositors should be given a higher ranking in the hierarchy of claims than other senior debt. In effect they would only ever bear losses after other senior creditors such as bondholders.
I am glad to report that the discussion provided the Presidency with sufficient clarity on the position of Member States to enable us to press ahead with our efforts to achieve agreement on this file. On the question of how deposits are affected I noted convergence on a number of points:
The objective of the Irish Presidency in placing this item on the May ECOFIN agenda was to try to achieve a common understanding on this issue which would help to unlock discussion on other areas of the BRRD notably the financing element.
65. Deputy Derek Keating asked the Minister for Finance the outcome of his recent negotiations at European leader level in relation to the promissory notes; and if he will make a statement on the matter. [19949/13]
Minister for Finance (Deputy Michael Noonan): As the Deputy is aware, on 6/7 February the liquidation of IBRC was agreed in the Houses of the Oireachtas and the IBRC Promissory Notes were replaced with longer-dated Irish Government Bonds. This followed extensive discussions with our European partners at all levels, particularly in the later stages of 2012 and into 2013.
The new arrangements go a long way towards addressing the systemic liquidity issue in the Irish banking system and substantially improve the debt position of the State, while materially improving our ability to regain access to the bond markets and exit the Troika programme.
- A reduction in the State’s General Government deficit of approximately €1 billion (0.6% of GDP) per annum over the coming years, which will bring us closer to attaining our 3% deficit target by 2015.
- The State will be borrowing €20 billion less cash over the next 10 years due to the cashflow benefit of this arrangement. Next year the cash flow benefit will be €2.3 billion (excluding initial transaction costs).
This Government is aware that this solution does not address other challenges in the Irish banking system. However it was an important step in restoring the health of the Irish banking sector and confidence in the Irish economy. We have been seeking and will continue to seek a comprehensive solution to the remaining structural and funding issues in our banking sector, in conjunction with our European partners. We will continue to participate in the development of the ESM and the structuring of the Single Supervisory Mechanism to ensure that Ireland will benefit, on similar terms to other member states, from developments in this regard.
Minister for Finance (Deputy Michael Noonan): In 2011, I requested that the Central Bank examine ways to improve Ireland’s payment infrastructure. The Central Bank established a Steering Committee which prepared and submitted the National Payments Plan to me. The membership of the Steering Group was to act as representatives for all sections in society, including marginalised and disadvantaged groups. Government subsequently approved the plan in April 2013.
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