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Central Bank governor Patrick Honohan was a key player in ensuring ECB assent to the deal on the IBRC promissory notes. Laura Hutton/Photocall Ireland
Promissory notes

Central Bank says ECB deal will 'contribute to financial stability'

The independent body, which takes over ownership of the promissory notes in the deal, welcomes the moves.

THE CENTRAL BANK has welcomed news of the deal reached between the European Central Bank and the Irish government on the resolution of the IBRC promissory notes.

In a statement this evening the bank said the developments regarding the former Anglo Irish Bank would “contribute to financial stability” by winding down IBRC “in a definitive manner”.

This meant that IBRC would not be reliant on so-called ‘Exceptional Liquidity Arrangements’ (ELA), the ad hoc mechanism by which money had been created and loaned to Anglo Irish Bank and Irish Nationwide.

“The Central Bank will not suffer any losses on its lending to IBRC under ELA arrangements,” it said.

It confirmed that the arrangement – which the Government says will reduce Ireland’s funding requirements by about €20 billion over the next decade – would see the Central Bank “take ownership of the collateral held against the ELA borrowing”.

This refers to the promissory notes, which were created by the Government as collateral to allow Anglo and Irish Nationwide access the emergency funding.

This collateral will be exchanged “for marketable sovereign bonds and government-guaranteed NAMA bonds.”

The Central Bank said the bonds taken on would be sold as soon as possible under the terms of the deal announced today.

Details of the deal provided by the Department of Finance this evening outline that the Central Bank will only sell off €0.5 billion of its new bonds – with a total face value of €25 billion – before the end of 2014, and a maximum of €0.5 billion each year from 2015 to 2018.

Sales will be limited to €1 billion a year from 2019 to 2023, and to €2 billion a year from 2024 onward.

The arrangement means that the Central Bank can only sell on a quarter of its newly-acquired bonds in the next decade – locking in a relatively low interest rate for the Irish Government in doing so.

This is because while the bonds will carry a rough average interest rate of between 3 per cent and 3.5 per cent, the Central Bank will itself borrow the money from the ECB at relatively low rates – currently 0.75 per cent.

The difference between the two rates becomes profit for the Central Bank – which is returned to the Exchequer at the end of the year anyway.

Kenny: First payment on new Government bonds in 2038

In full:’s coverage of the Promissory Note deal

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