EARLIER THIS WEEK, the Finance Minister said that he was confident of recouping the €29 billion the government has put into AIB, Bank of Ireland and Permanent TSB.

Michael Noonan said that he had hired Goldman Sachs to advise on the best way to “optimise the return” on the state’s investment in the three banks.

But, how will that take shape?

Many see the state as having two options to recoup the money: sell the stakes in the banks to interested bidders or receive retrospective recapitalisation from the European Stability Mechanism (ESM).

While state has put more than €29 billion into the three banks, the stakes were worth little more than €15 billion at the end of 2014.

While the government would undoubtedly appreciate having an extra €15 billion to play with ahead of a pre-election Budget, there is little desire to take a loss of €14 billion.

So, if the country does apply for retrospective recapitalisation, what happens? Do we fill out some forms and have €29 billion overnight?

In short – no.

Applying to the ESM’s direct recapitalisation instrument (DRI) is a complicated process and ESM Managing Director Klaus Regling doesn’t necessarily think we would be approved.

In an October interview with Market News International, Regling said that low bond yields have been Ireland’s “reward”.

“It has not been definitively ruled out in a legal sense, but politically I don’t see a consensus there at all.

So, at the moment, politically, I think that it is de facto ruled out. Also there is the question of need. Ireland now has interest rates well below 2% in its 10-year borrowing, which I think is clearly a reward for its adjustment efforts and for playing by the rules. And that helps the economy a lot.

Hypothetically, if Noonan were to apply, the system is complicated.

Officially, each case will be examined after an official application and the governing board of the ESM decides if a bank is eligible to receive support.

Even then, the system is heavily monitored and complex.

In the FAQ on the DRI, the official ESM stance is that it can be used retrospectively on a case-by-case basis, but there is little appetite for that in Europe.

Back in November, Noonan said that once the Single Supervisory Mechanism (SSM) is established and the recapitalisation instrument is in place Ireland would be able to make a formal application for retrospective recapitalisation of its banks.

However, the Department of Finance says that he is yet to make a decision on whether to make the application to the ESM or pursue a sale of the stakes in the banks.

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