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Noonan arrives in Brussels for key talks on aid for banks

Michael Noonan will chair tomorrow’s meeting of EU finance ministers; today’s Eurogroup meeting will elect a new head.

FINANCE MINISTER Michael Noonan has arrived in Brussels for two days of meetings which are likely to have a major influence in the prospect of whether Ireland can recoup some of the cost of its banking investments from the Eurozone’s bailout fund.

The finance ministers of the 17 eurozone member states are discussing the criteria that should apply for cases where the eurozone’s bailout fund, the European Stability Mechanism, will take part in bailouts for banks and share the burden with national governments.

Arriving at the meeting, Noonan told reporters that the European Commission had formed working parties to develop proposals on how the ESM could be used.

“What the Commission have in mind, in putting this discussion on the agenda, is that they would like political direction to be given to those people in the working parties,” he said.

“They want to get the flavour of the different views among the member states of the eurozone [...] and there are a variety of views,” he said.

Noonan commented that Ireland’s policy was to ensure that the agreements of last June – when the heads of all 27 European nations agreed “to split the banks and the sovereign” – was enforced.

We’ll be arguing what we understood to be the situation on the 29th of June: that banks that were still functioning – lending, trading banks – would be eligible even though insolvent banks on wind-downs mightn’t be.

Ireland has invested a total of €64.1 billion in its banking sector, though this includes €34.7 billion in the former Anglo Irish Bank and Irish Nationwide, whose modern incarnation IBRC would be considered ineligible to be recouped.

Much of the remaining €29.4 billion in investment, which is held in shares in the banks, has since fallen in value as the banks’ shares have slipped on stock markets – but Noonan said it was “much too early” to discuss how much of its costs Ireland may be able to recoup.

Aid ‘should apply retrospectively’ to surviving banks

“My political input would be that these policy instruments, when they’re put in place, should apply retrospectively to banks that are still trading like BOI, AIB and Permanent TSB,” he said.

On a longer-term basis, after the establishment of a eurozone-wide banking regulator next year, Noonan said it was his platform that individual countries would still retain a “residual” obligation to contribute towards bailouts of their domestic banks.

This obligation would fall over time until eventually reaching almost zero, given the responsibility the new regulator would have to avoid such circumstances arising, he said.

“Whatever we negotiate, we’re not going to get 100 per cent,” he said. “There will always be an element of the sovereign having to carry some part of the burden.”

He added that he was “not averse” to having the government sell off its preference shares and contingent capital in the banks at “par” value – meaning it would recoup its full investment in those categories, and not have to accept a loss.

The government has already sold €1 billion of its contingent capital in Bank of Ireland at this price, helping to recoup its €4.7 billion costs for bailout out that institution.

It is traditional to hold a meeting of the Eurogroup – the finance ministers from each of the 17 eurozone countries – the evening before the full ‘Ecofin’ meetings, which involve the finance ministers of all 27 EU member states.

With Ireland holding the presidency of the Council of the European Union, Noonan will take the chair at tomorrow’s Ecofin meeting – the first of six occasions in which he will chair the meetings. April’s meeting is due to take place in Dublin.

Junior finance minister Brian Hayes, who has also travelled to Brussels, will represent Ireland at tomorrow’s meeting while Noonan takes control of overall proceedings.

This evening’s meeting will elect a new president of the Eurogroup, as Luxembourg prime minister Jean-Claude Juncker ends his tenure. Dutch politician Jeroen Dijsselbloem – who has only been the finance minister of the Netherlands since November – is likely to take over.

Read: Ireland sells €1 billion in Bank of Ireland bonds

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Gavan Reilly

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