IRISH FINANCE MINISTER'S STATEMENT ON NEW BANK BILL

Statement by the Minister for Finance on the publication of the 
Credit Institutions (Stabilisation) Bill 2010  
The Credit Institutions (Stabilisation) Bill, 2010 was published by the
Minister for Finance, Mr Brian Lenihan T.D., today.  The Bill will be
debated in the Dail on Wednesday and it is expected to be enacted by the
Oireachtas by the end of this week.  The Bill provides the legislative
basis for the reorganisation and restructuring of the banking system
agreed in the joint EU - IMF Programme for Ireland. 
The Minister stated "A comprehensive restructuring of the retail banking
system in the State is a key pillar of the EU-IMF Programme agreement.
This Bill will allow the Minister to take the actions required to bring
about a domestic retail banking system that is proportionate to and
focused on the Irish economy.  The banking system must play its role in
providing the credit to the real economy to support our recovery. 
The joint EU - IMF Programme for Ireland has provided, on a contingency
basis, the resources and support required to restore the banking system
to health."  
The Bill provides broad powers to the Minister for Finance (in
consultation with the Governor of the Central Bank of Ireland) to act on
financial stability grounds to effect the restructuring actions and
recapitalisation measures envisaged in the Programme.  The Programme
builds upon and intensifies the banking measures introduced by the
Government to date.   
The Bill applies to banks who have received financial support from the
State, building societies and credit unions.  Given the exceptional
nature of the powers contained in the Bill, the powers are time-limited
and scheduled to expire on 31 December 2012.  
The powers provided in the Bill allow the Minister to implement key
aspects of the agreed Programme for bank restructuring as follows:-.  
*    to issue directions to take or prevent any actions in order to
support the Government's banking strategy;
*    to transfer relevant institutions' assets and liabilities to
facilitate the restructuring of the banking sector;
*    the making of subordinated liabilities orders, on a case by case
basis and under particular conditions, to achieve appropriate burden
sharing by subordinated creditors in relevant institutions which have
received State support. 
The Bill provides the legislative framework for the key steps required
to ensure that the size and capacity of the banking system is fully
aligned to the financial needs of the wider economy.   It is the first
important step in putting in place an extensive Special Resolution
Regime (SRR) that will provide for a comprehensive framework to
facilitate the orderly management and resolution of distressed credit
institutions.   In that context, the Bill includes the powers to appoint
a special manager to a relevant institution which would only arise in
limited and exceptional circumstances in order to achieve the objectives
of the legislation.  
In the first instance, the provisions in the Bill once it is enacted by
the Oireachtas will be available to the Minister to effect, in part, the
injection of capital into Allied Irish Banks prior to year end as
necessary to ensure the bank is compliant with the regulatory capital
requirements as set by the Central Bank of Ireland.  It will also
facilitate the planned restructuring of Anglo Irish Bank and Irish
Nationwide Building Society as set out in the Programme agreement and
consistent with EU State aid requirements.   
The Bill also contains provisions providing the legislative basis that
underpins the Minister's decision that financial support required for
AIB will be conditional on the non-payment of bonuses regardless of when
they were awarded.  
Draft legislation providing for the introduction of a comprehensive SRR,
consistent with best international practice, is scheduled for
introduction to the Oireachtas by end-February 2011. 
14th December 2010  
Ends 
The Bill can be accessed at 
http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/bills/2010/58
10/document1.htm 
 
 
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