Saturday 10 December 2016

Banking Inquiry: Finance Minister estimates final cost of financial crash will be €35bn

Clodagh Sheehy

Published 10/09/2015 | 16:55

Minister for Finance Michael Noonan TD during a Quarterly National Accounts & Balance of International Payments press briefing at Government Buildings, Dublin. Photo: Gareth Chaney Collins
Minister for Finance Michael Noonan TD during a Quarterly National Accounts & Balance of International Payments press briefing at Government Buildings, Dublin. Photo: Gareth Chaney Collins

The final cost of the financial crash to the taxpayer will be between €30bn and €35bn, Finance Minister Michael Noonan has estimated.

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He told the Banking Inquiry he was confident that “overtime we will, at a minimum, fully recover the funds that this Government invested in these banks”.

It was also likely that NAMA and the Irish Bank Resolution Corporation “will produce a surplus for the Exchequer”.

Taking all of these figures together “it is now apparent that the ultimate direct cost of the bank recapitalisation will be the funds invested by the previous Government into Anglo Irish Bank.”

Mr Noonan said they had “taken steps to limit this cost but the final cost, based on the best information available to me at present will be between €30bn and €35bn”.

The Minister also told the lnquiry that since Bank of Ireland and AIB had returned to profitability and profitability for PTSB was forecast this year “this will have positive, knock on benefits for the taxpayer”.

He pointed out that since he took office in 2011 the international regulatory environment had changed radically and in the EU the Banking Union had been put in place to break the bank/sovereign link.

As a result “concerns about the contagion aspect of any future bank resolutions should be mitigated.”

A critical element was the establishment of the Single Supervisory Mechanism for the systemic banks in the Euro area and all these measures aimed “to ensure we do not repeat the errors of the past”.

Looking to the future he would expect the changes in the law and institutions in financial regulation  would ensure adequate communication and assessment in future in relation to liquidity and solvency issues.

He said he wanted to see “robust, honest and informed debate and scrutiny of the budgetary choices facing Ireland.”

He added: we must never allow a position where there is a perception or a reality of a close relationship between the State and certain sectors.

“We must have faith and confidence in the institutions of the State to withstand criticism from particular sectors which are motivated by self-interest.”

The Banking Crisis had resulted in the State being a major stake holder in the banking sector requiring formalisation of the relationship between the two.

The taxpayers investment in the banks, however, “should not be viewed as a mechanism to control the banks for political purposes nor to absolve the bank boards of their responsibilities.

“Any attempt to blur the lines between the role of Government and the role of the banks is not in the best interest of the Irish taxpayer or the Country,” he added.

NAMA was now fully engaged in its core role of managing and selling the assets under its control, and to date had repaid just under €20 billion of its senior debt.

It will have repaid 80p by 2016 and 100pc by 2018; two years ahead of target.

In addition, NAMA had committed to deliver 4,500 residential units and to develop the Dublin Docklands strategic development zone and Dublin’s Central Business District.

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