Friday 20 April 2018

Crucial banking bill published

The Government will have powers to parachute special managers into banks under new laws to oversee EU/IMF multibillion-euro bailout and reduce the size of troubled finance houses.

Legislation was published today on the €85bn EU/IMF loan with €35bn earmarked to shore up banks.

The rules will impose so-called burden-sharing on global money markets, with some subordinated lenders forced to take a hit on loans made to Irish banks.

Finance Minister Brian Lenihan said the Credit Institutions Bill will allow the Government to create a banking system in line with the size of the economy.

"A comprehensive restructuring of the retail banking system in the state is a key pillar of the EU-IMF programme agreement," Mr Lenihan said.

"The banking system must play its role in providing the credit to the real economy to support our recovery."

The Government plans to draw down €10bn initially to pay into banks, with another €25bn set aside as a contingency fund.

The Bill will also underpin Mr Lenihan's pledge that much-needed money will only be given to Allied Irish Banks if the controversial €40m bankers' bonuses are scrapped.

The Department of Finance said the legislation allows the minister to issue directions or prevent actions in order to support the Government's banking strategy and to transfer assets and liabilities to facilitate restructuring.

It will also set in stone how the Government can make subordinated liabilities orders, on a case-by-case basis and under particular conditions, to achieve burden-sharing with international lenders.

It said a special manager will only be appointed to a bank "in limited and exceptional circumstances in order to achieve the objectives of the legislation".

The laws, which will run until December next year, will be debated in the Dail tomorrow.

Under the deal Allied Irish Banks will become majority state-owned while the Bank of Ireland is being given the chance to raise €2.1bn itself by February to avoid the Government stepping in.

Irish Life & Permanent said it will have to raise an extra €100m but will use its own resources.

The laws will also give legal effect to the effective wind-down of Anglo Irish Bank, expected to be early next year, and Irish Nationwide Building Society.

The Department of Finance hopes the Bill will be enacted by the Oireachtas by the end of the week.

Mr Lenihan said once the legislation is passed Allied Irish Banks will be given a cash injection by the end of the year.

Press Association

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