Ireland breached EU rules on IBRC liquidation – ECB
IRELAND breached EU rules by failing to consult the European Central Bank (ECB) in advance about the law to liquidate IBRC and replace its debts to the Central Bank.
The deal, which allowed for the tearing up of the so-called Anglo Irish Bank promissory notes, also raised concerns at the ECB about 'monetary financing', the ECB said.
The IBRC deal is listed among 21 cases of euro member states not being in compliance with an obligation to consult the ECB on relevant legislation, in the central bank's annual report published yesterday.
There is no penalty for the failure.
The Department of Finance declined to say whether it believes it was non-compliant.
In its report, the ECB said it was not consulted by authorities here ahead of the emergency legislation rushed through the Dail in February last year that led to the scrapping of the expensive "prom note".
The deal meant the IBRC was placed into special liquidation. Its debt, owed to the Central Bank and secured on the promissory note, was replaced with €25bn of long-term Irish government bonds.
The ECB said it understands the reason for the failure to consult on the issue was the "urgent nature of the situation".
The IBRC deal also raised concerns about 'monetary financing' or lending directly to governments, something the ECB is banned from doing, the report said.
"The liquidation of the Irish Bank Resolution Corporation (IBRC) raises serious monetary financing concerns. These concerns could be somewhat mitigated by the disposal strategy of the Central Bank of Ireland," the ECB said.
Under the deal, which was officially "noted" by the ECB last year, the Central Bank must sell the bonds it holds to private investors as soon as practicable – to remove the perception it is a lender to the Government.
A minimum disposal of €500m of the bonds has to be made this year, under the original deal.
From 2024, the schedule will speed up, and if the bonds are still not sold €2bn of debt will have to be sold every year.
But there are reports that some officials within the ECB want to see the schedule speeded up, which could account for the emphasis on the issue in yesterday's report.
However, given the fact that all of the issues were well understood last year it is unlikely the new report will cause any new problems for Ireland.