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 Header Item Written Answers Nos. 1 - 20
 Header Item Tax Code
 Header Item NAMA Social Housing Expenditure
 Header Item Budget 2015
 Header Item Mortgage Arrears Rate
 Header Item Property Tax Application
 Header Item Irish Fiscal Advisory Council Reports
 Header Item Insurance Industry Regulation
 Header Item Fiscal Policy
 Header Item Tax Agreements
 Header Item Financial Services Sector
 Header Item Banks Recapitalisation

Thursday, 2 October 2014

Dáil Éireann Debate
Vol. 852 No. 3

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Written Answers Nos. 1 - 20

  The following are questions tabled by Members for written response and the ministerial replies as received on the day from the Departments [unrevised].

  Questions Nos. 1 to 9, inclusive, answered orally.

Tax Code

 10. Deputy Catherine Murphy Information on Catherine Murphy Zoom on Catherine Murphy asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views that the long-term global trend is undeniably toward the progressive elimination of the ability of large multinationals to avoid corporation tax through complex arrangements; his further views that Ireland's vital strategic interest lies in Government preparing a plan to ensure the retention of multinational employers as the favourable tax regime may be eroded by the actions of other states; his long-term strategy in this regard; and if he will make a statement on the matter. [37071/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The ability of some multinationals to lower the amount of corporation tax they pay world-wide using international structures is an issue that has attracted a lot of public and media attention over the past 24 months.

The G20 have acknowledged that this is a global challenge that requires global action, and this is happening through the OECD Base Erosion and Profit Shifting ('BEPS') project.  Ireland is actively engaged in this process and it is anticipated that BEPS will result in changes being made to the international taxation rulebook which countries rely on for international trade.    

At the same time, countries are increasingly competing for mobile foreign direct investment ('FDI').  The competitiveness of Ireland's overall corporate tax regime is important in that regard, and as I said in my Budget speech last October, Ireland will play fair, as we have always done, but play to win.

Last year I published a new International Tax Strategy statement in the Budget which sets out Ireland's objectives and commitments in relation to these issues.  In it, I was clear that the best way to address the issue of aggressive tax planning across borders is for countries to work together at an international level.  This is particularly important as we need to ensure a level playing field among countries, in order for Ireland to compete fairly.

As I said in the Dáil last week, I remain firmly of the view that the changes that are coming internationally present many opportunities for Ireland as a competitive location for FDI.

For example, one of the key concepts of BEPS is the better alignment of substance with taxing rights. The alignment of substance with a competitive rate of tax has been the cornerstone of our corporation tax policy since the 1950s so I believe that any change that may result from this process will lead to additional opportunities for Ireland.  Ireland has not been and will never will be a brass-plate location.  We only have and want real substantive FDI, the kind that brings real jobs and investment into Ireland.  This will not change in the post-BEPS environment.

At 12.5%, Ireland has the most competitive headline corporate tax rate in the OECD, which is applied to a broad base.  Corporate tax rates are a matter of national sovereignty. This Government is committed to maintaining it.

Ireland's offering of a competitive corporate tax rate, the availability of skills, and a reputation for being business friendly is a huge advantage that other countries will struggle to match.  As international tax loopholes progressively get closed down, our low general corporation tax rate will become even more attractive.

Indeed as we continue to improve our offering for knowledge based investment, R&D and intellectual property, I believe over the coming years we can continue to grow our share of FDI-related investment.

NAMA Social Housing Expenditure

 11. Deputy Pearse Doherty Information on Pearse Doherty Zoom on Pearse Doherty asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan in view of the need for social housing and the changed property market, if he will change the mandate of the National Asset Management Agency strategy. [37048/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan Section 10 of the NAMA Act outlines clearly the primary objective that the legislature set for NAMA, namely that it achieves the best financial return for the State from the assets entrusted to it.  NAMA is making very significant progress by reference to this objective.  In my recent section 227 Review of NAMA, which the Deputy should be aware of, the NAMA Board have announced renewed debt redemption targets. By the end of this year, NAMA will have redeemed 50% of its senior debt, two years ahead of schedule, and expects to have redeemed 80% of its senior debt by the end of 2016 assuming that market conditions remain strong.  This progress is extremely important in ensuring that Irish taxpayers face no further losses from the banking and property market crash.  It is also extremely important in terms of generating confidence at home and abroad in Ireland's economic recovery.  In their recent decisions to upgrade Ireland's sovereign credit rating, both Standard and Poor's and Moody's highlighted the faster rate at which NAMA is paying down its debt and reducing Ireland's contingent liability.  NAMA is clearly achieving the mandate set for it by the Oireachtas and I do not propose any course of action that could impact on its ability to complete this important work on behalf of Irish taxpayers.

It is not part of NAMA's statutory remit to supply social housing.  Nonetheless, and consistent with its commercial objectives, NAMA is making a very significant contribution in facilitating the delivery of social housing through the Housing Agency to local authorities and approved housing bodies.  It has made 5,455 houses and apartments available to local authorities and approved housing bodies for social housing.  These 5,455 units constitute one third of the completed housing stock held in Ireland by NAMA's debtors and receivers and almost all of NAMA's unoccupied housing stock.  NAMA has also invested over €20m to date in finishing, refurbishing and fitting out these homes for delivery as social housing where local authorities have confirmed demand.   

NAMA has no role in determining the take-up of properties that it has made available for social housing as this is a matter for local authorities.  However, NAMA has introduced a number of initiatives to streamline the delivery of homes for which demand has been confirmed.  This includes the establishment of a special purpose vehicle, National Asset Residential Property Services Ltd. (NARPS), to expedite the delivery of housing.  Through NARPS, NAMA acquires houses and apartments from debtors and receivers and directly leases them to approved housing bodies under long-term leasing arrangements - reducing the initial capital outlay required from the approved housing bodies.  In conjunction with the establishment of NARPS, NAMA worked with the housing bodies and introduced standardised leasing terms to further streamline the process.  Both these initiatives are working extremely well. 

Of the 5,455 properties made available by NAMA, local authorities have confirmed demand for just over 2,000 units.  NAMA expects that it will exceed the target of delivering 1,000 of these homes for social housing by the end of 2014 with the remainder being delivered over the following 12-18 months.

NAMA has also signalled its intention to provide future Part V housing on NAMA-funded residential developments through its social housing SPV, National Asset Residential Property Services Ltd. (NARPS).  This is a very important initiative, which will mean that NAMA will bear the upfront capital cost of delivering Part V housing on estates for which it funds development and that such housing will be delivered on-site fully in accordance with Government policy in this area.

As the Deputy is aware, NAMA has stated that it will fund the delivery of some 4,500 new homes in the Dublin area over the period to end-2016. Furthermore, sites held by its debtors and receivers could provide a further 18,000 new homes in the Dublin area and significant additional housing in the other main urban centres in the period beyond 2016.  These numbers highlight the substantial contribution that NAMA could make, directly and indirectly, to the delivery of housing stock generally and as part of that, the delivery of social housing through Part V over the coming years.

I am satisfied therefore that, in the context of its overriding commercial mandate, NAMA is doing all that it can to facilitate the supply of social housing and I do not propose to make any changes to its mandate.  The statutory clarity given to NAMA by the Oireachtas in 2009 has been very important in guiding the Agency's work and progress to date and I am satisfied that the clarity provided by the fact that its mandate is primarily a commercial mandate has been an important factor in its success.

Budget 2015

 12. Deputy Stephen S. Donnelly Information on Stephen Donnelly Zoom on Stephen Donnelly asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will provide the updated figures he is using for budget 2015, regarding changes since the April stability programme update, SPU, to include, projected general Government deficit for 2014, SPU at €8 billion, carry forward into 2015 from previous budgetary measures, net or gross changes to the 2015 general Government deficit if there were no changes brought in by budget 2015, that is SPU has approximately €1.5 billion net and the constituent parts of these changes, that is savings due to early IMF loan repayments, revenue take revised upwards, social welfare payments revised downwards and so on. [37068/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Stability Programme Update published in April forecast a deficit of 4.8% of GDP for this year and 2.9% for 2015 underpinned by a consolidation package of €2.0bn.  However, the Deputy should be aware that there have been a number of important changes since April, most notably the performance of taxes and impact of the ESA2010 statistical changes introduced by Europe. 

In relation to taxes, cumulative tax revenue was up some €971m or 4.1% on profile by the end of August. This coupled with continued expenditure restraint means that we will overperform the 4.8% of GDP forecast by a comfortable margin.  The next official forecast of the 2014 deficit will be contained in the White Paper on Receipts and Expenditures which will be published on midnight, Friday 10 October.  This will also incorporate the no-policy change scenario for 2015 as sought by the Deputy.

A considerable part of the overperformance of taxes in 2014 will have a positive base effect going into 2015. Furthermore, the introduction of the ESA 2010 European statistical standards has led to the upward revision to the level of GDP in Ireland going back over a number of years. These were first presented by the CSO in July 2014 and Budget 2015 will be the first publication to be based on the new standard.

Overall GDP in 2013 was revised up by €10.7bn or 6.5 per cent by the CSO, from €164.1bn to €174.8bn. The bulk of the upward revisions (€7.0bn) relates the inclusion of research and development (R&D) as capital formation. However, other revisions mainly relating to revised estimates of exports and the inclusion of illicit activity have added about €3.7 bn. These revisions have had a small positive impact on the growth rates in previous years.

In terms of carry forward to be contained in the forthcoming Budget, it is presently estimated that there will be a very limited negative revenue carryover into 2015 as a result of Budget 2014 measures. It should also be noted that the pension levy of 0.6% is not included in the budgetary arithmetic for 2015.

With regard to the proposed early repayment of IMF loans, the proposal is to make an early repayment of a portion of those loans and final agreement on this is subject to the necessary national approval procedures of EU Member States. Annual savings achieved on interest expenditure due to any early repayment will depend market conditions at the time of any such repayments, however the cash savings achieved over the maturity of the loans are expected to be in the region of €1.5 billion.

Mortgage Arrears Rate

 13. Deputy Sean Fleming Information on Seán Fleming Zoom on Seán Fleming asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on the very high level of arrears in the sub-prime mortgage sector; and if he will make a statement on the matter. [37064/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Central Bank has advised that there is no such regulated category as 'sub-prime' lender but that phrase is sometimes used to refer to some non-deposit taking 'retail credit firms'. Retail credit firms are a regulated category of entities which are authorised to provide credit (in the form of cash loans) directly to individuals. Some firms authorised in this category are mortgage lenders. Retail credit firms have been subject to regulation by the Central Bank since 1 February 2008. A register of all Retail Credit Firms is available on the Central Bank website.

The latest published Central Bank mortgage arrears and restructures statistics are to end June 2014 and show overall arrears and arrears greater than 90 days fell for the fourth and third consecutive quarter respectively.  At end-June 2014, there were 762,575 private residential mortgage accounts for principal dwellings held in the State, with some 90,343 principal dwelling houses in arrears of greater than 90 days, representing a decline in the greater than 90 days arrears category of 3 per cent over the quarter.  I am informed by the Central Bank that, at end-June 2014, six of these retail credit firms had a total of 17,986 principal dwelling house mortgage accounts of which 5,047 were classified as restructured. 

The Central Bank has informed me that the same consumer protection framework applies to retail credit lenders as to other regulated lenders including the Consumer Protection Code and the Code of Conduct on Mortgage Arrears. The CCMA sets out requirements for all mortgage lenders, including retail credit firms, dealing with borrowers in arrears or pre-arrears on a mortgage loan which is secured by their primary residence. It provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender and that long term resolution is sought by lenders with each of their borrowers.  The Central Bank has advised that retail credit firms were also included in the scope of the Central Bank's recent review of the 'Implementation of the Revised CCMA' by mortgage lenders, the purpose of which was to ensure that mortgage lenders achieved full implementation of the requirements of the revised CCMA by end December 2013.

The Central Bank continues to engage with all mortgage lenders, including retail credit firms, in relation to lenders' mortgage arrears resolution strategies and approaches to dealing with borrowers in or facing arrears.  Early and effective engagement between borrowers and lenders is key to resolving cases of mortgage difficulty.  Where there is effective and meaningful engagement regarding a mortgage difficulty, an increasing number of durable long term mortgage restructures is being put in place.

Property Tax Application

 14. Deputy Clare Daly Information on Clare Daly Zoom on Clare Daly asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on the logic of a home owner with pyrite having to spend thousands of euro to have a test conducted to prove the presence of pyrite in a home to claim an exemption from the property tax, which would not even cover the cost of the test; and his views regarding the need to have the statutory instrument amended accordingly so that the spirit of the legislation may be properly accommodated and home owners with pyrite may be exempted from the local property tax as intended. [37016/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Pyrite Panel appointed by the Minister for the Environment, Community & Local Government recommended that consideration be given to providing an exemption from LPT where damage from pyritic heave had been proven by testing in accordance with a National Standards Authority of Ireland (NSAI) standard capable of determining if there was reactive pyrite in the sub-floor hard core materials, and if it had caused pyritic heave.  I.S. 398 titled "Reactive pyrite in sub-floor hardcore material Part 1: Testing and categorisation protocol" was published on 29 January 2013 by the NSAI in response to the Panel's recommendation.

Accordingly, section 10A of the Finance (Local Property Tax) Act 2012 (as amended) provides that an exemption from the charge to Local Property Tax (LPT) will apply for a temporary period of at least three consecutive years for residential properties that have been certified under the Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013 made by the Minister for the Environment, Community & Local Government as having "significant pyritic damage".  The Regulations set out the methodology for the assessment of dwellings to establish significant pyritic damage. These Regulations require that homeowners demonstrate significant pyritic damage in accordance with the NSAI standard I.S. 398.

To be eligible for an exemption from LPT, a liable person must

- have a Damage Condition Rating of 2 or a Damage Condition Rating of 1 with progression, established on foot of a Building Condition Assessment ("BCA") carried out by a competent person in accordance with the NSAI standard, and

- have a sub-floor hard core material classified by the appropriate competent person(s), as susceptible to significant or limited expansion, established on foot of testing the sub-floor hard core material.

The purpose of the Building Condition Assessment is to demonstrate damage and to inform whether sampling and testing of the sub-floor hardcore of the residential property should be undertaken in order to confirm that such damage arises from pyrite.  The Building Condition Assessment does not involve any invasive internal or external inspections to a residential property and, on its own, cannot be used to state conclusively that reactive pyrite is present in the sub-floor hardcore of the property.

Officials of my Department, with officials of the Department of Environment, Community & Local Government, have been examining the alternatives other than testing that may be available in order to confirm entitlement to a Local Property Tax exemption. I expect to make a decision in the matter shortly that will be consistent with the original objectives of the legislation and the report of the Pyrite Panel and I will communicate my decision to the Deputy immediately it is made. I thank her for bringing this matter to attention.

Irish Fiscal Advisory Council Reports

 15. Deputy Richard Boyd Barrett Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan when the Irish Fiscal Advisory Council last met and the schedule of upcoming meetings. [35725/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Irish Fiscal Advisory Council was established on a statutory basis on the 31 December 2012 under the Fiscal Responsibility Act 2012.

  The provisions of the Act took into account the common principles proposed by the European Commission concerning the role and independence of institutions responsible at national level for monitoring observance of the rules as set out in Article 3.1 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union or the Fiscal Compact, as it is more commonly known.

  In light of these, Section 8(1) of the Act stipulates that the Fiscal Council shall be independent in the performance of its functions. Paragraph 16 of the Schedule to the Act provides that the Council may regulate its own procedures.

  Accordingly, the Council does not inform me of when it has held meetings or its schedule for future meetings. I can inform the Deputy that the Council's website,, does provide information regarding the dates of meetings it has held.

  However, I have asked my officials to pass your request directly to the Council.

Insurance Industry Regulation

 16. Deputy Pearse Doherty Information on Pearse Doherty Zoom on Pearse Doherty asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan the length of time customers at Setanta Insurance will have to wait to have their claims processed; and the legislative or regulatory measures he is proposing to prevent a repeat of the Setanta situation. [37044/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan With regard to Setanta, you will appreciate that a liquidation of an insurance company is a legally complex and time consuming process.  In general terms, under the Statute of Limitations, claimants are given two years following an accident to make an initial claim.  However, it could take several years for a particular case to be finalised.  Setanta is a Maltese incorporated company and, therefore, the Setanta liquidation is being carried out under Maltese law. The Setanta Liquidator is currently examining a range of factors in order to estimate the cost of claims and the extent to which claims can be met in the Setanta liquidation.  The Liquidator has advised that settlements can only be paid out after all of the company's liabilities are quantified, including claims.

  The Insurance Compensation Fund (ICF) provides for payments to meet the liabilities of insolvent insurers in certain cases where it is unlikely that claims can be met otherwise than from the ICF.  Under the Insurance Act 1964 claims by bodies corporate or unincorporated bodies are not covered by the ICF, except where there is a liability to or by an individual.  In addition, all ICF payments are subject to a limit of 65% of the amount due or €825,000, whichever is the lesser.  Management and administration of the ICF is under the control of the President of the High Court acting through the Office of the Accountant of the Courts of Justice.  The Accountant of the Courts of Justice  is currently engaging with both the Setanta Liquidator and his legal advisors to put in place an appropriate mechanism to commence making applications to the High Court in accordance with the Insurance Act 1964.  I understand that at the moment the Accountant is not in a position to put a timeline on when the first applications will be made.  Procedures for processing claims and the timing of payments, including the question of advance payments from the ICF, is a matter for the President of the High Court.     

  The day to day responsibility for the supervision of Irish authorised financial institutions is a matter for the Central Bank of Ireland which is statutorily independent in the exercise of its regulatory and supervisory functions.  However, since Setanta is a Maltese incorporated company, under EU passporting rules, its financial position is not supervised by the Central Bank. However the Bank is responsible for supervising for conduct of business rules. Furthermore, EEA insurance regulators are members of the European Insurance and Occupational Pensions Authority, EIOPA, and are required to comply with the general protocol relating to the collaboration of the insurance supervisory authorities of the member states of the European Union. This general protocol statement was issued in 2008 and is under review by EIOPA.

  The current legal and regulatory framework for the provision of insurance in the European Economic Area, and the supervision of that activity, is prescribed by European Union Law in the Life and Non-Life Insurance Directives.  Since the relevant legislation is EU determined, there may be limits  as to what can be done in the short-term.  The matter has, however, been raised with the European Commission and it has indicated that it will also review whether any issues raised relating to the regulatory and legislative framework require action.  It is too early as yet to consider whether legislative measures.

  Following negotiations that were completed at European level in November, 2013, a new regime known as Solvency II will commence on 1 January 2016.  This will strengthen the EU regulatory framework. The Solvency II EU Directive sets out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection.  The new regime will also ensure greater cooperation between supervisors. 

  With regard to domestic legislation, my officials are taking note of how the ICF framework is responding to current requirements. My Department and the Central Bank will in due course be reviewing the overall circumstances relating to Setanta and report to me on what lessons can be learned and how the framework can be strengthened.

Fiscal Policy

 17. Deputy Bernard J. Durkan Information on Bernard Durkan Zoom on Bernard Durkan asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan the extent to which he remains satisfied that the fiscal and economic strategy to date continues to meet budgetary and economic requirements and targets in line with best economic practice; if the progress to date indicates continued economic recovery for the future; the degree to which specific issues have been identified as being fundamental to continued economic and social progress; and if he will make a statement on the matter. [37049/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan Following successful implementation of the EU-IMF programme, the Irish economy is emerging from the crisis and there are clears signs that economic recovery is underway. 

First estimates of economic activity for the second quarter of this year were very strong and were well ahead of consensus expectations with GDP growing by 1.5 per cent over the quarter and by 7.7 per cent year-on-year. Taken in conjunction with first quarter data, GDP grew by 5.8 per cent in the first half of this year. The increase in economic activity is broadly-based with both domestic sectors and exporting sectors performing strongly.

Recovery is perhaps most clearly evident in the labour market with employment increasing in each of the last seven quarters representing an increase of over 70,000 jobs since the low-point in mid-2012.  In line with this, the standardised unemployment rate stood at 11.2 per cent in August, having fallen from a peak of 15.1 per cent in 2012.

Significant progress has been made in addressing the underlying problems of the public finances.  The policy measures implemented by the Government have resulted in a decline in the deficit.  This decline has been gradual and in a phased manner, consistent with the dual needs of supporting economic activity as well as repairing the public finances.  All of the interim deficit ceilings that were set have been met and Ireland is firmly on track to achieve a deficit of below 3 per cent in 2015.  This has been important in restoring Ireland's credibility.  Thereafter, fiscal policy will be set in line with the requirement to move towards Ireland's medium-term budgetary objective, which is for a balanced budget in structural terms.  In addition, the debt-to-GDP ratio is estimated to have peaked and is now on a firm downward trajectory.

The Government remains focused on maintaining the reform momentum to achieve the goals of creating more jobs to enhance living standards and ultimately to achieve full employment.  The Government will work to ensure that any obstacles to achieving this are removed.  While the Government recognises that further improvements in competitiveness are needed, all the recent data show that we are moving in the right direction.

Tax Agreements

 18. Deputy Micheál Martin Information on Micheál Martin Zoom on Micheál Martin asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan the position regarding the double taxation agreement with the USA; and if he will make a statement on the matter. [35666/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The double taxation agreement between Ireland and the United States was signed in 1997 and entered into force in 1998.  The treaty is working well and currently there are no plans to amend it.

Financial Services Sector

 19. Deputy Dara Calleary Information on Dara Calleary Zoom on Dara Calleary asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on the significant fall in Dublin’s standing as a financial services centre in the recent Global Financial Centres Index; and if he will make a statement on the matter. [37062/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I understand that the Deputy is referring to the Global Financial Centres Index 15. It is the case that Dublin has decreased in its ranking compared to the 2014 survey.

The change in the ratings is not an issue unique to Dublin, 23 of the 27 centres in Europe declined in the rankings including Copenhagen, Edinburgh, Madrid, Lisbon and Rome.  However, in the survey Dublin continues to be ranked in the top 20 European centres.

Of course this is not the only evaluation of Ireland's ability to attract and retain business activity. Forbes named Ireland "the best place in the world to do business"; the IMD competitiveness yearbook ranked Ireland 1st in the world for the availability of skilled people and the flexibility of the workforce.

The financial services industry continues to attract projects and create employment in Ireland. Between 2009 and 2012 6,000 net new jobs were created within the industry with strong growth in fund administration, insurance, aircraft leasing and other linked technology based companies. According to a FSI survey in April this year, the International Financial Services sector currently employs approximately 35,700 people including some 10,000 people outside Dublin.

The Government had already recognised the need to re-consider the existing strategy for international financial services. Minister Simon Harris has been tasked with promoting and developing international financial services and is the first time a Minster has been given such responsibility in twenty years.  Minister Harris recently announced that he intends to revise the strategy for the international financial services sector with the aim of completing the new strategy in early 2015.

Banks Recapitalisation

 20. Deputy Pearse Doherty Information on Pearse Doherty Zoom on Pearse Doherty asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan when he will apply for a retroactive recapitalisation of the Irish banking sector through the European Stability Mechanism, ESM. [37046/14]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns" and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism, the ESM, could recapitalize banks directly.

On 10 June 2014 the euro area Member States reached a preliminary agreement on the operational framework for the ESM's Direct Recapitalisation Instrument (DRI). This includes a specific provision in relation to the retroactive application of the instrument. Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.

What is now required is a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty. The aim is to have this process completed by early November this year, subject to completion of national approval procedures. For Ireland the European Stability Mechanism (Amendment) Bill 2014 which was published last week will fulfil this purpose.  The Board of Governors' decision would allow the ESM DRI to come into effect once the Single Supervisory Mechanism is in place and operational which is expected to be on 4 November this year.

In relation to retrospective recapitalisation, the draft guideline states that the potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement. As I have stated previously, it will not be possible to make a formal application to the ESM for retrospective recapitalisation before the Instrument is in place as expected in November. It would therefore be premature to make any submission in advance of that.

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