2016 ANNUAL REPORT. Section 6(15), Credit Institutions (Financial Support) Act June 2017

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1 2016 ANNUAL REPORT Section 6(15), Credit Institutions (Financial Support) Act 2008 June 2017

2 In exercise of the obligations of the Minister for Finance under section 6(15) of the Credit Institutions (Financial Support) Act 2008 (No. 18 of 2008), a report on financial support for the period 2016 is hereby laid before both Houses of the Oireachtas in accordance with the provisions of that Section. 06 June 2017

3 Financial Support for the year 2016 A number of different types of financial support have been provided by the Minister for Finance under Section 6 of the Credit Institutions (Financial Support) Act There were no payments from the Exchequer during 2016 in respect of recapitalisation of credit institutions as outlined below. In the year 2016 financial support took the form of the guarantee provided under the Credit Institutions (Eligible Liabilities Guarantee) Scheme, 2009 ( ELG Scheme ). 1. Payments made in the form of recapitalisation of Credit Institutions During 2016 there were no payments from the Exchequer in the form of recapitalisation of Credit Institutions. At end-year 2016, the aggregate amount of payments made from the Exchequer since 2009 remained at bn. 2. Promissory Note Payments In 2010, the State committed to make future payments towards recapitalisation of Credit Institutions by way of promissory notes to cover a total amount of 30.85bn as follows: Year bn. Institution Method Type Detail INBS Capital Injection Promissory Note Exchanged in Anglo Irish Bank Capital Injection Promissory Note Exchanged in EBS Capital Injection Promissory Note Redeemed in At end-2016 the principal balance of the promissory notes outstanding was 0m. On 7 February 2013, the Irish Bank Resolution Corporation Act 2013 was passed and joint special liquidators were appointed to IBRC. As a result of the liquidation the Central Bank of Ireland became the beneficial owner of collateral used by IBRC for lending from the Central Bank of Ireland which included the promissory notes. As part of the transaction the promissory notes were replaced with a portfolio of Irish Government bonds issued by the NTMA which were valued at billion, which was equivalent to the nominal value of the promissory notes. The Central Bank of Ireland is now the beneficial owner of these bonds along with the bonds issued to meet the 2012 IBRC promissory note instalment. The bonds are held by the Central Bank of Ireland in a special portfolio and can be sold when financial stability conditions permit.

4 3. The Credit Institutions (Eligible Liability) Scheme, 2009, as amended ( ELG Scheme ) The ELG Scheme was introduced on 9 December Under the terms of the ELG Scheme eligible liabilities are those which satisfy the eligibility criteria set out in paragraph 12 of the Scheme including any of the following: Deposits, to the extent not covered by deposit protection schemes in the State (other than the CIFS Scheme), or any other jurisdiction; Senior unsecured certificates of deposit; Senior unsecured commercial paper; Other senior unsecured bonds and notes; and Other forms of senior unsecured debt which may be specified by the Minister, consistent with EU State aid rules and the EU Commission s Banking Communication (2008/C 270/02) and subject to prior consultations with the EU Commission. On the 26 th February 2013, following a decision by the Government, it was announced that the ELG Scheme would end for new liabilities at midnight on 28 th March Liabilities incurred after January 2010 and before midnight on 28th March 2013 remain covered until their next maturity subject to a maximum term of 5 years (28th March 2018). Payments As a result of the liquidation of IBRC in February 2013 a number of payments have now been made from the Exchequer under various guarantees including the Eligible Liabilities Guarantee ( ELG ) Scheme. In relation to the ELG Scheme, payments for the 12 months to the end of December 2016 were 4.181m These payments under the ELG scheme are owing to the Exchequer and stand as an unsecured credit in the liquidation of IBRC. Any remaining assets in IBRC, after the unwinding of all secured liabilities, will be available for the benefit of the pool of unsecured creditors (including the Minister due to payments under guarantees, unguaranteed bondholders, suppliers, and sundry liabilities). The Special Liquidators commenced paying an interim dividend of 25% to all admitted unsecured creditors of the liquidation in December As part of this, the Department of Finance received an interim dividend of 280m (part of this payment was received in Q1 2017).

5 Outstanding covered liabilities under the ELG Scheme at end-2016 At end-december 2016, the amount of liabilities covered by the ELG Scheme amounted to 1.377billion. ELG Fees 2016 Under paragraph 8.1 of the Rules of the Credit Institutions (Eligible Liabilities Guarantee) Scheme, the Guarantor shall charge a fee in respect of each Guaranteed Liability. Paragraph 8.9 specifies that fees shall be payable to an account specified by the Scheme Operator. A total of 41.74m was paid into the Central Bank ELG Scheme Account in respect of fees received for 2016 on an accruals basis (part of this payment was received in Q as fees are paid quarterly in arrears). On a cash basis 47.29m was paid into the Central Bank ELG Scheme Account in respect of fees received for 2016 (represents fees received in respect of Q4 2015, Q1 2016, Q and Q3 2016). 4. Ministerial Guarantees and Letters of Comfort in support of ELA lending Exceptional Liquidity Assistance (ELA) provided by the Central Bank of Ireland ( CBI ) allows credit institutions to access short-term funding from the Bank based on various assets or collateral pledged as security. The collateral provided by the banks availing of ELA includes: promissory notes issued by the Minister; loans including residential mortgages and investments or development loans; and guarantees of the Minister. In addition, the CBI has received letters of comfort from the Minister. These confirm that any shortfall on the liquidation of collateral can be made good by the State. From April 2012 onwards, all ELA borrowing was attributable solely to IBRC, this was eliminated upon the liquidation of IBRC in February 2013 and no further Ministerial Guarantees are in place as none of the Covered Banks were in receipt of ELA.

Government Announcement - 11 February Recapitalisation of Allied Irish Bank and Bank of Ireland. Recapitalisation Package

Government Announcement - 11 February 2009 Recapitalisation of Allied Irish Bank and Bank of Ireland Recapitalisation Package The Minister for Finance today announced that the Government has agreed the