Irish Finance Minister Michael Noonan has welcomed the European Commission's
decision to approve the government's schemes for the salvaging of credit unions
and the restructuring of the Bank of Ireland.
Approval was issued for the government's revised plan on the restructuring of
the Bank of Ireland, under European Union state aid rules. The main elements
of the plan were announced in June, and the government says the Commission's
action confirms the bank's achievement of long-term viability. The Commission
is satisfied that the revised plan provides an appropriate contribution by the
bank to its restructuring costs and contains measures to limit distortions of
competition in the Irish banking sector.
The Commission's decision follows several months of detailed analysis and assessment
of the plan involving the European Commission, Bank of Ireland and the national
authorities. The revised plan consists of significant deleveraging and disposal
of non-core assets so that the business model can now re-focus on core lending
to support the economy, and also contains measures to continue to facilitate
competition in the banking sector. The government believes the bank's adherence
to the deleveraging and disposal timetable to date has been very strong.
Noonan commented: “The Commission’s approval of the revised restructuring
plan is another step in the achievement of the Government’s strategy of
returning the banking system to long-term viability and profitability.”
The plan will be implemented over various time-frames between now and December
31, 2015.
Also welcomed was the Commission's decision on scheme for the salvaging of
credit unions under the Central Bank and Credit Institutions (Resolution) Act
2011. The scheme was found to be in line with the Commission's guidance on state
aid to overcome the financial crisis. The Act came into force on October 21,
and provides options for the Central Bank to deal with credit institutions (including
credit unions) in distress. Options include the appointment of a special manager,
modified liquidation and the transfer of a credit union’s assets and liabilities
to a willing transferee.
The government has committed to initial funding of up to EUR250m (USD326m),
which will be provided from the Exchequer by the end of the year. This will be recoupable
over the medium term via a levy on certain financial institutions via the Resolution Fund established under the
same legislation. In addition, if required, further funding will be made available
in 2012.
The Department of Finance has said that the Commission's approval will enable
the Central Bank to proceed with swift action where intervention
is required. The authorisation is granted until June 30, 2012. Beyond that date,
the Commission will reassess the compatibility of the measure on the basis of
the evolution of the economic and regulatory environment.
Noonan said: “The Commission’s approval supports the Government’s
work to underpin the stability and viability of credit unions in Ireland”.
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